There was cautious optimism among Hong Kong producers at thestart of the year as the box office appeared to be recovering and mainlandChina opened its doors through the much-vaunted Cepa trade agreement.

But after a dispiriting summer - during which localsfilms were flattened by the US competition and production levels started tofall - talk turned once again to crisis measures and how to tackle onlinepiracy.

As the year drew to a close, the industry was waitingnervously for the release of Stephen Chow's Kung Fu Hustle in the hope that Hong Kong's biggestbox-office draw would bring the audience back to local films.

Overheard this year

'Cepa has certainly encouraged us to look at Chinamore seriously. Most companies are looking at co-producing, because it allowsour films to be shown in China as if they're a local production, whichpossibly gives us an edge over American films.' Albert Lee, CEO of Emperor Motion Pictures, talkingabout the Cepa trade pact between China and Hong Kong.

'Not manypeople are making these kinds of films because they take a long time to packageand with the fast food culture of Hong Kong, people don't have that muchtime to waste. In Hong Kong you package and shoot a film in two months becauseyou can't afford not to.'Applause Pictures co-founder Peter Chan comments on the global successof Hong Kong-China co-productions such as Hero and House Of Flying Daggers.

'We nolonger have the vehicles to launch new stars. We used to have stars coming outof [local broadcaster] TVB's training school, but now actors stay in TVand the medium has become alienated from the film industry.' ProducerCarl Chang on Hong Kong's talent shortage.

'Downloading is the greatest threat facing ourindustry - even the pirates are being forced out of business.'Woody Tsung, chief executive of the Motion Picture Industry Association.

The year ahead

'Mybiggest hope is to discover more great new talent in Asia. My greatest fear isillegal downloading on the internet spreading freely around the world andgovernments sitting back and not doing anything about it. Bill Kong, executive director,Edko Films.

'I hope the Hong Kong SAR government will set up amedia/content development board which will aggregate local and China resourcesto make great Chinese-language films.'Nansun Shi, executive director, Film Workshop.

Box office snapshot

Highest-grossing film: The Day After Tomorrow (Fox) $5.4m (hk$41.6m)

Highest-grossing arthouse film: The Passion Of The Christ (Fox) $2m

Highest-grossing local film: Fantasia (China Star) $3.2m