By Feng Fei,,Wang Zhonghong & Zhang Hong of DRC

Research Report No 66, 2010

I. Animation Industry Is an Emerging Industry of Strategic Importance

1. Animation industry's development concerns China's juvenile growth and cultural security

Animation has an important influence on Chinese teenagers. Being an indispensable carrier of culture and art in the lives of teenagers, animation plays an indispensable role in motivating and cultivating juvenile creativeness and innovativeness. Our survey shows that 85% of primary school students like watching animated products. But many Chinese teenagers are deeply influenced by foreign animated products. It indicates that 70% of primary school students say they like Japanese, American and Korean animated products most. The cultural penetration by foreign animated products has influenced the value judgment and cultural recognition of Chinese teenagers. For example, the recent appearance of pro-Korean and pro-Japanese groups has been mostly due to the influence of animated products. If this issue is not properly handled, it will pose a challenge to the inheritance of Chinese culture and the healthy growth of Chinese teenagers. In this sense, animation can influence a country's future, concerning the growth of the next generation and the country's cultural security.

2. Development of animation industry is an important way to boost China's cultural soft strength and overall national strength

Cultural soft strength is an important component of the overall national strength. A country's strength is closely related to the global influence of its culture. After World War II, viewing the development of animation industry as a strategic task to improve its national image, Japan had, in this regard, scored a huge success. Currently, 60% of the animated products broadcast worldwide are produced by Japan. Classics such as Ultraman and Robot Cat have become known to people all over the world, which have enhanced Japan's national image. Mickey Mouse and Donald Duck, images produced by the American Walt Disney Company, have won worldwide popularity and helped spread the American culture. When China strives to become a world power, it undoubtedly needs to promote its image and spread Chinese culture across the world. As a popular mode of cultural dissemination and entertainment among the general public and especially among teenagers, animation is an effective way to present the Chinese culture to the world, boost China's cultural soft strength, and increase its overall national strength.

3. China's animation industry has a good market prospect and can promote related industries and employment

China's animation industry has a huge market potential. Its teenagers alone total about 370 million. Meanwhile, large numbers of adults can also become consumers of animated products as a result of accelerated life rhythm, higher mental pressure and the growth of animation-influenced teenagers. If China's animation industry can go abroad, its scale will become even larger. Preliminary estimates indicate that by 2015, the total annual output value of China's animation industry alone will exceed 160 billion yuan, and will exceed 500 billion yuan if the derivative industries are added. The jobs offered by the animation industry will at least double the current level. In addition, the market prospect for animation applications is also excellent. Animated promotional publicity has been used in more and more areas. Furthermore, as most of the hardware equipment and soft designs for China's animation production originate from developed countries, home-made technologies and productions will become a major growth sector for the animation industry.

4. Animation industry is also an effective way to elevate level of China's industrial design

In recent years, low design level and weak design capacity have become a major bottleneck to China's efforts to upgrade animation industry and boost international competitiveness. As animation uses high technologies to conceive a virtual world, it has been closely linked with the real-life design in various industries and in various sectors. Developing animation industry can help elevate the animation design level and the level of the whole design sector. Moreover, it can further promote the development and progress of auto industry, space industry, other industries and city planning and construction, which all have a close relationship with the design industry. II. China's Animation Industry Is in Crucial Period for Qualitative Elevation

In recent years, China has attached great importance to the development of the animation industry. The central government has established an inter-ministerial joint conference on the development of the animation industry, comprising 10 ministries and commissions, and also introduced a host of preferential policies. Regional governments have also responded with great zeal. Dozens of cities, including Beijing, Shanghai, Hangzhou, Changzhou and Changsha, have all worked out their development plans for the animation industry. So far, over 70 bases have been established across the country for the animation industry. The number of animation producers and the quantity of animated products have been rising rapidly. The number of animation producers soared from 120 in 2002 to 5,473 in 2008, and the annual output of animated products also rose from 12,000 minutes in 2003 to 130,000 minutes in 2008. Some animation producers and animated products have come to the fore. Lamb Joy and Wolf Grey, a production by the Original Power Culture Communication Co., Ltd. in Guangdong Province, has been a great success in China. Our survey indicates that 61% primary school students regard the production as one of their favorite animated products. My Own Swordsman, a production by the Beijing United Film Investment Co., Ltd., has been exported to Japan and South Korea. Animation industry alliances have sprung up one after another. They include the China Animation Publishing Industry Alliance, the Beijing Animation Game Industry Alliance, the Zhongguancun Mobile Flash Animation Industry Alliance, the Wuhan Animation Industry Alliance, and the Hangguan Animation Industry Alliance. These industry alliances have played an important role in improving industrial chains and building public service platforms.

But we must understand that China's animation industry is still in a take-off stage and has not formed a profit-making model for self growth. Most animation enterprises are enthusiastic but lack market experience. There are many animation production bases, but their operations are mostly not so good. They produce quite a few animated products, but the quality of their products is not so good. Besides, the concepts, systems, policies, laws and other factors for the development of the animation industry are yet to improve. In short, China's animation industry faces the following difficulties and problems.

1. Low economic efficiency and a mature and market-based profit-making model is yet to be formed

Compared with film and television investment, animation production is noted for long cycle, low screenplay pay, high investment risk and low profitability. Many animation producers derive their incomes mainly from the purchases by television stations at prices far lower than production costs. Many animation producers do not even have chances to be broadcast by television stations. Accordingly, animation enterprises are mainly depending on the subsidies from government and other industries to survive. Investigations indicate that over 85% of Chinese animation enterprises are losing money. If this situation continues, it will dampen the enthusiasm of investors and operators and impede the development of the budding animation industry.

2. Creation capacity is low and few works have good plots, images and market prospects

Animation is a creation-based industry. One of the reasons why China's animation industry does not have good economic efficiency is because it lacks creation and lacks works with excellent contents, images and market values. Only a fraction of the annual 100,000-minute productions can claim to be qualitatively good. Most enterprises are engaged in processing with supplied materials. Some original works are noted for narrow field of vision, repeated subject material, childish preaching, dull plot, and boring images. Many are even clearly copied. Some works have good plots and images, but do not have market awareness. So they are difficult to sell and have limited potential to develop, let alone the development of derivative products. Besides, the fact that most hardware and software for animation production originate from foreign countries is also a constraint to the development of China's animation industry.

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