It has been a year of ironic contradictions for the Hong Kong film industry. Undeniably, local producers are still struggling with falling production levels, as investors put resources into fewer but larger films, and local box office for home-grown productions continues to shrink.

Yet despite the gloom, Hong Kong talent has probably not had such a high profile internationally since John Woo first blazed a trail in Hollywood. Over the past year, leading directors Wong Kar-wai, the Pang brothers and Andrew Lau have all made their English-language debuts with major US and European studios and talent. Johnnie To is about to follow suit with a remake of Jean-Pierre Melville's The Red Circle for StudioCanal. Meanwhile, Hong Kong has reaffirmed that it is a hot place to source remake material following the success of The Departed, Martin Scorsese's Oscar-winning remake of Infernal Affairs.

But this time around, the talent drain is not all one way. With the growth of the mainland China market, film-makers such as Woo and Taiwan-born Ang Lee increasingly return to Asia to make Chinese-language films.

And therein lies the dilemma for Hong Kong producers. As the Hong Kong box office is tiny, and the global market for Chinese-language films remains limited, all hopes are pinned on the China market, which remains complicated despite the access that Hong Kong enjoys via the Cepa trade agreement. Apart from piracy, censorship and the lack of screens, the experience of the past few years appears to prove that only big-budget Mandarin-language costume epics work in China.

'It's like the early 1980s in Hong Kong - people want big films when they splash out on a cinema ticket, so they feel like they're getting their money's worth,' says Emperor Motion Pictures CEO Albert Lee. 'It's those films in the $1.3m-$2.6m (hk$10m-hk$20m) range that are the riskiest investments. There's also the substantial p&a costs for mainland China that can almost double your budget.'

Also, due to cultural differences, Hong Kong comedies often leave mainland audiences cold, while gritty crime thrillers struggle with the censors. However, some films appear to be bucking the trend. Media Asia's crime thriller Confession Of Pain grossed a healthy $9.4m (rmb73m) over Christmas, despite going head-to-head with Curse Of The Golden Flower, and the distinctly unseasonal drugs thriller Protege grossed $6.8m (rmb53m) over Chinese New Year.

'We're keeping a close eye on developments like these as it shows there are opportunities for producers,' says Fortune Star Entertainment general manager Peter Poon. 'We're also watching films like (Huayi Brothers' suspense thriller) The Matrimony. If films like that can work within the limits of what kind of horror films are allowed in China, then it opens up a whole new genre to independent producers.'

Under the third phase of Cepa, introduced last year, Hong Kong films can be released in their original Cantonese-language versions in the neighbouring Guangdong province. But while this expands the Cantonese-speaking audience for Hong Kong films, they still have to pass censorship, and box-office success is by no means guaranteed. Much more encouraging is the recent announcement by Hong Kong's financial secretary Henry Tang that the government has set aside $38m to create a fund to support local film production and foster new talent. Tang also said that the long-gestating Film Development Council will soon be established.

The industry is also lobbying for new legislation on illegal downloading which has had a huge impact on theatrical and video revenues. Changes to copyright legislation, including criminalising illegal downloading, are currently being debated via a public consultation document issued at the end of last year.

But Hong Kong has to tread carefully if it wants to maintain its image as a communications hub with a free flow of information. Indeed it is these traits, along with its efficiency and access to the China market, that give Hong Kong a future as a hub in the rapidly evolving pan-Asian film market. Last October, for example, Japan's Avex Group followed fellow Japanese major Kadokawa in setting up a beachhead in Hong Kong to strengthen its regional ambitions.

'We're in the business of making commercial films and the creative community and industry for mainstream movies is still here in Hong Kong,' says Avex Asia managing director Buddy Marini. 'We feel we need to get close to that industry which is going to help shape the mainland Chinese industry.'

Hong Kong Top 10, 2006
1.Pirates Of The Caribbean: Dead ... $4.6m (hk$35.8m)
2.The Da Vinci Code $4.5m (hk$34.8m)
3.The Chronicles Of Narnia: $3.93m (hk$30.6m)
The Lion, The Witch And The Wardrobe
4.Mission: Impossible III $3.9m (hk$30.4m)
5.Fearless $3.88m (hk$30.2m)
6.Superman Returns $3.3m (hk$25.6m)
7.Rob-B-Hood $3m (hk$23.5m)
8.X-Men: The Last Stand $2.7m (hk$20.7m)
9.Eight Below $2.3m (hk$18.1m)
10Casino Royale$2.1m (hk$16.5m)
Source: Motion Picture Industry Association. Information accurate as of December 31, 2006


$116.5m (hk$907m) - Total box office in 2006: up a marginal 0.22% from 2005. Local productions had a market share of 31%, around the same as the previous year.
51 - Number of local films released in 2006: compared with 55 the previous year.
47/182 - Number of cinemas/screens as of March 2007: (compared with 53 cinemas with 198 screens as of March 2006).
Source: Motion Picture Industry Association.


China may have fallen from the good graces of global media giants over the past year, but the growth of its film market continues to create ripples across the region. Box office for local and foreign films is still climbing, investment is pouring into new multiplexes and local producers are churning out greater numbers of films.

Local productions also continue to win plaudits overseas, for example Wang Quanan's Tuya's Marriage took this year's Berlin Golden Bear.

But behind the bumper figures lies a private production and distribution industry that is still in its infancy and fettered by government controls. There has not been much improvement over the past year on issues such as piracy, censorship and the lack of a ratings system. Indeed, while Tuya's Marriage was feted in Berlin, the other Chinese film in competition, Li Yu's Lost In Beijing, fell foul of Chinese censors.

Overseas investors are also frustrated as China has stalled on approving new production joint ventures and rescinded a scheme that allowed majority stakes in exhibition ventures, prompting Warner Bros International Cinemas (Wbic) to quit the market. And although there have been some developments in distributing foreign movies in China (see page 16), it does not look as if the annual quota of 20 revenue-sharing imports will be widened soon.

However, it seems the nation's cinema market has started to pick up momentum and will roll on regardless. Local, Hong Kong and other Asian companies, such as Korea's CJ Entertainment and MK Pictures, are pumping investment into new multiplexes and there are signs that a cinema-going culture is starting to take root. There is always the risk that other film distribution channels, such as the internet, will propagate faster but then the people investing in bricks-and-mortar are not solely relying on film content.

'We don't worry about TV, internet and online gaming taking away audiences because with digital cinema and satellite transmission you can deliver all of that inside a theatre,' says Qin Hong, chairman of Stellar Megamedia which co-owns China's third largest circuit with China Film. Due to a government-led investment programme, China already has around 200 digital screens.

Over the past year, there has also been a huge increase in production investment, with new players appearing to spring up almost daily. But in this gold rush era it is difficult to tell who is going to go the distance. Only a handful of companies, such as Huayi Brothers and Polybona, have a track record in production financing or have the know-how to distribute and market a film.

Polarised market

Ever since Hero kick-started the market in 2002, local productions have been polarised between 'da pian' - big-budget costume epics that perform well at home despite diminishing returns overseas - and much smaller films that struggle to secure a theatrical release. But over the past year, there have been signs that more diverse genres can succeed. Ning Hao's low-budget comedy Crazy Stone grossed a healthy $3m last summer and suspense thriller The Matrimony performed well over Chinese New Year.

'Small films are starting to do better because, with the increase in screens, there is more competition between theatres and ticket prices are coming down,' says Polybona CEO Yu Dong.

As for the da pian, state-owned China Film has been positioning itself as a one-stop shop for both local films and overseas co-productions. A new financing model has emerged whereby China Film lines up private investors, in some cases several for one project, from the burgeoning ranks of domestic production companies. Its aim is to create a string of home-grown blockbusters with international potential. Forthcoming films that employ this model include Stephen Chow's A Hope, Peter Chan's The Warlords and John Woo's Red Cliff.

The advantage for the local production companies - such as Chengtian Entertainment which is investing in both The Warlords and Red Cliff - is that they learn the ropes and raise their profile by aligning themselves with bigger films. Other companies, such as Cheerland Films which is co-producing Roger Spottiswoode's Children Of Huang Shi, achieve this by working directly with overseas producers. 'China's film market only opened a few years ago so we're all striving to find our own method of operation,' says Cheerland general manager Hou Li.

Meanwhile, the US studios are forging ahead with Chinese-language co-productions, touted by the authorities as the most effective method of market access. Fox is the most recent to join the fray with the Gordon Chan-scripted Gold Bandits. Warner China Film HG Corp, the only film production joint venture to be approved so far, is also having a busy year. It has just released hit comedy Call For Love and is developing Ning Hao's next project, Crazy Racer.

China Top 10, 2006
1.Curse Of The Golden Flower $32m (rmb250m)
2.The Banquet $16.6m (rmb130m)
3.The Da Vinci Code $13.4m (rmb105m)
4.King Kong $13.1m (rmb102m)
5.Fearless $12.9m (rmb101m)
6.Rob-B-Hood $12.4m (rmb97m)
7.Mission: Impossible III $10.5m (rmb82m)
8.Poseidon $8.8m (rmb68.9m)
9.Battle Of Wits $8.6m (rmb67m)
10.Superman Returns $8m (rmb62.5m)
Source: State Administration of Radio, Film and Television (Sarft). Information accurate as of December 31, 2006


$335.5m (rmb2.62bn) - Total box office in 2006: up 30% from 2005. Local productions, including co-productions with Hong Kong, had a market share of 55%.
330 - Number of films produced in 2006: compared with 260 in 2005. More than 100 were digital productions, up from 52 the previous year. Only 30% of the 330 local productions managed to secure a theatrical release.
70/300 - Number of new cinemas/screens in 2006: China now has around 1,300 cinemas with 3,000 screens.
Source: State Administration of Radio, Film and Television $335.5m (rmb2.62bn)
Total box office in 2006: up 30% from 2005. Local productions, including co-productions with Hong Kong, had a market share of 55%.
330 - Number of films produced in 2006: compared with 260 in 2005. More than 100 were digital productions, up from 52 the previous year. Only 30% of the 330 local productions managed to secure a theatrical release.
70/300 - Number of new cinemas/screens in 2006: China now has around 1,300 cinemas with 3,000 screens.
Source: State Administration of Radio, Film and Television


Dir: Feng Xiaogang
Cast: Huang Xiaoming, Zhang Hanyu, Deng Chao
Prod cos: Huayi Brothers (Ch), Media Asia (HK)
Int'l sales: Felice Bee, Huayi Brothers (86) 10 6457 0490

Dir: Wilson Yip
Action dir: Donnie Yen
Cast: Donnie Yen, Louis Koo, Collin Chou
Prod cos: Mandarin Films (HK), Polybona (Ch)
Int'l sales: Mandarin Films (852) 2579 1718

Dir: Andrew Lau
Cast: TBC
Prod cos: Fox (US), Beijing Ciwen (Ch), Fortune Star (HK)
Int'l sales: Fortune Star Ent't (852) 2621 8888

Dir: Stephen Chow
Cast: Stephen Chow, Zhang Yuqi, Yuen Qiu
Prod cos: Star Overseas (HK), China Film (Ch), Polybona (Ch)
Int'l sales: TBC

Dir: Sammo Hung
Prod cos: Sundream Motion Pictures (HK), Huayi Brothers (Ch)
Int'l sales: Sundream Motion Pictures (852) 2112 6388

Dir: Benny Chan
Cast: Nicholas Tse, Shawn Yue, Jaycee Chan
Prod cos: Universe Entertainment (HK)
Int'l sales: Universe Films Distribution (852) 2416 3008

Dir: Chen Kaige
Cast: TBC
Prod cos: China Film (Ch), Chengtian Entertainment (Ch), Huayi Brothers (Ch)
Int'l sales: TBC

Dir: Lu Chuan
Cast: TBC
Prod cos: China Film (Ch), Stellar Megamedia (Ch), Media Asia (HK)
Int'l sales: TBC

Dir: John Woo
Cast: Chow Yun-fat, Takeshi Kaneshiro, Lin Chi-ling
Prod cos: Lion Rock Productions (US)
Int'l sales: Summit Ent't (1) 310 309 8400

Dir: Christina Yao
Cast: Aaron Kwok, Hao Lei, Jennifer Tilly
Prod cos: Crystal Clear Pictures (HK), Arc Light Films (Taiwan)
Int'l sales: TBC

Dir: Jiang Wen
Cast: Jiang Wen, Anthony Wong, Jaycee Chan, Joan Chen
Prod cos: Buyilehu Films (Ch), Emperor Motion Pictures (HK)
Int'l sales: Emperor Motion Pictures (852) 2835 6688

Dir: Daniel Lee
Action dir: Sammo Hung
Cast: Andy Lau, Maggie Q
Prod cos: Visualizer (HK), Taewon Entertainment (S Kor)
Int'l sales: Taewon (82) 2 2017 0000

Dirs: Tsui Hark, Ringo Lam, Johnnie To
Cast: Simon Yam, Sun Honglei, Louis Koo, Kelly Lin, Lam Ka-tung
Prod cos: Milkyway Image (HK)
Int'l sales: Celluloid Dreams (33) 1 49 70 83 23

Dir: Peter Chan
Cast: Jet Li, Andy Lau, Takeshi Kaneshiro, Xu Jinglei
Prod cos: Morgan Chan Films (HK), Media Asia (HK), China Film (Ch)
Int'l sales: ARM Distribution (852) 2366 1622/Media Asia (852) 2314 4288

- For further details of projects visit www.ScreenDaily.com/hongkong.