Shanghai breaks ground on Disney theme park

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

After about a decade's worth ofspeculation 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.

"Today is the culmination of many years of hard work, dedication and partnership," Iger said. "This is a defining moment in our company's history."

The theme park will cost an estimated $3.7 billion US 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 per cent of total attendance.

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

Major investment

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 four square km out of a total of nearly 20 squarekm for the entire resort, according to the city government.

Local media reported that Disney will take a 43 per cent equity stake in the venture, while a venture owned by a consortium of government-backed local companies will own the majority 57 per cent. Disney will hold a 70 per cent stake in a joint venture management company that will run the park.

Walt Disney Parks and Resorts Chairman Tom Staggs said it has been a longtime goal of Disney to open a park in Shanghai.

"Coming to Shanghai in mainland China is a dream come true for all of us in Disney."

He called Shanghai "a city where Chinese traditional culture and modern innovation come together."

Disney has said it will take five years to open the park, while Han said it will open in four years.Like other foreign entertainment companies, Disney has struggled to break into the tightly controlled China market while also fending off rampant piracy of both software and product lines.

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 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.