Publishing and technology companies have been forced to collaborate more closely with educational institutions, with some establishing their own training schools to deal with the demand.

More mainland-created animation is shown on domestic television stations and, since the State Administration of Radio, Film and Television opened up the domestic cartoon industry to private investors in 2004 - and with the formation of 15 animation production centres in Shanghai, Hangzhou, Dalian and other cities - the industry has begun a push towards world-class standards.

But mainland animation has not become strong enough to block out foreign competition, and the ability to compete on the same stage as American heavyweights, such as Pixar or DreamWorks, may still be more than five years away.

Research shows that more than 1.3 billion yuan (HK$1.46 billion) is spent on cartoons every year on the mainland, but more than 80 per cent of the revenue flows straight out of the country.

Liu Hongliang, managing director of Beijing Golden Pinasters Animation, a leading production house in the capital which produced the mainland's first modern 2D animation feature film, Zhang Ga, the Soldier Boy in 2005, said his company had been affected by the shortage and supported any kind of collaboration with educational institutions.

Zhang Ga was a 12 million yuan collaboration with Beijing Television (BTV) and the Youth Film Production Unit at Beijing Film Academy.

'We desperately need talented people,' Mr Liu said. 'We expect to at least double our staff within the next year and we are looking at merging with other institutions and enterprises.

'The capabilities of graduates are limited, and they cannot transfer directly to production positions because they have little idea about the basics of how to make a film. The criteria for entry into animation schools are too low. The solution is to establish a production line of talent which leads to working in the industry. The real animation film production business is about teamwork, and is very structured and organised. There needs to be more awareness of this.'

Animation covers a wide range of services, but essentially there are two categories. The first is traditional 2D cartoons or modern 3D films distributed through cinemas, DVDs or broadcast on TV. The second is for the Web, such as flash animation for corporate entities.

Xue Hao, chief director of education development for Crystal Digital Technology (Crystal CG), said: 'The biggest problem in China is the discrepancy between the skills coming through and the ability to use the new technology available.'

The firm has 1,600 employees and offices in seven mainland cities, and Hong Kong, Singapore and London.

'What the industry requires and what students have been learning in universities is not the same,' he said. 'It's practical experience and specialist skills that are in demand. There is a particular shortage of qualified animators and special effects expertise.'

In an attempt to address industry demands, eight institutions - including universities, publishers and technology companies - joined forces and set up the Tertiary Digital Art Professional Intern and Training Federation this year.

Crystal CG was ahead of the game when it established its own training college five years ago, providing the company with a steady flow of fresh talent. The college, in Beijing, encourages students to specialise in fields such as modelling (design of faces and features), animation (movement), rigging (creation of body shapes), special effects, texture and lighting or technical support. It churns out more than 1,000 graduates a year, many of whom move straight into a full-time job with the company, which expects to double its headcount within a year. Crystal CG has also expanded into the field of digital visualisation, and is the official graphic design services supplier for the 2008 Beijing Olympic Games.

Mr Liu, 45, who honed his skills working in the fledgling animation studios of Shenzhen in the late 1980s, is optimistic about the future. 'Although the trend of supplying production services to foreign companies will continue - the industry needs this to survive - homemade productions are on the verge of a breakthrough,' he said.

'Homemade films are taking more market share. The quantity and quality is increasing and, with a bigger audience, the profit will begin to come back to China rather than go overseas.'