Part of the debate centerd around last month's establishment of the second national film distribution company, the Huaxia Film Distribution Co. Its formation broke the nearly half century monopoly of distribution rights that had been held by the China Film Group Corp, including its grip on imported films.

Huaxia is a conglomerate comprising 19 State-run domestic film studios and distributors.

The China Media Group holds a 20 per cent stake, the Changchun Film Group 10 per cent, and the China Film Group Corp and Shanghai Film Group 11 per cent each.

But the China Film Group Corp remains the sole company responsible for selecting and buying overseas films for the local market.

"For the time being, imported films, especially Hollywood blockbusters, are still the major sources of box office revenue," said Quan Qiumei, an industry analyst with the China Business Herald, despite the fact that a number of Chinese films have become hits over the past few years.

For instance, Hero, a kung fu film directed by Zhang Yimou, last year scooped 250 million yuan (US$30.4 million) in ticket sales.

The new competition will focus mainly on the distribution of domestically-made films as China still limits the number of imported films to 20 titles per year.

"The fact that shareholders of the two distribution giants overlap indicates there will still be a lack of competition in a real sense in the film distribution market," said Yin Hong, a media researcher with the School of Communications of Tsinghua University.

It is reported that the China Film Group Corp owns 10 per cent of the Beijing Century Universal Film Distribution Co.

Also with private investment and backing from financial institutions, the Beijing company controls one of the major nationwide film and theatrical release networks in China, but it is inferior to the top two -- the China Film Group and Huaxia.

The China Film Group also reportedly holds a controlling stake in the largest local distributors - Beijing Xinyinglian Film Distribution Co and Beijing Zhongying Megastar Film Distribution Co.

As the situation stands, the China Film Group has an advantage over Huaxia in both promoting domestic and imported films, experts say.

"It is far from enough just to set up the Huaxia Film Distribution Co Ltd to revitalize the Chinese film market," said Li Guoxin, deputy general manager of the Beijing company.

Although the country now has two major distributors, downstream distributors do not have any say in choosing imported films and the timetable for screening them, Li Guoxin said.

"The limited volume of imported films is far from enough for the huge market. Most Chinese cinemas are starving for films. This is an on-demand market," he said.

It is true that imported films are more diversified, in terms of genres and production locations, compared with two or three years ago.

For instance, with the implementation earlier this year of the Closer Economic Partnership Arrangement between Hong Kong Special Administrative Region and the mainland, Hong Kong films supposedly enjoy the same status as other domestic productions.

But most imported Hong Kong films, if not all, have so far failed to rival the imported blockbusters from Western countries including the United States, in terms of box office revenue, said Zhang Yong, manager of the Dongchuang Cinema in eastern Beijing.

According to China's commitment to the World Trade Organization, it will allow at least 20 overseas feature films entry into the domestic market each year and the number may rise to about 40 per year in the future.

But further steps may well be taken, such as granting film importation licences to two rival companies, instead of a single one, suggested Li Ershi, a film scholar with the Beijing Film Academy.

In this way, the film importation companies, and eventually Chinese film buffs, may have a wider range of cultural and entertainment products to choose from.

This may also help put pressure on the Chinese film industry to grow faster and stronger, and produce more films that are highly marketable, meaning they can gain a bigger share of the global film market.

"Many local Chinese entertainment tabloids keep a close watch on new TV programs, music trends, film productions worldwide, but most Chinese audiences can only read the news without real access to enjoying the products," Li Ershi noted.

Chinese people are eager to get their hands on more diversified films, Li noted, making it difficult to eradicate DVD piracy in the country.

(China Daily September 5, 2003)