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HONG KONG-- Middle Kingdom or Magic Kingdom?

The news that Walt Disney Co. might turn a secluded bay on a Hong Kong island into its newest theme park has triggered some soul-searching over whether Mickey Mouse and friends are the right torchbearers for a former British territory still struggling to redefine itself two years after its return to mainland China's control.

Landing the world's third overseas Disneyland--after Paris and Tokyo--would seem a high-profile coup and a boon for Hong Kong, whose recession-plagued economy has suffered a 17% decline in tourism since Asia's economies went into decline. And it might help preserve the territory's unique standing.

"There were some hand-over misconceptions," said Joe Wong, assistant commissioner for tourism. "People thought Hong Kong was becoming a Chinese city and had lost its international flavor."

But David Tang, the flamboyant owner of the trendy Shanghai Tang retail stores here, offers a different interpretation of Hong Kong's image problem.

Rather than adding another popular American icon to one of Asia's best-known skylines, he believes Hong Kong should spend its tax dollars remaking itself into a cosmopolitan gateway to China, offering tourists a sophisticated window into Tang Dynasty poetry, Sichuan cooking and Asian-influenced silk fashions.

"Hong Kong should take the lead in the renaissance of Chinese culture," said the king of Shanghai retro, dressed in an elegant linen Chinese-style suit. "Embracing Disney sends the wrong message."

As American entertainment firms circle Asia and pick their targets for the 21st century, it's no surprise that Disney would provoke such hand-wringing here adjacent to the Middle Kingdom (the literal translation of the word "China").

Concerns about American cultural imperialism are rampant. From Singapore to Toronto to Paris, a rising chorus of voices questions whether openness to Hollywood blockbusters, MTV and Gap clothing spell the end of their indigenous, but less marketable, ways of life.

Disney in particular triggers a love-hate response wherever it goes, while its movies have created some extra baggage in China these days.

And foreign cultural influence has a particular resonance here in Hong Kong, which is struggling to forge a new identity under a unique "one country, two systems" policy designed to allow its people to pursue their freewheeling capitalist ways while rejoining the world's largest communist country.

Disney is treading cautiously, after being broadsided by France's haughty opposition to its costly Disneyland Paris theme park in 1992 and being forced to shelve plans two years later for a historical-themed park in Virginia.

"The one thing that Disney is looking for is someone to welcome them with a huge bearhug," said Tim O'Brien, an editor at Amusement Business, an industry trade magazine. "Disney's smart enough to make sure they're never going to have another Paris. They learned their lesson that everybody doesn't like the American way of doing things."

After his return from China last year, Disney Chairman and Chief Executive Michael Eisner expressed confidence that "the Chinese people love Mickey no less than Big Mac," referring to the success of McDonald's in the world's most populous country.

But Disney, which has been considering a theme park in China for at least seven years, has reason to be wary. In recent weeks, those golden arches and other prominent American icons have been the targets of anti-American sentiments triggered by NATO's May 8 accidental bombing of the Chinese Embassy in Belgrade.

And Disney itself has run afoul of the Chinese government's political sensitivities. After being blacklisted in 1997 for distributing a film about the life of the Dalai Lama, the exiled Tibetan leader, the Burbank-based entertainment giant has struggled to recover in China, hiring former Secretary of State Henry Kissinger to reopen the doors to the Middle Kingdom.

"Mulan," the animated film that was Disney's first foray back into the China market, did not fare well at the box office this spring. The movie was criticized for being too "foreign-looking" in its depiction of a beloved Chinese historical tale.

There are other elements of risk to the proposed venture, even with Disney's popular cast of characters. In addition to the volatile U.S.-Chinese political relationship, Disney would face China's tight controls on the entertainment industry, widespread piracy and a nonconvertible currency that makes it difficult to get profit out of the country.

Mainland China is also littered with failed theme parks.

There is a healthy appetite for theme parks and other leisure activities because of China's expanding middle class, the government's one-child policy that encourages parental indulgence, and a move to a five-day workweek, says Roy Aaron, chairman and chief executive of Los Angeles-based Intra-Asia Entertainment Corp.

But Aaron, whose firm is raising funds to renovate theme parks in Weifang and Chongqing, said many foreign operators rushed into the market in the 1990s with theme park projects that were poorly designed, located too far from urban centers or too expensive for local tastes.

Last year, unhappy employees looted a Taiwanese-backed theme park near Wujiang that has since been shuttered. American Dream Park, an international venture backed by investors from the U.S., Hong Kong and Taiwan, has sharply pared back its plans to build an America-inspired theme park chain in China, and its park near Shanghai is struggling, according to industry sources.

Given the obstacles on the mainland, it is hardly surprising that Hong Kong--a freewheeling capitalist enclave that is already one of Asia's top tourist choices--has emerged as the likely site for Asia's next Disneyland. Rumors persist, however, that the Chinese cities of Shanghai and Zhuhai remain in the running.

Disney officials are characteristically closemouthed about the venture, refusing to even confirm that a Hong Kong Disneyland is in the works. One apparent reason for their reticence: A dispute over China's future economic potential is at the center of Disney's nasty legal spat with former Disney executive Jeffrey Katzenberg.

"No decision has been made to go there [Hong Kong]," said John Dreyer, a Disney spokesman. "There are discussions about the possibility, but it's entirely possible the decision will be not to go."

Indeed, rumors surfaced as late as last week that Shanghai claimed to still be in the running.

But in March, Hong Kong Financial Secretary Donald Tsang said Hong Kong had signed a letter of intent with Disney and set a deadline of July 1 to complete the negotiations.

Hong Kong's leaders cite studies that show a Disney park would not only be a major attraction for its 6.3 million residents, but also would dramatically boost its international appeal, particularly among families, teenagers and honeymooners.
As in much of Asia, children here are widely exposed to Disney cartoons, films and retail products through Mickey's Corner stores and sidewalk stalls filled with pirated toys and videos.

"People in Hong Kong are crazy about Disney," said Woody Tsung, chief executive of Hong Kong's Motion Picture Industry Assn. and a Disney supporter.

Disney could also nurture its mainland China ambitions because middle- and upper-middle-class mainlanders have become a major source of tourists for Hong Kong. Because of concerns over illegal immigration and overcrowding, Hong Kong limits visitors from the mainland but increased its quota last year 30%.

Even John Corcoran, chief executive of Ocean Park, Hong Kong's most popular theme park, believes his marine-oriented venture and other local tourist attractions would benefit from the extra boost provided by Disneyland.

"There is a synergy that is created by this kind of situation," said Corcoran, who previously worked for Disney.
But although Hong Kong officials say their talks with Disney have moved from "casual dating" to "serious courting," the relationship has not been all wine and roses, according to sources in Hong Kong.

Disney's well-publicized stumbles in China--as well as Disneyland Paris' rocky start--have caused some here to wonder whether the huge U.S. company has taken its cultural sensitivity training seriously.

Timothy Fok, the elected legislator for sports, art and culture, warned against assuming that Disney's success with Tokyo Disneyland, the most popular theme park in the world, could be easily transplanted. He argued that Hong Kong's citizens are more sophisticated, well-traveled and culturally confident than many of their Asian neighbors.

Fok, who has visited Disney projects around the world in his role as cultural czar, said Disney needs to incorporate more local flavor to succeed in this cosmopolitan entrepot. Of particular interest to Fok is promoting the local film community, which is the world's third-largest producer of movies and the birthplace of the kung fu film genre.

"A Disney theme park that does not capture and reflect the local heritage and vibrancy would be a pointless parody of American kitsch," the young tycoon wrote in a recent newspaper column.

Disney's reputation for playing legal hardball has made Fok and others nervous. They cite reports that Disney broke off talks with the government of Queensland, Australia, after the state refused to provide $850 million in subsidies, tax breaks and other inducements. Queensland Premier Peter Beattie told the media that "only Goofy" would have agreed to the Disney deal.
"If the terms aren't right, we can walk away," Fok said during an interview at Stone Manor, his baronial mansion overlooking Hong Kong's Victoria Harbor.

For all the high-minded debate, the biggest sticking point here is likely to be land costs.
While Hong Kong's astronomical real estate prices have dropped by as much as 40%, they are still considerable for a land-intensive project like a theme park. The likely site of the Disney park is a largely undeveloped area on north Lantau Island called Penny's Bay, which is near Hong Kong's new international airport.

The Hong Kong government had already budgeted funds to reclaim land at the Penny's Bay site, which was originally slated to become a container port and is worth "several billion dollars," according to Fok. But given the importance Hong Kong's land-starved citizens attach to owning real estate, the government is unlikely to relinquish total control over the valuable property, according to Barry Mak, assistant professor at the Hong Kong Polytechnic University's department of hotel and tourism management.

Mak said the government is also concerned that the Disney project provide jobs for Hong Kong residents, who are suffering 6% unemployment, and business for local firms. The project, which could be completed in five or six years, is expected to cost $500 million to $1 billion. One local study estimated it would create as many as 12,000 jobs.
"It is really hard to say for sure it will bring benefits to Hong Kong, but I think the pluses are higher than the minuses," the professor said.

To residents of Peng Chau, a tiny island across the water from the proposed Penny's Bay site, Disney is just the latest bit of modern life to intrude on their serenity. The north Lantau Island location is a secluded bay occupied by a small shipyard and a power plant surrounded by heavily forested hills.

Chan Lit Fong, the owner of a health food store and head of the Green Peng Chau Assn., bemoans the loss of Hong Kong's island greenery, which she regards as the last oasis in an increasingly harsh, consumerist society.

"Can't we celebrate the natural things in the world instead of just copying from America?" she asked.

Maybe. But that isn't going to put food on the table of Wen Yat Kwan, a third-generation fisherman who has watched the fish population of Penny's Bay nearly disappear over his lifetime as the harbor has been reclaimed for development and the water has grown more polluted.

From his vantage point, a Disney theme park across the water offers possible employment for the first generation of Chans who will not be able to support themselves with a boat and a couple of fishing lines.
"I'm going to fish as long as I can," said the lanky 50-year-old, gunning the motor of his slender skiff. "But my kids all want to do something else. I asked them to help me, but they don't want to."

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Mickey Mao?

A proposed American-style theme park in Hong Kong at Pennys Bay on North Lantau Island has sparked controversy in a city that is struggling to redefine itself.