Shanghai may greet Obama with Disney park deal

SHANGHAI/LOS ANGELES Wed Oct 28, 2009 5:25am EDT

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SHANGHAI/LOS ANGELES (Reuters) - With President Barack Obama due to visit China next month, speculation is swirling Walt Disney Co (DIS.N) may finally be about to announce a long-awaited deal to build a theme park in Shanghai.

Disney and the Shanghai government have been waiting since January for Beijing's approval to move forward with what would be the country's second Disneyland, after a Hong Kong park opened in 2005 to a string of operational problems and lackluster attendance.

"Beijing has approved the project. Now it's up to Shanghai and Disney to work out the plan and make this thing happen," a Shanghai government source familiar with the situation told Reuters on Wednesday.

The source asked not to be identified before a deal was made public, while spokespeople from Disney and the Shanghai government said they had nothing to announce at this time.

By building in Shanghai, the company that brought Mickey Mouse and Toy Story to the big screen would be tapping a huge consumer market and growing personal wealth in one the country's modern, Western-influenced cities.

Media reports have placed the cost of the park around $3.6 billion.

Disney would also aim to grab mainland money-making chances that have tended to elude it in Hong Kong, where its fifth resort was built in 2005.

Anticipation is riding high that good news on Disney will be timed to coincide with Obama's visit to China from November 15 to 18 -- granting Disney its decade-old wish to locate a theme park on the mainland of the world's most populous country.

Analysts said a Disney agreement could be a feel-good bilateral story, highlighting U.S. cultural influence and an investment that does not entail U.S. job losses in the manufacturing sector.

China would get a boost to its leisure sector and to domestic demand as it tries to trim its dependence on exports, which left it vulnerable during the financial crisis, wrote Gong Weisong, an editor at the state-run Shanghai Securities News.

"For a big country, besides GDP, soft power is also very important, and developing a culture industry has great commercial value," he wrote in a front-page commentary on Wednesday that said the time was right to go ahead with the Disney project.

China could also underscore its commitment to protecting the Disney brand to counter widespread U.S. complaints that its protection of intellectual property rights is still lax.

'DISNEY-CONCEPT' STOCKS

Under a plan agreed upon by Disney and the Shanghai government in January, Disney would own a 43 percent equity stake in the new theme park and a local government-owned joint venture holding company would own 57 percent.

The plan calls for a large theme park and hotel complex to open in 2013 in the southern outskirts of Shanghai's Pudong district. Media reports have placed the cost of the park around $3.6 billion.

A spokesman for the Shanghai government said it had no information to release at this moment on the Disney project, while a spokeswoman for the Los Angeles-based media conglomerate said it had not been told of any approval.

"No deal has been agreed to, no project has been approved," said Disney spokeswoman Leslie Goodman.

Nevertheless, talk of the deal was widespread in Chinese financial markets, pushing up the shares of so-called "Disney-concept" stocks such as Shanghai Lujiazui Finance & Trade Zone Development and Shanghai Jielong Group Industry, which are expected to be participants in the project.

Lujiazui Finance (600663.SS) rose 4 percent on Tuesday to its highest since mid-August, after Chinese media reported a deal could be near. Jielong Group (600836.SS) soared its 10 percent daily limit, on a day the benchmark Shanghai composite index .SSEC fell nearly 3 percent.

The Securities Times, one of China's three official financial newspapers, reported on Tuesday that policy makers had approved the project earlier this month.

"Currently, it is going through the final administrative process, with a formal announcement likely to be made to the public this week," the newspaper said.

Talks were stalled by a Shanghai government scandal in 2006 and Disney's need to focus on Hong Kong Disneyland.

(Additional reporting by Michael Flaherty in Hong Kong, Edmund Klamman in Shanghai and Paul Eckert in Washington; Editing by Lincoln Feast)

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