"China adds 700 screens to its total every year, and what we have is only a small portion of them," Yu said. "We are changing our strategy to also include cinema operation in order to have a complete business portfolio."

Overseas listing

A domestic listing on the A-share market may be relatively easy since two movie and TV production studios, Huayi Brothers and Zhejiang Huace Film and TV Co. Ltd., have already set precedents. Huayi and Huace were listed at the ChiNext, the Nasdaq-style board for small and medium-sized companies at the Shenzhen Stock Exchange on October 30, 2009, and October 26, 2010, respectively.

But Yu said Polybona goals are more than financial—it wants to be China's counterpart to Paramount Pictures Corp. in seeking a U.S. listing.

"We hope we can operate the company according to international standards, raise brand awareness among an international audience, and attract more and better professionals to work for China's movie industry, in addition to raising money to support our expansion in movie production and distribution," Yu said.

Listing overseas remains a key route for venture capital firms to leave their investments in China, given the country's strict foreign exchange controls.

Through three rounds of fundraising in 2007, 2008 and 2010, Polybona has raised $11.5 million mainly from venture capital firms Sequoia Capital and SIG Asia Investments, and 100 million yuan ($15 million) from Matrix Partner China.

While eyeing an overseas listing, Polybona shifted its focus from cooperating with Hong Kong movie producers to Hollywood studios. Last June, the studio was licensed to reproduce a Paramount production, What Women Want, and invited Gong Li and Hong Kong actor Andy Lau to star in the Chinese version. Paramount Pictures also invested in the Chinese production.

In another move, the studio will produce a movie based on Hua Mulan, a legendary ancient Chinese heroine, in a joint investment with the London-based motion picture investor Global Film Finance and a Canadian studio. The movie, which stars famous Chinese actress Zhang Ziyi and is directed by Jan de Bont, who directed Speed, started shooting in Hengdian World Studios in Zhejiang Province last November.

A bigger slice of pie

In seeking a U.S. listing, Polybona also hopes to attract international capital and talent to help China's movie market grow.

China's box-office revenue has surged more than 10-fold from 900 million yuan in 2003 thanks to reform efforts in the movie sector. But compared with the U.S. movie market, where American citizens saw 4.3 movies on average last year, the Chinese only saw 0.3, said Yu.

"When every Chinese person sees at least one movie a year, China will become the world's second largest movie market with annual box-office revenue reaching 30 billion yuan ($4.5 billion)," he said. "By then, Polybona would be Asia's largest movie studio if it can maintain the present 10-percent stake of the domestic market." Yu estimates its movies will account for 20 percent of the Chinese box office this year.