By Ellen Zhang and Alessandro Diviggiano
BEIJING/SHENZHEN, Sept 23 (Reuters) - When Zhu Zhili was looking for a base to set up an artificial intelligence film studio in China two years ago, there was just one clear choice: the southern city of Shenzhen with its vast tech ecosystem.
This year, AI filmmaker Zhu said he has fielded calls from officials in cities and industrial parks across China, all with the same pitch: bring your AI film business here.
"I am approached every day by a range of cities,
from major metropolitan areas to smaller localities," Zhu said, "hoping we can establish either technology or the company there."
Those appeals reflect a major push by China to embed artificial intelligence into every corner of the economy – including the latest movies showing at cinemas.
Local governments have responded by promising to build tech clusters and offering subsidies to AI filmmakers and startups. That is straight out of a familiar industrial policy playbook, treating AI-generated content the way China built electric vehicles, solar panels and robotics into globally competitive industries.
The result is a fast-emerging industry of AI filmmakers, studios and streaming platforms in China seeking an early lead in production techniques and distribution.
China has created the "best environment" for AI filmmakers with "cheap rent, living allowance and computing support," said Zhu, who also heads the AI-Generated Content (AIGC) department at China Wit Media in Shenzhen.
Zhu runs his personal studio in Shenzhen from a shared workspace with the backing of the city government and Hong Kong Polytechnic University.
FILMMAKERS DRAWN TO AI'S LOW PRODUUCTION COST
While China's all-out push for AI in film has been welcomed by filmmakers like Zhu, the industry faces growing risks familiar to other sectors showered with state support. As companies step up production of goods like cars and consumer products, domestic demand remains constrained, driving down prices in what many see as a race to the bottom.
There are signs that AI video content may already be approaching overcapacity. In the first half of the year, 221,900 new AI shows were launched on Douyin, the Chinese version of TikTok, but only 1,055 drew more than 100 million views, a typical benchmark of success, according to DataEye.
Filmmakers say they are drawn to AI by the low production costs.
In the first half of 2026, the cost of producing AI short dramas plunged from 5,000 yuan ($747) per minute to just a few hundred yuan, according to state broadcaster CCTV.
"A normal wedding scene might cost me 60,000 yuan to shoot conventionally," said Pan Xiaojun, a postgraduate film-directing student based in Hainan, southern China. "But with AI, I can bring the same surreal scene to life for just 1,400 yuan."
Pan said subsidies and rent waivers from a local government in Hainan allowed him to push his computing costs down further.
Other cities have also stepped up incentives.
Shanghai in May introduced measures 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 to support audiovisual technology. Its Huairou district, a hub of China's film industry, offers producers of short AI dramas vouchers to reduce computing costs.
Shenzhen is also stepping up efforts to attract AI film talent, offering technical support for video production, visual effects and content generation, as well as subsidised rent.
Major Chinese streaming platform iQIYI is "all-in" on AI, CEO Gong Yu said in August. It is offering some creators subsidies for AI content that streams on the platform.
PUSHBACK AND OVERLOAD
The National Film Administration has granted a public-screening licence to the 90-minute science-fiction epic "Sanxingdui: Future Memories", the first AI film produced by a major Chinese studio to receive regulatory approval for theatrical release in China.
The film is due to be released this year, producer Bona Film Group said.
While Chinese consumers have been receptive to AI-generated content, there has nonetheless been a backlash.
Chinese actors have raised concerns over the use of their likenesses in AI films, fuelling worries about copyright infringement and job losses for voice actors.
Consumers also complain of plagiarism and a lack of originality.
"Some people directly blend other people's original characters or dance clips into AI-generated content without any credit. I think that behaviour is completely unacceptable," said Wen, a 22-year-old AI content fan.
The unexpected box-office success of the crudely animated, conventionally produced film, "Niu Lai," was seen by some as a backlash against AI content.
China requires explicit labelling for AIGC but has yet to introduce clear copyright rules for it.
For now, AI film content produced in China is surging, and even going abroad.
Director Cao Yiwen premiered her AI-animated film during the World AI Film Festival in Cannes in April, and said she thought that China was taking the lead in the industry.
"France and the rest of Europe are still watching and waiting to see whether China will introduce clear laws," she said. "We fell behind in the first two industrial revolutions, so perhaps this is the Third Industrial Revolution."
($1 = 6.6955 Chinese yuan renminbi)
(Additional reporting by Kevin Krolicki, Zhiwei Feng and Josh Arslan; Editing by Philip McClellan and Michael Perry)
