China's top film executivesays Beijing may soon allow foreign exhibitors to take a majority stake in itstheatre chains and is also actively considering relaxing the country's intricaterules regarding international co-productions.

Yang Buting, chief executiveofficer of sprawling entertainment conglomerate China Film Group, told theShoWest convention in Las Vegas yesterday that the Chinese Government was easingits attitude towards foreign partnerships in order to spur more outsideinvestment in what already appears to be a surging local film industry.

At present, foreignownership stakes in Chinese theatres is limited to a maximum 49%. In addition,any co-owned theatres cannot be branded with a Westernised name, althoughWarner Bros' partially-owned complex in Shanghai already seems to have skirtedthat particular restriction.

"China's Government willfurther adjust the foreign investment limits in order to make it morefavourable to foreign investors," said Yang without specifying whether foreignentities would also be given managerial control along with their majorityholdings.

Speaking in the market-drivenlanguage that has come to define the rapidly reforming Chinese economy, Yangadded: "I believe that anyone of you investing in China will be able to enjoy avery handsome return on your investment."

At the same time, Yang suggestedBeijing is willing to ease its rules on international co-productions,particularly with regard to where official joint venture projects can shoot withoutlosing their status and how many local talents and technicians they arerequired to employ.

Foreign producers willwelcome any relaxation in what constitutes an officially designatedco-production. Because such international films are considered Chinese when itcomes to their local release, they are able to by-pass the tight import quotasthat restricts the number of foreign films that are distributed in China eachyear.

Among those leading the wayin Chinese co-productions has been Columbia Pictures Film Production Asia,whose managing director Barbara Robinson also made the trek to Las Vegas. Co-productions,she acknowledged, remained "highly regulated", with Chinese authoritiesreserving the right to script approval and final cut. However, "I can say thatfor the first time there is a real sense of optimism," said Robinson. "The rateof change at every level in China is truly mind-boggling."

So far, Columbia Pictureshas been involved in nine co-productions, seven of which were shot entirely inChina. Typically such projects are post-produced outside China in places suchas Australia and Thailand, while special effects work is carried out in the USand Hong Kong. But even this aspect of Chinese filmmaking expertise is changingsays Robinson: in the case of its upcoming epic, Warriors Of Heaven AndEarth, Columbia Pictures is for thefirst time doing most of the computer generated imagery in China itself.

With a population of 1.3bnpeople crammed into a country the size of the United States, China represents amouthwatering but so far only theoretical opportunity for both foreignexhibitors and distributors.

There are only approximately7800 recognisable movie screens in China, all of them concentrated in the crowdedcities that are home to some 400m people. Outside those densely populated urbancentres, there are another 20,000 or so crude mobile screening facilities that servethe 900m strong rural hinterlands with mostly 16mm prints.

In an effort to modernize thecountry's exhibition infrastructure, China has been at the forefront of thedigital revolution. China Film Group has spent some $20m installing 34 state-of-theart digital exhibition facilities in the last two years. By Yang's estimate,there will be 100 digital theatres operational by the end of this year - exceeding the 75 that are currently open for business in the US.

China has seen the benefitsof this rapid high-tech rollout in terms of enhanced box office results. Yangclaims that Zhang Yimou's Herowas able to gross some $30m in China alone, easily outpacing the previousrecord-holder, Big Shot's Funeral,a co-production with Columbia Pictures Film Production Asia that earned anestimated $4.8m.

An even starker illustrationof how digital technology is reaping dividends was provided by Sjoerd DeClerk,managing director of Barco Digital Cinema, which has been installing much ofthe digital projection equipment in China.

According to Barco'stallies, the digitally projected version of Star Wars Episode II was released on screens representing 1.7% of thetotal screen count in China, and yet its box office gross represented 11.6% ofthe total. The digital version of Ice Age did even better, being released on 1.7% of Chinese screens butaccounting for 14.4% of that film's total Chinese gross.

But most emphatic of all wasthe digital success of the Chinese film Red Snow. The number of digital screens that show Red Snow represented just 4.67% of the total number ofChinese theatres that played the film. Its digital box office, however,amounted to 25.13% of its eventual total gross.