Shanghai to begin building long-sought Disney park

 Published: 4/7/2011 7:20:03 PM GMT
AP Original Cached

SHANGHAI – Walt Disney Co. and its Shanghai partner are breaking ground Friday for a long-awaited theme park that Disney hopes will draw legions of newly affluent Chinese and provide a cornerstone for its brand in the world's most populous country.

After about a decade's worth of speculation over the plan, Disney CEO Bob Iger and Shanghai dignitaries were attending the groundbreaking ceremony in former farm and factory grounds southeast of the city, where a row of backhoes stood ready.

The theme park is estimated to cost about $3.6 billion and Shanghai, China's commercial capital, plans for it to be part of an "international tourism resort" zone located not far from the city's main international airport in Pudong.

The importance of the project was shown by the fact the Communist Party boss for Shanghai, Yu Zhengsheng, was at the groundbreaking along with Han Zheng, the mayor, and Disney executives.

"Disney is a classic urban entertainment brand. This project will help improve Shanghai's profile as a world famous tourism destination and lend a big boost to the development of culture and leisure industries of Shanghai and the Yangtze river delta," Han said.

Both sides are presumably hoping the park will prove more successful than Hong Kong Disneyland, which has struggled to remain profitable though it reports increasing popularity with visitors from the mainland, who account for more than 40 percent of total attendance.

The park will be Disney's fourth outside the U.S., after Paris, Tokyo and Hong Kong.

Disney and the city government set up a joint venture to manage the project, one of the city's biggest foreign investments. The park is expected to cover about 1.5 square miles (4 square kilometers) out of a total of nearly 8 square miles (20 square kilometers) for the entire resort, according to the city government.

Local media reported that Disney will take a 43 percent equity stake in the venture, while a venture owned by a consortium of government-backed local companies will own the majority 57 percent.

The park is expected to open in about five years, and will be "distinctly Disney, yet authentically Chinese," Walt Disney Parks and Resorts Chairman Tom Staggs told a recent investors conference.

"We think there is huge potential for a Disney property in Shanghai," Staggs said according to a transcript of the event.

Like other foreign entertainment companies, Disney has struggled to break into the closely guarded China market and to fend off rampant piracy of both software and product lines.

The Shanghai park "has the ability to do a substantial amount for us in terms of brand growth. And we view it as a real cornerstone of growth initiative in that market," Iger told the same conference.

Talk of a Disney park has been circulating for over a decade, and in recent years speculation over its location has driven rallies in share prices for local real estate developers.

Residents were long ago moved off farmland in the once rural area of Chuansha to make way for the park.

The project is a new showcase for Shanghai, whose aspirations as a tourism destination were fortified by its experience with the 2010 World Expo, which drew a record 72 million visitors during its six-month run, almost all of them Chinese tourists. Although the city is one of China's most modern and affluent, it lacks the big historic landmarks claimed by ancient capitals like Beijing and Xi'an.

For that event, the city of 22 million built nearly a dozen subway lines, highways, airport upgrades and other modern facilities. The Disney project will prolong that building boom.

But China's past experiences with theme parks offer little encouragement, with most running at losses and many eventually closing down. Meanwhile, competition in the region has been heating up, with a planned Legoland Park in Malaysia, a massive amusement park on the Singaporean resort island of Sentosa and a slew of less well-known parks in the Shanghai region itself.

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