At the recent FICCI Frames conference in Mumbai, Anand Mahindra, a leading industrialist and recent entrant to the film business, said he was convinced India's economy would recover more quickly than other major economies for two reasons.

First, he believes India has a great strength in its agricultural sector, which is insulated from global meltdown and employs around 60% of the population. This was good news for the Bollywood titans in the room - as India's rural audience is the bedrock of the country's $1.5bn box-office market - but less relevant for the foreign delegates.

More interesting to them was Mahindra's second assertion that consumers around the world will 'migrate very aggressively to value-for-money propositions' - so companies will outsource more, not less, to India and China. This means India's young middle class will still be able to afford $5 tickets in urban multiplexes, which in addition to Bollywood also show Hollywood and occasionally European films.

But what about now - the dark days before the green shoots of recovery - when the local industry is reeling from the impact of the global financial crisis' Last year, a surplus of capital in the Indian film business led to a massive hike in budgets and talent costs - a bubble that thanks to the credit crunch has now burst, leaving many Bollywood films sitting on the shelf.

Further east, South Korea has its own burst bubble, although its troubles can be said to pre-date the credit crunch. Indeed, all the leading Asian markets are being hit by the double whammy of external pressure and internal woes. On a macro level, the global downturn is resulting in lower exports, higher unemployment and lower consumer spending across the region. At the level of local film industries, China is still grappling with censorship and Japan with an ageing audience while young consumers are busy playing with their mobile phones.

The long-term picture across the region remains bright. Economists believe consumer spending will pick up due to falling commodity prices and fiscal stimulus measures. East Asian studios - never highly leveraged - have not cut back their production slates and new multiplexes are opening daily in China. Local sleeper hits such as Departures in Japan and Old Partner in Korea have also lifted spirits with their astonishing revenue-to-budget ratios.

But during these uncertain times, Asia is not likely to import a huge amount of product from the West. Audiences in China and Japan increasingly prefer home-grown movies, along with a few Hollywood tentpoles (see p12-15), and while Korea has recently been opening up, the rising dollar and plummeting won are making it difficult for local distributors to buy independent foreign films. In China, the authorities throw their weight behind local releases and ensure there are no runaway Hollywood successes.

There will be exceptions of course - Slumdog Millionaire is now the fourth highest-grossing foreign film ever in India with a take of $6m - and although East Asians rarely watch Indian actors, they will flock to this winning combination of cute kids, triumphant underdog and Oscar stamp of approval. But on the whole, Asia should conserve energy during the recession, building up its own reserves of talent and finance and focusing on its own strengths.

Likewise, expectations are not high that Asia will sell much product to stumbling markets in the west. Chinese producers have already realised the $40m martial-arts epics that drive their home market are a tough sell in North America and cannot recoup from China alone. Upcoming projects such as Feng Xiaogang's Tangshan Earthquake are being made for a more conservative $25m.

The downturn makes it more important than ever to adopt the right strategy in Asia. The region has huge audiences, pockets of production finance and a wealth of talent, content and material. But it should be seen as a long-term partner rather than simply a market. The best way in is to co-produce films that appeal to local audiences and work with local players who know how to market them. Hollywood has already started, with mixed results - Warner Bros' Chandni Chowk To China performed below expectations - but it was bound to be a process of trial and error.

The trick is to lay the groundwork as soon as possible because if Mahindra is right and India - if not the whole of Asia - bounces back before the west, it will be all the stronger for having spent some time in the pits.