On the heels of its success with five-screen Cinema City in Shekou, Shenzhen, the Hong Kong-based Intercontinental Group, backed by Japan's Kadokawa Holdings, plans to build its second multiplex in Mainland China.

Rigo Jesu, managing director of the Hong Kong-based Intercontinental Group, said here at Filmart that Intercontinental's exhibition subsidiary Multiplex Cinema Ltd (MCL), would open a new six-screen site at the end of 2008, also in the southern city of Shenzhen.

Jesu said the expansion of the exhibition sector, not production or distribution, was key to the predicted Chinese cinema boom. 'Until there is a strong infrastructure of cinemas, the film business can never grow,' he said.

MCL Cinema City became only the 28th site in China to get the highest five-star rating, which means it gets Chinese government preference for mass purchase of tickets.

Jesu said another key to the complex's initial success was the level of service. 'Some of the other cinemas in China may have the right technology don't have the right services and maintenance and customer service,' he said.

Jesu noted that MCL was able to charge about 20% more per film ticket in China than in its Hong Kong cinemas, by targeting the top 3% (most affluent) of the Chinese market.

When the wide-ranging partnership between Kadokawa and Intercontinental was announced in November 2005, the companies said they planned to open ten luxury cinemas in China.

'Kadokawa and Intercontinental decided that MCL should spearhead the move into China. We decided joint ventures with mainland China weren't the way to go,' Jesu said. 'CEPA offered an extremely good opportunity for a local company to move into China as a wholly-owned company.'

CEPA, or the Closer Economic Partnership Arrangement, between the Chinese and Hong Kong governments, lets select Hong Kong companies operate under different rules in China. Warner Bros International Cinemas recently withdrew from the Chinese market after the Chinese government ruled in late 2005 that foreign companies couldn't hold majority stakes in exhibition companies.

Also speaking at Filmart, Kadokawa chairman Tsuguhiko Kadokawa said that the company's alliance with Intercontinental Group Holdings was an important venture and that he would like to go forward with an initial public offering (IPO) in the Hong Kong Stock Exchange.