Battle to Become China’s Richest Person: A Threat for Google, Disney, and Amazon?

Rising company valuations have resulted in almost monthly changes for who holds the title of the wealthiest person in China. What do these rising valuations mean for Hollywood and Silicon Valley?

Mar 1, 2014 at 11:00AM

There's a battle taking place in China over who will lead the country as its wealthiest person. Driven mostly by rising company valuations, CEOs at the biggest and best-performing companies are fighting for the title. While this war wages on, these companies' valuations seek to leave Hollywood and Silicon Valley wondering where all the money has gone.


Wang Jinglin of Wanda Group, Entertainment mogul seeking to complete the world's largest entertainment production facility. Photo: Forbes Asia

Hollywood is about to be rivaled by entertainment production in China
Entertainment and real estate mogul Wang Jianlin had gained enough wealth by August 2013 to claim the title of China's richest person. Under his company Dalian Wanda Group, he is currently building the entertainment metropolis of the century.

Located in the coastal temperate city of Qingdao, China, the USD $8.2 billion (about RMB 50 billion) investment will include a 10,000 square foot (929 square meters) main studio, 19 smaller studios, a full theme park, seven separate hotels, an IMAX (NYSE:IMAX) research center, a film museum, a waxworks center, and even a year-round automobile and yacht trading center. This "Oriental Movie Metropolis" is set to open in 2016.

Qingdao Wandawood Map

Quaint, coastal Qingdao, China is the site of the "Oriental Movie Metropolis"

Wang has said that China will have the world's largest film industry by 2018. He predicts that China will surpass the U.S. in box-office revenues by 2018, and double U.S. box office sales by 2023.

Entertainment is one of the industries most positively affected by growing national incomes. Given the forecast rise of 75% of China's urban population into the middle class by that date, Wang's statement is believable.

What does this mean for Hollywood companies?
The Walt Disney Co
(NYSE:DIS) is the market leader in diversified media networks and the company gains from years of hard-won consumer loyalty, brand recognition, and diversification among income streams that include media, networks, and theme parks. Could this new megaproduction center in China threaten Hollywood and companies like Disney?

Disney Revenue
Disney's income stream diversification helps the company to avoid competitive risk in any one segment.
Information from Disney's year end 2013 earnings release.

Actually, the center could become a huge boost to the American industry. One way to take advantage of the growing Chinese entertainment industry is to look for partnerships and production deals. One company that is already making the most of partnerships with the growing players in China is IMAX. The film-screen technology company will have a research center built into the new Qingdao production center, and it will likely see huge benefits from the increased production and technological advancements of these new facilities. Additionally, IMAX has already benefited from the Wanda Group with an inked deal that promises to build at least 40, and as many as 120, new IMAX theaters in China by 2021 at properties owned by the Wanda Group.

Baidu and Tencent look to be leaders in search and e-commerce
Robin Li, founder of the search engine Baidu, edged Wang in December 2013 to claim the position of China's wealth leader. Baidu, the most widely used search engine in China, makes money from advertising, e-commerce, and integrated Internet applications, much in the same way as Google (NASDAQ:GOOGL). Google has had a tough history with its work in China, which led to the company closing most of its operations in the country in 2010 following a disagreement with the local government over Internet censorship. Baidu happily took the opportunity to become the search engine of the masses in China, and as of the third quarter of 2013 it had 531 million total users, as well as 100,000 daily mobile search users.

Now, a new name has risen to the top of the charts. Tencent CEO Pony Ma has now taken the lead after shares of his company, listed in Hong Kong, have soared with 92% growth over the last year alone. Tencent is an e-commerce services company which also provides online and mobile games, applications across various platforms, and other mobile value-added services such as mobile music and mobile books. Recently, the company announced that it bought almost 10% of the logistics center operator China South City Holdings Ltd., a trade center for industrial materials, for $193 million. The move appears to be an attempt to further challenge existing leaders in online presence and e-commerce.

Is the rise of these tech giants a threat to Google and Amazon?
Tencent and Baidu, along with a slew of Chinese companies also competing to gain global market share, continue to strengthen and grow their e-commerce businesses. This is important in China where online retailing has more than doubled each year from 2003 to 2011 and is projected to continue growing to $395 billion in 2015 according to research by McKinsey & Co. and as high as $1.64 trillion according to estimates at China Internet Watch.

China Online Retail Market
According to these estimates, China's e-commerce, including online B2B transactions, will reach $1.64 trillion (10 trillion CNY) in 2020, becoming the world's largest e-commerce economy. Source: China Internet Watch

For companies like Google and Amazon (NASDAQ:AMZN), these Chinese companies will be tough competition in the coming years. For example, Amazon has grown significantly not just in the United States, but also internationally. During 2013, 40% of Amazon's revenue came from regions outside of North America, down from 42% in 2012. While shares of the company are up 435% in the last five years, the company now needs to prove that its strategy can keep it on top and justify its P/E multiple of 587. With heavy competition coming from these Chinese behemoths, not just in China but increasingly in other markets abroad, this may get harder and harder.

Foolish conclusion: watch these Chinese behemoths for what they might mean to your U.S.-listed portfolio
Companies in China are continuing to grow and compete for leadership positions, not just in China but increasingly throughout the world. While most of these companies are listed on Chinese stock exchanges so they are not easily accessed by U.S.-based investors, it's important to understand what their growth means for their U.S. based competitors.


Could this one industry reverse the trend, and end the "made in China" era?
For the first time since the early days of this country, we're in a position to dominate the global manufacturing landscape thanks to a single, revolutionary technology: 3D printing. Although this sounds like something out of a science fiction novel, the success of 3D printing is already a foregone conclusion to many manufacturers around the world. The trick now is to identify the companies -- and thereby the stocks -- that will prevail in the battle for market share. To see the three companies that are currently positioned to do so, simply download our invaluable free report on the topic by clicking here now.

Bradley Seth McNew owns shares of Walt Disney. The Motley Fool recommends, Google, Imax, and Walt Disney. The Motley Fool owns shares of, Google, Imax, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information