The Chinese government is set to further relax its control over the country's film industry by allowing private companies to produce independently for the first time.

Traditionally only the state-run studios have been entitled to produce films in China, although some independent filmmakers have managed to slip through the net. However, the State Administration of Radio, Film and Television (SARFT) has announced that from February 1, private entities will be able to apply for a movie production licence on a project-by-project basis.

Foreign companies will not be eligible for a licence unless they are co-producing with a local partner.

The move is aimed at attracting private capital to the domestic film industry which faces increased competition now that China is a member of the World Trade Organisation. Amongst other measures, the country has pledged to double the number of foreign films that can be distributed on a revenue-sharing basis from 10 to 20 a year.

China is also restructuring its internal distribution system, a move which is expected to loosen government agency China Film's monopoly on the distribution of foreign films. Six regional distributors are being established which the government has suggested will be allowed to sub-distribute movies on China Film's behalf.