THE GLORY REVIVAL: The Grand Cinema in Shanghai, which was built in the 1920s, was reopened to audiences after an overall renovation in January 2009. The cinema had been the country's top one in terms of box office revenues for 11 years (PEI XIN)

If the 2002 domestic blockbuster, Hero, directed by Chinese director Zhang Yimou, inspired more Chinese directors to pursue commercial successes with homegrown stories, the Shenzhen listing of Huayi Brothers Media Corp. Ltd. last October is encouraging many top domestic studios to capitalize on their businesses.

China's movie industry has flourished in the past seven years, thanks to the consolidation of the state-owned studio and distribution system, with domestic box office revenues hitting 6.21 billion yuan ($909 million) in 2009 from roughly 1.5 billion yuan ($219.6 million) in 2004, a growth of more than 30 percent annually.

Still, many industrial observers look forward to the long-expected movie industry legislation, considering its absence the biggest obstacle to the industry's further prosperity in the domestic market.

The latest development came on January 25 when the State Council put forward a guideline featuring 10 measures to boost China's movie industry. While encouraging more state-owned or state-controlled studios to seek public listing, the guideline pledges to expedite related legislation efforts to develop the industry.

Other measures addressed common problems facing domestic movie producers and distributors, such as difficulties in acquiring bank credit, shortages of professionals for movie productions and screen numbers nationwide, especially in rural areas.

The guideline supports easier access to financial services and diversified investments for domestic studios. Chinese studios are also encouraged to cooperate with their overseas counterparts to become global players.

"Capital accumulation through business expansion is the top priority for domestic movie studios now because the size of the domestic market is not big enough to create a Chinese counterpart of, say, Walt Disney Pictures," Wang Zhongjun, Co-president of Huayi Brothers, said.

A fledging market

China embarked on an all-around industrial development campaign of its movie sector in 2002 when the country doubled its imports of foreign films to 20, as required by its WTO membership.

That year, as part of its reform of the old state-planned studio system, the country allowed private capital to be spent on independent movie productions, and introduced a new distribution and screening system to replace the old one where the China Film Group Corp. (CFGC) enjoyed a monopoly and cinemas cheated on box office statistics.

The new system gave birth to more than 30 domestic movie distributors. Cinemas nationwide are required to join with a distributor before being permitted to show each film. Movie producers negotiate with distributors for screening schedules and box office profits are split between producers, distributors and cinemas. Cinemas must have ticket terminals in order to get their share of box office revenues.

The measures ensure an effective distribution of domestic films and accurate box office statistics nationwide. Movie production after 2002 is no longer guided by "targets" set by the government on the number and content of movies, but is "more of a question of what was needed and what people wanted," according to Tong Gang, Director of the Film Bureau at China's State Administration of Radio, Film and Television (SARFT).

After seven years of development, local studios are stronger than ever before—genres produced by these studios accounted for 56.6 percent of last year's total box office revenues.