Investing.com - Government offiicials in Beijing are now implementing a new policy that will restrain what they call "irrational" overseas investments in several business sectors, including Hollywood films and American sports, as part of a new strategy to stop capital flight, according to analysts.
Beijing increasingly sees capital flight as a primary cause of devaluation of China's currency.
Government operatives associated with the Communist Party are saying they will scrutinize all offshore purchases by Chinese firms of more than $1 billion if they are not part of the investor's "core business" area. Deals far below that capital threshold already are being reviewed, analysts said.
Chinese officials believe many domestic companies are covering-up capital flight as foreign investment.
Other firms there may be using high-profile entertainment purchases — a sector seen as cosmopolitan and stylish by Chinese investors — as a quick strategy to bolster stock prices.
For Hollywood, this may make it more difficult for "concept deals" for new pictures and TV shows to be reached, analysts said.
A firm called CastleHill Partners, a Beijing-based merchant bank, focused on the media and entertainment industries, has reportedly been part of many recent deals involving Chinese cash and Hollywood production talent.
Among major 2016 deals: Dalian Wanda Group purchased Legendary Entertainment for $3.5 billion and Dick Clark Productions for $1 billion. Alibaba (NYSE:BABA) also made a major investment in Steven Spielberg's Amblin Entertainment.
Beijing-based Perfect World Pictures invested $500 million for 50 films for Universal Studios.