JASON BOOTH

Staff Reporter

Even as relations between the United States and China get worse, the Magic Kingdom is intensifying its efforts to do more business in the Middle Kingdom.

Last week, the government of Hong Kong announced that it was engaged in talks with Walt Disney Co. concerning the building of a major theme park near the city. Disney analysts and China watchers say that in some ways, the Burbank-based entertainment giant's timing could not be better.

"Property prices in Hong Kong have fallen so much that (developing a park) would cost a whole lot less now than it would have two years ago," said Greg Fager, director of the Asian department at the Institute of International Finance in Washington.

Beijing, meanwhile, looks ready to give Disney a second chance after having shut the company's films out of the Chinese market for nearly two years. That unofficial ban followed a string of Disney movies that were deemed anti-Chinese, such as "Seven Years in Tibet" and "Kundun."

Beijing is now looking for Disney to be more politically sensitive, said Thomas Leong, who represents the China Co-Production Corp., a government-backed agency that overseas all co-productions between Chinese and foreign film production companies.

"I see a very bright future for Disney in China as long as they learn from their experience and they do things the way they are done in China, rather than trying to force the American way onto the Chinese," he said.

Beijing's acquiescence is driven by economic reality.

With Hong Kong in the midst of a serious recession, which has also caused economic difficulties on the mainland, Chinese officials are more than happy to welcome a major investment. Those economic concerns should easily override any political animosity between China and Washington, analysts say.

"China wants to show that the idea of 'One Country, Two Systems' works," said Alex Pan, who runs the China practice for PriceWaterhouseCoopers LLP in Los Angeles. "Following the Hong Kong economic crisis, Beijing wants to support anything that will help Hong Kong to help itself."

From Disney's perspective, Hong Kong is a near-ideal location for the company's first theme park in China, according to analysts. (Disney officials declined to comment for this story, citing ongoing negotiations with Chinese officials.)

A Hong Kong theme park would give Disney a chance to tap the Chinese market without the risks of attempting to build a park in China proper.

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