After a strong showing atthis year's Venice and Toronto film festivals, not to mention a few big hitsover the summer, Hong Kong producers currently have several reasons to feelconfident. But the trend towards declining production numbers is unlikely to bereversed before the end of the year.

Although Media Asia's mangaadaptation Initial D and Tsui Hark's Seven Swords - both of whichscreened at Venice - outperformed US blockbusters in Chinese-speakingterritories this summer, the overall market share for Hong Kong productions intheir local market has continued to shrink.

Meanwhile, the success ofthese two big-budget action titles means the industry will continue to focus ona smaller number of more expensive films.

"The summer was encouragingbut the mood in the industry is still quite cautious," says UniverseEntertainment COO Alvin Lam. "Most companies will keep on producing but it'sbecome more important than ever to find stories that work outside Hong Kong."

Indeed, the pan-Asianmarket, with China at its epicentre, is now the driving force in Hong Kongfilm. However, the fast-growing mainland market still has its limitations asthe producers of Wong Ching Po's stylish gangster flick Mob Sister (aka AhSou) discovered in August when the film's mainland release was delayed foralmost a week. Mainland film censors still frown on horror and violent ortriad-themed films but it's precisely this type of product that is Hong Kong'scalling card in the West.

"It seems we're now makingtwo kinds of films," says Media Asia executive director and production chiefJohn Chong. "On the one hand there's the China market, which has never beenmore important, but we're also looking at Europe and the US."

Seven Swords, which grossed more than $10m in China over thesummer, confirmed that period action films and dramas are the safest bet forthe mainland market and there are many in various stages of production.Sundream Motion Pictures is about to start shooting $16-18m Battle Of Wisdom,a co-production with Beijing-based Huayi Brothers, starring Andy Lau anddirected by Jacob Cheung. Huayi is also teaming with Media Asia to makemainland director Feng Xiaogang's $20m The Banquet, which has Zhang Ziyiheading the cast.

In addition, Ronny Yu's Fearless,starring Jet Li, wrapped over the summer and producer Bill Kong is next workingon an untitled period drama to be directed by Zhang Yimou and star Gong Li andChow Yun-fat.

Universe is planning abig-budget period action film to be directed by Benny Chan and Visualizer FilmProduction is developing a project based on the classical Chinese novel, RomanceOf The Three Kingdoms, which has Daniel Lee attached to direct. Thenthere's a string of pan-Asian blockbusters to be released before the end of theyear. Stanley Tong's The Myth, starring Jackie Chan, begins it pan-Asianroll-out on September 23 and will be followed by Chen Kaige's The Promiseand Jeff Lau's A Chinese Tall Story in December.

Meanwhile, the other kind ofHong Kong film - gritty gangster thrillers - also remain firmly in evidence.Wilson Yip's SPL is set for release in Hong Kong on November 18following its premiere in Toronto. In addition, prolific director-producerJohnnie To, who has recently become an international festival favourite, isworking on a follow-up, though not strictly a sequel, to his Cannes competitionentry Election and is also planning a gun-fighting movie, Exiled,set to star Anthony Wong and Francis Ng, for Media Asia.

The recent trend towardspan-Asian or international production inevitably leads to the age-old argumentof quantity versus quality. The shift towards big-budget films and longerpost-production periods has resulted in higher production values and majorinternational stars such as Jackie Chan, Jet Li and Chow Yun-fat have all beenlured home. But the falling production numbers mean there are fewer films tokeep everyone working, groom new talent and lift overall market share.

For full Hong Kong listings, see's production listings section