A film studio in East China's Jiangsu province will spend 10 billion yuan ($1.57 billion) on developing a national digital film industrial park to produce Chinese cinema.
Wuxi Studio, which currently focuses on digital films and digital post production, will branch into film production, post-production and distribution with the money granted by the State Administration of Radio, Film and Television and the People's Government of Jiangsu Province.
The value of the massive investment is being questioned. Recent Chinese films have performed poorly at the box office and the majority of local film studios are running at a loss.
In the first six months of this year, more than 100 domestic films accounted for just 35 percent of total cinema ticket sales while just 38 imported films enjoyed a much bigger market share. According to a survey by the Institute for Cultural Industries at Peking University, more than 80 percent of film studios in China are losing money.
Wei Pengju from the Creative Culture Research School at the Central University of Finance and Economics, said amid an economic downturn there is no need to establish an elaborate studio with high land and capital costs.
Executives of the industrial park said the volume of the investment is determined through research and most of the money will be spent on hardware and supporting facilities.
The People's Daily newspaper reported that the studio, which officially opened on May 29 this year, hopes to achieve an annual output value of 20 billion yuan within three to five years.
There are currently 60 movie enterprises stationed in the industrial park, including some well-known companies such as Technicolor and Base FX, a visual effects company that has won Emmys Awards in two consecutive years.
Qi Yongfeng, professor of culture research at the Communication University of China, said Wuxi Studio could have a bright future despite the difficulties many other domestic film studios are experiencing due to financial struggles. Qi said Wuxi Studio is well positioned in the market and is up to date with current trends in film production.
Wuxi Studio's biggest rival is the State Production Base of China Film Group, which was established in 2008 in the Huairou district of Beijing. It also focuses on digital post-production and has ambitions to develop into an international film studio.
Over the past three years more than half of Chinese made films with box office receipts exceeding 100 million yuan were produced in Huairou.