These are troubled times for Shanghai's film industry. By all indications, the city is gradually finding its feet as the mainland's business and financial powerhouse, and is looking confidently to an even bigger role in the country's emergence as an economic giant in the new millennium. But when it comes to making movies, the script is going badly wrong. Shanghai's once-powerful production industry is struggling to make films that leave any impression on the city's 13 million residents, let alone the mainland's 1.2 billion population. Today the city that launched the mainland's movie industry 90 years ago makes only a few films a year, compared with its pre-1949 heyday, when almost all mainland-made films were produced there. 'The country is expected to make 50 to 60 films this year, a post-1949 low, and Shanghai's share is no more than 10,' said Shanghai-based director and producer Xie Jin. His 1997 blockbuster Opium War earned a record 70 million yuan (about HK$65.28 million) at the mainland box office. His company, Xie Jin Zhong Lu Film and Television, is one of Shanghai's three main production companies. The other two are Shanghai Yong Le Films and Shanghai Films Group. This is a far cry from the 1920s, when Shanghai ruled the movie world with more than 100 film companies producing about 700 movies. So why are things so bad? On the surface, Shanghai's film woes are a reflection of a bigger national problem - viewers feel that mainland productions tend to be badly scripted and produced, and so they cannot withstand competition from Hollywood. 'Hollywood films are much better-made than Chinese films, with lively story ideas, writing, and acting - more fast-paced and exciting for audiences - and we know it,' said one Shanghai film industry insider. Wang Aimin, business manager at the city's oldest cinema Guotai, said: 'Movie fans, after having seen better-produced Hollywood movies, are more fussy about what to watch these days.' At least half of the country's yearly box office revenues of about 1.5 billion yuan, goes to imported Hollywood movies, according to estimates. The country restricts Hollywood imports to eight to 12 a year. While figures on losses in the mainland film industry are not available, one industry source admitted: 'It is not an exaggeration to say that nine out of 10 mainland films do not make money.' The cost of a typical mainland production is about three million yuan, but most films are lucky to recoup less than half that at the domestic box office. Most mainland films are made by the 16 leading government-backed provincial studios, and, as usual, lose money. 'Yet foreign films are not the major cause of the mainland industry's woes. It was already in dire straits before imported movies were allowed in from 1995,' Mr Xie said. The crux of the industry's problem, as with other state sectors, is that key decisions about what films to make and when to release them are decided by the government and propaganda machines - not the film-makers. 'We have producers and production studios which make films to please government leaders, film critics and judges of film awards - not for the film-going public,' Mr Xie said 'Naturally, after a while, the studios and producers lose the ability to judge for themselves what the public wants.' Shanghai, the 'cradle of Chinese cinema', had to contend with Jiang Qing, who found greater public recognition - and eventual notoriety - away from the camera, as wife of Mao Zedong and one of the hated 'Gang of Four'. In a swipe back at Shanghai, where she was never feted as a major talent (she was a minor actress pre-1949), she helped strangle the industry's creative freedom and talent during the 10-year Cultural Revolution. To a large extent, these have never been restored. Under government policy, Shanghai cinemas must allocate two-thirds of viewing time to domestic productions, and the rest to imported films. This directive is aimed at protecting the faltering mainland film industry from bigger, generally slicker, big-budget Hollywood films which are subject to the eight to 12 imports a year restriction. Hollywood studios are fighting to increase this annual quota to an initial figure of about 40 films, as part of Beijing's entry price into the World Trade Organisation. Beijing has jealously guarded its domestic film industry. It fears not just competition from Hollywood, but a tide of American popular culture which could undermine the Communist Party's authority. Jack Valenti, chairman of the Motion Picture Association of America, said in March he hoped to lift the limits on the number of Hollywood films shown in the mainland in a move linked to Beijing's WTO bid. His plan has naturally triggered howls of protest from within the domestic industry, which makes many films which go virtually unwatched. Not that the restriction on Western films seen in the mainland works well in practice. Thanks largely to Asia's highly-lucrative pirate video compact disc trade, high-quality copies of all the leading US box-office hits can be bought within weeks of their big-screen releases from suitcase vendors on many Shanghai streets - indeed throughout the mainland - for as little as five or six yuan. All this means that the masses have acquired a healthy (or perhaps, in Beijing's opinion, unhealthy) taste for Western films, replete with car chases, expensive special effects, crashing soundtracks and dynamic editing techniques that Shanghai film-makers and their mainland colleagues can only dream about. Unless the mainland cultural commissars relax their monopolistic and ideological grip on the industry, and encourage government studios to make commercially viable movies, things will stay bad or get even worse, especially with the probable import of more foreign films after Beijing's WTO entry. There are, however, signs that Beijing is waking up to the challenge, with independent film studios, previously not permitted, in Shanghai and elsewhere slowly starting to make films the public want to see. Recent reports say mainland film-makers will spend millions of yuan buying from the US and Germany state-of-the-art technology, such as digital recording equipment, computer-aided operational systems, lighting and cameras. This equipment is destined for use at Changchuan Film Studios, one of the mainland's top three film-makers. More significantly, a handful of smaller independent studios such as Yima Film Studio and Mr Xie's Xie Jin Zhong Lu Film and Television have opened up in the past few years to produce commercially-driven films using improved technology. In Beijing, a government-linked studio, Zijincheng Film Studio, has been given more artistic leeway to make films and has produced several critically-acclaimed and profitable movies such as Jia Fang, Yi Fang (Party A and Party B) and Bu Jian Bu San (Be Here or Be Square). Those films and a third, Liang Xin (Conscience), all earned three million yuan from ticket sales in Shanghai alone, and about 10 times that across the country. 'These are a handful of popular movies which suit the mood and tastes of the domestic audience, and are well-produced,' said Mr Wang. 'It shows domestic studios can make good movies if they try harder.' Hollywood has no need to look over its shoulder. At least, not for a while.