Faced with a rapidly expanding cinema sector, Chinese producers are looking to end their reliance on martial-arts epics. Sen-lun Yu looks at the new funds aiming to generate an upturn in cheaper commercial homegrown product.

Chinese film-making may be best-known internationally for its eye-popping martial-arts films and its lavishly mounted epic dramas. But now the territory is pushing to diversify its output away from mega-budget productions. This year alone, at least six new funds have been launched with a total of around $22.2m (rmb170m) to back young film-makers with projects that explore contemporary issues and low to mid-range budgets, usually $784,000-$2m (rmb6m-rmb15m).

The reasoning is clear: the local industry wants to break its reliance on expensive martial-arts pictures like Hero and Curse Of The Golden Flower, and produce a more diverse range of films to cater for China's rapidly expanding cinema market. The territory allows the theatrical release of around 40 non-Chinese films every year and film-makers are concerned these films will corner the expanding marketplace if they themselves do not produce enough commercial fare.

The new funds come from a range of private and government sources. In January, the Film Bureau of China's State Administration of Radio, Film and Television (Sarft) announced plans to give 16 film-makers, under the age of 45, $65,000 (rmb500,000) each to assist with the completion or release of a film.

Beneficiaries include Venice Golden Lion winner Jia Zhangke, Wang Xiaoshuai and director-actress Xu Jinglei. Zhang Pimin, deputy director of the Film Bureau, says that one of the body's major tasks in 2007 is to encourage film-making in diverse genres and to support the production of small to mid-budget films.

In April, X'ian City government's Qujiang Film Studio held an inaugural film festival for the work of 10 debut or second-time directors in X'ian City. The festival organisers have also announced a five-year fund worth $13m (rmb100m) to subsidise young film-makers: the 10 directors selected in the first year are eligible to apply for their next projects.

The state-owned China Film Group Corporation (Cfgc) is another company with big plans to develop new Chinese film-makers. With a $2m (rmb15m) budget this year to subsidise projects from young directors, the group is also teaming with overseas funds to develop projects. A co-production partnership set up with Taiwan-based Era International aims to make 10 films in the next three years, all with young Taiwanese and Chinese film-makers. Recently, Cfgc also announced a co-operation with IDG China Media Fund to develop five films in the next two years.

'We're very happy to hear about the new government funds. We've been waiting for something like this for a long time,' says director Wang Xiaoshuai. Wang and Jia Zhangke are generally seen as leading the 'Sixth Generation' of Chinese directors, known for their work exploring contemporary China. But despite the international plaudits - Wang picked up the Cannes Jury Prize in 2005 for Shanghai Dreams - their films often find it hard to stay in China's movie theatres for more than a couple of weeks.

However, the raft of new funds does not aim to help only arthouse directors such as Wang. They are generally market-focused, aiming to make more commercial films.

In the past three years, the box office for local films has been taken up by big-budget period dramas co-produced with Hong Kong or other Asian countries. In 2006, the top five grossing local films accounted for 45% of total local-film box office; whereas six award-winning films (including Jia Zhangke's Venice winner Still Life and Wang Chao's Cannes Un Certain Regard winner Luxury Car) claimed less than 1% of the market. The polarised situation indicates that, except for a few top-selling movies, most local films are in fact losing money at home.

'Apart from the three established film-makers - Feng Xiaogang (The Banquet), Zhang Yimou (Curse Of The Golden Flower) and Chen Kaige (The Promise) - China is lacking box-office directors, and there are almost none among younger generations,' says Gao Jun, general manager of Beijing-based cinema circuit New Film Association. 'We need film-makers that can make good and money-making films. And we believe they are out there. All they need is a little help with funding.'

To this end, New Film Association is stepping into production, with plans to establish the China Youth Director Investment Company. The fund, which will aim to invest in five projects annually, launches later this year.

The support for new blood among exhibitors such as the New Film Association reflects the change in the cinema sector. China's screen count increased by 300 last year to 3,000, and the number is estimated to increase to 5,000 screens in 2010, according to Nielsen NRG. With more screens there is an increasing demand for product, as well as more diverse movies.

Two to three local films are released in cinemas every month, each making less than $650,000 (rmb5m) on average. 'Obviously, the numbers and performance of local films could not meet with market demands. And if there are still not enough successful local films in the next two years, they will soon give in the screen spaces to foreign films,' says Guan Yadi of Beijing-based Life Pictures.

The Crazy Stone, a caper comedy by 30-year-old director Ning Hao was one of the few small-budget films to succeed at the box office. The $520,000 (rmb4m) film grossed $3m (rmb23m) in China last year and its success has set something of a benchmark.

Many local production companies prepared their 2007 slate following the Crazy Stone model: black comedies budgeted at $650,000-$1.3m (rmb5m-rmb10m) made by young directors. These production companies include China Film Group, Ming Yue Tang Film & TV Cultural Ltd (established by Daniel Yu, former COO of Focus Films) and the newly established Life Pictures.

'2007 is definitely a year with many mid-budget films emerging in the market. And we hope it will be the year of new Chinese commercial films,' Guan says.

With the funds at an early stage, the real test of China's new lower-budget commercial approach will come later this year when films such as Ning Hao's The Crazy Race and China Film's new project, My Name Is Liu Yaojin are released.