Crouching Tiger, Leaping Dragon

In 1993 China launched reforms in the film industry to thoroughly remold old production paradigms and planned-economy film distribution techniques. Since 1994, China Film Group Corp. has imported ten overseas blockbusters every year. The Fugitive, its first imported crowd-pleaser, garnered a domestic audience of 1.39 million and box office receipts of RMB 11.27 million on its one-week-long first run in six major cities including Beijing and Shanghai.

Hot on The Fugitive's heels came other popular foreign films, mostly from Hollywood, such as Titanic, installments of the James Bond 007 franchise and the Pirates of the Caribbean series. In the first few years of overseas blockbusters' prevalence on Chinese screens, they took in up to 80 percent of Chinese domestic box office revenue each year.

At the same time, domestically made films were taking great strides to catch up to their foreign competition. Hero, released at the end of 2002, appealed to local audiences by assembling a cast with Chinese stars from the mainland, Hong Kong and Taiwan. It went into history as being the first mainland production to auction its VCD and DVD rights and spent a record RMB 10 million on promotion and marketing. By virtue of the interest in Far East culture aroused by Crouching Tiger, Hidden Dragon, Hero was also well received in foreign markets with total overseas box office receipts topping RMB 1.1 billion. Filmmaking subsequently became recognized as a lucrative new growth industry ripe for investment.

Hero's success encouraged Chinese directors to produce a series of films in a similar style. The Promise, The Banquet and Curse of the Golden Flower generated considerable box office revenues despite being widely criticized for their unoriginality and poor filmmaking.

In 2004 for the first time domestic films outperformed imported blockbusters in terms of revenue, pulling in 55 percent of the RMB 1.5 billion in ticket sales at Chinese theaters for that year.

"The fast development of the Chinese film industry has attracted the attention of overseas directors and producers. In their eyes, China's movie market is a potential gold mine," Gao Jun said. "Just five or six years ago, annual box-office revenues on the mainland were less than RMB 1 billion. In 2011 the figure stood at RMB 13 billion. Such growth is found nowhere else in the world."

China now produces over 500 films per year – five times the amount of five years ago. The country is now the world's third largest player in terms of number of films produced on a yearly basis, trailing India and the U.S.

Domestic filmmakers are gradually moving away from the idea that waiting for ticket sales is the only way to recoup a movie's production and marketing costs. "We are starting to recognize that there are different ways to get returns on our investments. For instance, royalties from audio, video and multi-media rights can add up," Gao Jun says.

Eyes on the Globe

The sharp increase in the number of movie theaters and movie screens is regarded as one of the main drivers of development in China's film industry.

Nevertheless, some experts assert that the number of movie screens built so far is still inadequate. According to film director Yin Li, there are only 10,000 movie screens in China for a population of 1.3 billion. By contrast, the U.S. has 40,000 screens for 312 million people. Yin says a huge distribution market is also yet to be tapped.

Although the number of movie screens is on the rise, the appeal of film doesn't seem to be broadening as fast as it should. The growth in the number of filmgoers in China has actually been slowing down for a number of years now. In the early 1980s, Chinese people made tens of billions of visits to movie theaters every year. By 2010, this had declined to 250 million individual viewings. The steep fall can be probably attributed to ever increasing ticket prices. When Dark Side of the Moon, the third installment in the Transformers series, was released in the mainland, the ticket was priced at RMB 180 at some Imax theaters. Scalpers were reported as reselling these already heftily priced tickets for as much as RMB 400.

In Las Vegas in March 2011 at the opening day of CinemaCon, the annual gathering of theater owners hosted by the National Association of Theater Owners, Millard Ochs, president of Warner Bros. International Cinemas, predicted that Chinese box office revnues would surpass those of the U.S.'s within 10 years. However, his prediction was contended by China's netizens who pointed out that high ticket prices and poor quality production hamper the widening of cinema's appeal in China.

In the China Film Industry Report 2011, the China Film Association predicts the country will become the world's second largest film market within five years. Despite this rosy forecast, insiders say there is still a long way to go if the Chinese film industry is to become globally influential and competitive. Quality management needs to be improved, box office statistics are yet to be made more transparent, and the presence of Chinese productions in foreign markets is still low.

The cost-returns ratio of Chinese films is still below the levels in many countries. The domestic industry's investment in filmmaking accounts for only 2.09 percent of the world total, and its share in global box office revenues is even lower. In contrast, U.S. films, which attract 52 percent of global investment, pull in 93 percent of worldwide revenues.

Looking ahead, Bona Film Group Corp's Chairman and CEO Yu Dong suggests China's filmmakers have an open mind and will widen the scope of their productions to penetrate overseas markets. China might not have developed its own Hollywood just yet, but don't be surprised to see more Chinese blockbusters heading to a theater near you in the near future.