Brian Ho of Sky Wonders Studio concedes that today's movie audience has many choices, and investors know that filmgoers are used to seeing big-studio quality. Sunny Boy © 2008 Sky Wonders Studio.

A relatively new area of opportunity is coproduction, although some studios have been involved with these for some time. Agogo Ent., the company's production division, which focuses on project development, financing and distribution, has been involved with coproductions on Mona the Vampire with Moonscoop and Code Lyoko with Cinar (now Cookie Jar). Meanwhile, Jade Digital has participated in coproductions with U.K., Spanish, German, U.S. and Japanese companies since 1991, and has distributed and merchandised some Japanese programs in China since 1995.

Geiger points out that some foreign studios are under the impression that they'll get both manpower and money from Chinese studios, but, in fact, most are only in a position to contribute manpower. He also notes that coproductions are subject to the same government scrutiny as proprietary films and TV shows, which can reduce their global appeal.

Government Intervention
The Chinese government plays a significant role in the animation industry. The State Administration of Radio, Film and Television (SARFT) has been increasingly restricting the amount of foreign animation on the airwaves throughout the 2000s in an effort to boost domestic production, culminating in the 2008 elimination of foreign cartoons entirely during prime time.

Domestic studios have not been able to keep up with demand; Chinese animators fill an estimated 13% of the total airtime available for animation, according to industry estimates, leading to dead air in some slots. Meanwhile, studies have shown that Chinese children prefer foreign over domestic animation. According to the Chinese Animation Association, Chinese consumers spend $2.5 billion a year on animation, but nearly 90% of that goes to foreign studios, especially in Japan. A mid-2000 survey in the magazine GoGo Top found that only one of Chinese children's top 20 favorite cartoon characters, The Monkey King, was Chinese. And other studies have indicated that only 11% of children favor Chinese TV cartoons, compared to 60% Japanese and 29% American cartoons.

The X|Media|Lab crew (l to r): Megan Elliott, director; Peili Yuan, general manager, XML China; and Brendan Harkin, founder and director, XML. © Heather Kenyon.

To encourage the growth of the Chinese animation industry, the government has taken several steps during the 2000s, in addition to restricting foreign programming. They include building "animation industrial bases" (see below); giving tax breaks to companies producing the desired content; creating national, provincial and city TV stations dedicated to children's programming; and launching international animation festivals to promote domestic fare. More schools are offering animation courses as well.

Geiger describes the animation industrial bases as campuses with four to five buildings around a quad, about five floors each, full of domestic and international companies ranging from Chinese gaming firms, to studios making Chinese TV series, to outposts of foreign studios. He spoke to a French studio with a home in one of the bases and reports, "They were getting tax breaks that would make you cry."

All this building is not without its critics, however. "Nearly all the funding support from the government has been consumed by the infrastructure construction of too many animation industry parks," says Exzine Yangtze, digital asset supervisor at XDI, a CG outsourcing company with offices in Hollywood and the Greater Yangtze Delta. She notes that there is little funding left for projects or related research. "The funding always has a hard time reaching the right place where it is really needed," she continues, noting that good talent, as a result, tends to go abroad for a better future. "It's hard to keep talent in China."

The Ministry of Culture must approve all content shown domestically. Many productions are based on traditional Chinese stories, but Western stories can be approved if they have what the government considers a proper moral message. This usually means a didactic tale with morals outlined in black and white -- evil characters must look evil and good characters look good, for example -- all of which can reduce the entertainment value of the production.