China's Cities Race to Build an AI Film Industry as Subsidies Flow
Chinese cities are competing to attract AI filmmakers with subsidies and tech support, fuelling a fast-growing industry amid fears of oversupply and calls for clearer copyright rules.
China is mobilising its familiar industrial-policy playbook to turn artificial intelligence-generated video into a competitive industry, with local governments across the country competing to attract AI filmmakers, studios and startups.
AI filmmaker Zhu Zhili, who set up a studio in Shenzhen two years ago, said he now receives daily approaches from cities and industrial parks keen to host his business. He credited Shenzhen with offering cheap rent, a living allowance and computing support, and runs his personal studio from a shared workspace backed by the city government and Hong Kong Polytechnic University.
The incentives extend well beyond Shenzhen. Shanghai introduced measures in May to accelerate AI-powered micro-drama production, offering computing power and cloud-based AI models to cut costs and support overseas distribution. Beijing has a 260 million yuan fund for audiovisual technology, while its Huairou district offers vouchers to short AI drama producers to reduce computing costs. Hainan has provided subsidies and rent waivers that one film student said helped lower his computing expenses further.
The appeal for creators is cost. A postgraduate film-directing student in Hainan, Pan Xiaojun, said a wedding scene that would cost 60,000 yuan to shoot conventionally can be produced with AI for about 1,400 yuan. The cost of making AI short dramas fell from 5,000 yuan per minute to a few hundred yuan in the first half of 2026, according to state broadcaster CCTV. Streaming platform iQIYI is also offering subsidies to some creators of AI content, with CEO Gong Yu saying in August that the company is "all-in" on the technology.
But the rapid expansion has raised concerns about overcapacity. In the first half of the year, 221,900 new AI shows launched on Douyin, yet only 1,055 drew more than 100 million views, a common benchmark of success, according to DataEye.
There has also been pushback. Chinese actors have raised concerns about the use of their likenesses in AI films, fuelling worries over copyright infringement and job losses among voice actors, while consumers complain of plagiarism and a lack of originality. China requires explicit labelling for AI-generated content but has yet to introduce clear copyright rules.
Even so, the sector is gaining mainstream recognition. The National Film Administration has granted a public-screening licence to "Sanxingdui: Future Memories", a 90-minute science-fiction epic described as the first AI film from a major Chinese studio to receive regulatory approval for theatrical release. Producer Bona Film Group said the film is due out this year.
Chinese AI film content is also travelling abroad. Director Cao Yiwen premiered her AI-animated film at the World AI Film Festival in Cannes in April, and said she believed China was taking the lead in the industry, while France and Europe wait to see whether Beijing introduces clear laws.