In Olympic year in 2008, the Chinese government placed subtle restrictions on the number and nature of foreign films that could be released in the territory. This year, the 60th anniversary of the creation of the People's Republic of China, a similar mood of patriotic fervour is gripping the authorities. 'We haven't seen any sign of a loosening up in the censorship process,' says a Chinese representative of a US studio.

Despite this, the Chinese box office is booming. Total revenues grew by 27% in 2008, largely due to an increase in the number of screens but also thanks to the increasingly sophisticated marketing nous of the country's distributors.

Painted Skin, the second biggest film of last year after Red Cliff Part 1, is a textbook case for modern film marketing in China. For virtually the first time in the territory, distributor Eastern Mordor (with three state-owned distribution companies, China Film, Huaxia Film Distribution and Shanghai Eastern Film Distribution) started to promote the film six months before its theatrical release. It created talking points around the film's cast and story during media events such as the Beijing Olympics. It also used well-timed release of film stills, advertisements and trailers during Hong Kong Filmart and Cannes as well as on major Chinese TV channels.

Holiday boom

The theatrical boom is being driven by the volume and strength of releases around China's holiday seasons, and the competition among distributors is fierce. In January, when most of the country was enjoying a week's holiday during the Chinese New Year, the only time most businesses are closed, staff at the country's film distributor were among the few who did not leave their desks.

Forty films were released between late November 2008 and early February 2009, double the number of new releases in the same period last year. They included the black comedy Crazy Racer and romantic comedy If You Are The One. Theatrical revenues were up 40% in the same period to $219.3m (rmb1.5bn) from last year's $131.6m (rmb900m).

'The holiday season is a good test for a company's marketing capability,' says Gao Jun of the exhibition circuit New Film Association.

In addition to the 20 Hollywood blockbusters imported into China annually on a revenue-sharing basis, China allows in another 20-25 international films including further US blockbusters. Chinese importers pay a flat fee for mainland distribution rights.

As China's only official distributors, China Film Group and Huaxia Film Distribution do not have the capacity to handle every release. Many private distribution companies are now working with them in an 'assisted promotion' capacity. This ranges from making acquisition suggestions to helping to market and distribute foreign titles.

Teng Jun, general manager at Beijing-based distribution company Creastar, estimates there are more than 30 firms now working in the assisted promotion business, up 10 from last year. These include powerhouses such as Polybona Film Distribution, Enlight Media, Dadi Century, Creastar, Shanghai Huayu, Forbidden City Trinity and Metro-Cine.

If marketed well, a flat-fee film can gross between $2.2m (rmb15m) and $3m (rmb20m). In 2008, Creastar handled Juliusz Machulski's Polish crime comedy Vinci which took $3.2m (rmb22m), while Beijing-based distribution company Avrio's release of Korean action title D-War made $4.3m (rmb30.3m).

Despite China's import quotas, which limit private distributors to two or three films a year, more companies are moving into this arena, expecting further growth. But until the quotas are relaxed, most estimates expect the market share for flat-fee films to remain at around 10% of the total box office. 'However, the assisted promotion scheme is a good way to understand the market and we'll keep doing it. For those who want to join the film business, it's a very good start,' says Avrio's Johnny Liu.

Ultimately, companies such as Creastar, Dadi Century and Avrio all plan to enter the film production/investment and exhibition business; handling international films is a good stepping stone.

Local films up, foreign titles down

Driven by films such as Painted Skin and Red Cliff - the highest-grossing film of the year - local titles garnered 61% of the total box office in 2008. The market share for international films fell to 39%, the lowest for three years. However, the total revenue for international films was up 8% year on year. 'We are not worried about the foreign film market in China,' says Creastar's Teng.

The company handled the Chinese release of Chaos starring Jason Statham and US documentary Nanking. Its 2009 schedule includes Russian director Oleg Pogodin's Man Of East. 'It is more that the growth of local films was surprisingly high. The market as a whole is still growing and consequently the market for foreign films is still very optimistic,' says Teng.

Kung Fu Panda was the highest grossing international film in 2008, imported on a revenue-sharing basis. Two worldwide hits, Wall-E and The Dark Knight, were not released in China, however, which affected the overall performance of foreign releases in 2008.

While it is understood the censors failed to pass The Dark Knight due to its dark subject matter, the decision not to introduce Wall-E is generally seen as an underestimation of the potential for animated films in China. Kung Fu Panda was an unexpected hit as previous Pixar films have failed to generate much interest at the box office.

Some say the authorities have other ways of tempering the box office of Hollywood films.

'Sometimes you don't need to openly block a foreign film,' says one local distributor. 'All you do is a little work, for example, to let two major Hollywood hits go head-to-head. You can bring down the selling power of foreign films.'

In late 2007, Die Hard 4.0 and The Bourne Ultimatum, films with a similar target audience, premiered on the same day, even though only 20 Hollywood films a year are released in China. Both films' gross were lower than expected.

China's Top 10 International Films 2008

China At A Glance