Hou Hsiao-hsien's long-awaited martial arts fantasy The Assassin has become the first film to secure direct investment from Taiwan's National Development Fund.

The script is based on a fantastical Tang dynasty (618-907 A.D.) short story about female assassin Nie Yinniang who can conjure horses out of folded paper and transform her hairpin into a flying spear. Hou has stated that the film will be more in the style of Japanese animator Hayao Miyazaki than recent Chinese blockbusters.

The Assassin is the first film to receive direct investment from the NDF, which can only invest a third of the budget up to a maximum of $3.2m. The NDF will invest $2.6m of the film's $8.7m budget and become an equity shareholder in the film. Local computer manufacturer Asus has also invested approximately $3m.

Local industry reaction has been mixed. Director Kevin Chu told local press that he was also approached by the Government Information Office (GIO) to apply for the fund before shooting his basketball film Kung Fu Dunk, but he was confident of the success of his own film and didn't want to share profits with the government.

The GIO awarded The Assassin a $480,000 subsidy in December 2005. While regulations demanded that the film be completed within eighteen months, Hou has received a series of extensions. The film is now expected to begin shooting in March 2009 with Shu Qi in the title role for theatrical release in October 2010.

Established in 1973, the NDF has primarily invested in high-tech, pharmaceutical and biotechnology industries. The fund, which is managed by the executive branch of Taiwan's government, set aside $640m in June 2005 to invest in the digital content, software and creative industries over a period of five years.