Market potential

The high level of investment interest is being spurred by the industry's big potential. A survey by research firm EntGroup Inc shows that 30 times more people in the US go to the cinema than in China, a gap investors are keen to close.

However, Zhao from Sparkle Roll is suspicious of the findings. "Only a part of Chinese society is able to watch movies in cinemas and that doesn't include the rural population. So we have to consider the local conditions when predicting the potential of a market," she said.

She added that the gap between the US and China was not so big if only urban residents were counted.

There were 620 million people living in China's cities by the end of 2009, 46.6 percent of the nation's total population. This was an increase of 163 million from 2000, according to the 2010 City's Blue Book issued by the Chinese Academy of Social Sciences and the Social Sciences Academic Press. By 2015, it is estimated urban residents in China will make up about 52 percent of an even higher total population.

A survey by Wanda showed that only 9 percent of city residents watch movies in cinemas, while 70 percent prefer to watch films through the Internet and on DVD. Twenty percent of residents rarely watch movies.

"The 90 percent (of non-cinema-goers) are all our target customers so the potential is huge," Ye from Wanda said.

At present, revenues at cinemas come mainly from box office receipts, half of which is distributed to cinemas, 20 percent to distributors and 30 percent to the movie producer.

Zhang expects his film will make more than 10 million yuan this year. He is famous for directing low budget art house films. Distant Thunder cost 5 to 6 million yuan to produce.

Foreign blockbusters are also believed to be a catalyst for China's fast-growing box office receipts. James Cameron's Avatar accounted for 18 percent of China's total box office revenue for the first nine months of this year, according to the State Administration of Radio, Film and Television.

"To be more attractive when competing with foreign films, Chinese directors should draw a story tailored to the tastes of global audiences instead of just the Chinese," Zhang said.