April 26th, 2012
08:27 AM GMT
Hong Kong (CNN) – To paraphrase Claude Rains in “Casablanca,” reports from U.S. regulators suggest they are “Shocked! Shocked!” to learn Hollywood studios may be lining pockets in Beijing to get a foothold in the Middle Kingdom's theater market.
The U.S. Securities and Exchange Commission appears to be poking around whether Hollywood studios are buying their way into one of the world’s largest – and most tightly controlled – media market. The investigation, first reported by Reuters, says the SEC has sent inquiries to 20th Century Fox, Disney and DreamWorks Animation.
The investigation centers on bribes to Chinese official to get the right to film and show studio movies in China, according to Reuters, the New York Times and the L.A. Times – all citing anonymous sources. The news comes just two months after China’s Vice-President Xi Jinping – who is widely expected to succeed Hu Jintao as president of China in 2013 – wrapped up a week-long trip to the U.S. with a Los Angeles visit that included a $2 billion deal between two Chinese firms and Dreamworks Animation.
Earlier this month, Disney announced that “Iron Man 3” will be co-produced in China with DMG Entertainment in Beijing.
The SEC investigation apparently centers on dealing with China Film Group, according to the Los Angeles Times.
The probe comes as the U.S. has stepped up investigations under the Foreign Corrupt Practices Act, which prevents U.S. firms from bribing officials overseas.
The China movie market – like so much of the nation – is booming with the growth of the middle class and disposable income. China 6,000 movie screens – nearly a third more than three year ago – and expects to have 20,000 screens by 2015, the New York Times reports.
Despite the growth in sales, the world's second largest economy is still perceived as a sometimes shady place to do business. The nation ranked 75th out of 182 nations in the 2011 Corruption Perceptions Index – behind Tunisia but ahead of Columbia.
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