When media reported that Walt Disney Co. (China) partnered with the city of Zhengzhou, capital of China's central province of Henan, to develop a project, people excitedly speculated there might be another Disneyland in the country soon, following the first one that opened last June in Shanghai.
Last month, Zhengzhou Foreign Investment Service Center released a list of key projects this year. Among them, a three billion yuan (about 430 U.S. dollars) Disney project in Zhongmu County, administered by Zhengzhou, was a highlight. It would contain features such as a dream-like theme street and recreational center.
But not long after people's anticipation rose for the project, Disney claimed the report was wrong, saying the company has no plans for any construction or investment in Henan Province.
This is not the end of the story. Several authorities in Zhongmu County and an executive with Zhengzhou International Cultural and Creative Industry Park insisted that the project is 100 percent real, and they have been cooperating with Disney.
So who is right? According to reports by Henan Business Daily, the Disney Zhengzhou project was signed in January last year with Dimei International Culture Investment Co., whose owner Meng Dekai has the title of Disney International Special Project Director.
Who is this powerful man? Meng Dekai's lawyer told media he is an employee with Disney, without giving further details, while Disney declined to comment on individual employee's actions.
It hasn't been confirmed whether Meng is an executive with Disney China, but he did manage to meet a number of high-ranking officials in local governments and signed investment agreements during the past few years. He is also the owner of a dozen companies, mostly registered in Zhongmu County as real estate businesses. The names of all his companies start with "Di", same as the first character of "Disney" in Chinese.
Disney said it doesn't own any of these companies and has never authorized anyone, or any of these companies, to sign agreements with governments. But Disney did admit it authorized a third party to sell products at Zhengzhou International Cultural and Creative Industry Park.
The official government website shows a Memorandum of Understanding between Disney and the Henan government was signed back in November 2015, with the two agreeing to build an e-commerce platform for Disney products.
This isn't the only awkward situation of its kind that foreign companies have found themselves in with local governments in China. There are several other real estate and cultural projects under the Disney name in Anhui Province, Inner Mongolia Autonomous Region and Zhejiang Province, with investments expected to total 30 billion yuan (4.3 billion U.S. dollars). The status of all these projects also is unclear.
In 2009, South Korea's Hyundai RNC Construction Co. LTD., an entity pretending to be affiliated with Hyundai Group but having no such relationship, successfully signed agreements with the government of Handan in Hebei Province. The company even won preferential subsidies of approximately 600 million yuan (87 million U.S. dollars) in the following years before the truth was exposed. Construction has been suspended for more than a year.
Researcher Yun Jie at the Institute of Political Science of Chinese Academy of Social Sciences said these kinds of situations result from local governments blindly pursuing investment. Lack of careful planning will not only negatively impact the government's image, but also cause economic losses.
"Economic indicators are a major factor in traditional officials' appraisals. Such big projects are super-lucrative to local governments, especially when faced with the pressure of an economic downturn. It is urgent that this mindset be changed," Yun said.