Hong Kong's overall box office leapt 11% to just over $129.6m (hk$1bn) in 2007, marking the first time the territory's box office has bounced back above the hk$1bn level since 2001.

The increase was due partly to new cinema openings, strong US studio product and a strengthening economy. Last year, the Lark Group's UA Cinemas opened Hong Kong's first Imax cinema, the seven-screen UA MegaBox in Kowloon.

In addition, Intercontinental Group's Multiplex Cinema Limited (MCL) joined forces with Shaw Property Holdings to open Hong Kong's biggest multiplex, the 12-screen Grand Cinema, also in Kowloon.

'Audiences are constantly looking for new cinematic experiences, so we have to introduce new elements such as 3D titles to stay competitive,' says MCL general manager June Wong.

Hong Kong's major exhibitors - Lark, Intercontinental, Golden Harvest and Broadway - are also helping to build China's exhibition infrastructure, encouraged by a ruling under the Cepa trade agreement that enables Hong Kong companies to wholly own cinemas on the mainland.

Producers such as Mei Ah Entertainment are also considering investments in mainland retail and entertainment complexes, while John Sham's Dadi Cinemas has built a digital cinema chain with 17 screens across Guangdong.

'Our strategy is to open cinemas in second and third-tier cities and reduce ticket prices,' says Sham. 'We can release blockbusters like Harry Potter at the same time as first-run markets. Before, (these) cities had to wait a few weeks for prints.'

Sham's venture highlights the further integration of the Hong Kong film industry into the mainland market. And while Hong Kong players establish mainland ventures, Chinese companies are also investing in Hong Kong.

Last year, Beijing-based Chengtian Entertainment acquired a controlling stake in one of Hong Kong's oldest studios, Golden Harvest, while Chinese investor Brandon Wen Rui Feng bought a 21% stake in production outfit BIG Media Group from Mei Ah.