-By Patrick Frater

HONG KONG -- On his just-completed swing through some of the Confucian parts of Asia -- China, Japan, Singapore and South Korea -- President Obama faced issues with which the film industry in this part of the world already is familiar.

These include issues of market access, a China that is pushing ahead as a regional superpower but already wants to play on a global stage and a string of Asian economies that largely have pulled out of recession and are out of step with a lumbering U.S.

Precisely how Asia's film industries deal with the rise of China and the new local balance of power isn't clear. It won't be without its bumps, but the biggest surprise might be how easily the rest of Asia falls in line.

"We could be entering an era of interdependence within Asian cinema," says Lee Joo-ick, a Korean producer who recently completed "The Warrior's Way," by first-time Korean director Sngmoo Lee, for Universal. "Korea, Japan and China each have their own problems, but collaboration is now making Asia bigger and stronger and more able to take on America head-to-head.

"The traditional obstacles in the way of working together in Asia were history, communications and different releasing seasons. These days, the Internet is changing that, capital is flowing more freely and the negative connotations of co-productions have been eliminated."

As the U.S and China are swapping barbs over tires and steel, Hollywood's and China's regulators are locked in a scorpionlike dance over access to the Middle Kingdom's movie market. The World Trade Organization's recent verdict mostly went in favor of the U.S. studios, but China is appealing the decision, and reparations, if any, will be made at China's speed.

Indeed, the studios that collectively will hide under the skirts of the MPA in order not to draw ire on their individual heads have little interest in damaging a golden egg of such potential. They want to crack it open, not smash it apart.

That's not to say China's fast-growing soft power doesn't have the capacity to scare the neighbors as its film and TV industries plot a course to overtake Japan in a few years' time and become the biggest entertainment market not only in Asia but also the world. China's phone and Internet populations already claim the No. 1 spot in numerical terms, though not in revenue. Chinese tastes and consumption patterns already are shaping parts of the entertainment world.

In movies, the Chinese film industry's seven-year track record of 25%-plus boxoffice growth has turned the heads of filmmakers elsewhere in Asia. Chinese grosses last year hit RMB4.3 billion ($635 million) and are on course to hit $800 million this year.

Producers in Hong Kong, Taiwan and Singapore make every film of any significant budget with one eye on the China market -- structuring films as co-productions, exploiting Chinese stories and deploying experienced Hong Kong cast and crew.

Some of Hong Kong's long-in-the-tooth stars, including Jackie Chan and Chow Yun-fat, have been given a new lease on life by the China market. After career dips, such directors as Gordon Chan, Daniel Lee and Benny Chan have enjoyed substantial China-side hits ("Painted Skin," "Three Kingdoms: Resurrection of the Dragon" and "Rob-B-Hood," respectively) and have been entrusted with budgets exceeding eight figures ("The King of Fighters," "14 Blades" and "Shaolin," respectively).

Taiwanese filmmakers have been slower to join the party as their island nation traditionally has played suspicious of China, and both territories previously have put quotas on each other's personnel and film imports.

But these days, singing star Jay Chou, actor Takeshi Kaneshiro and model-turned-actress Lin Chi-ling are huge draws in China and making the most of their common Mandarin language.

Taiwanese director Su Chao-pin is in production in Shanghai on "Jianyu Jianghu," a $12 million martial arts thriller with top Korean star Jang Dong-gun and Michelle Yeoh. Chou and Lin co-star in "Treasure Hunter," an "Indiana Jones"-style action-adventure -- directed by another Taiwanese, Kevin Chu -- that could be one of the holiday season's biggest draws in China.

For South Koreans, and more so for Japanese filmmakers, breaking into the China market has been harder and slower. But the popularity of Korean TV dramas and multiplex building by Korean conglomerates are cracking the door wider.

Zhang Ziyi's first production, "Sophie's Revenge," saw her star opposite Korean heartthrob So Ji-sub and the picture co-financed by Korea's CJ Entertainment.

Abroad, however, was the only place to go for companies like CJ, other Korean majors and the dueling telcos that have entered the media space. Korean companies enjoyed a sensational expansion of the film business early this decade, but that was followed by a downturn in local business and near-saturation multiplex building.

The CJ group has significant home-shopping interests in India and China, TV production facilities in Vietnam, an exhibition venture with Japan's T-Joy and, just last week, the film division inked a Hollywood-style development deal with Chris Columbus' 1492 Pictures.

China co-production also could prove a boon to the Japanese industry, which gives the illusion of being healthy but is balanced precariously. Local films in Japan have grabbed market share from Hollywood and claim about 60% of the boxoffice, but the spoils largely have fallen to powerhouse distributor Toho and the trio of big TV players whose film franchises often are extensions of their series (and manga comics), and which are able to cross-promote films and stars.

Elsewhere, the Japanese exhibition sector remains expensive and clogged with more than 600 releases a year. A succession of independent distributors has gone bust this year.

Co-production could be the way forward if Japan's unique system of "production committees" can be matched with Chinese firms' more freewheeling ways. Alternatively, a younger generation of Japanese producers might find that by working with China they have access to greater production finances.

Meanwhile, the MPA is unlikely to give up on its quest for China's import quotas to be lifted, for China Film Group's import monopoly to be abolished and for the number of distributors allowed to release Hollywood studio titles to be expanded from the current two.

At the same time, several U.S. studios quietly are getting on with the business of making modestly budgeted Chinese movies. Fox is completing the romantic comedy "Hot Summer Days," and Disney recently made "Trail of the Panda."

Significantly, these days the studios talk much less about using China as a low-cost location or making ambitiously budgeted Chinese films with pretensions of global appeal. Instead, the mainland Chinese and the Greater China market, which includes Taiwan and Hong Kong, are big enough to justify them in revenue terms.

There also is additional payback in terms of brand-building (especially important to Disney, with a substantial consumer products business in China and a newly approved theme park in Shanghai to build) and of "face."

Zhang Pimin, the former Xi'an studio chief who recently was elevated to vice minister in charge of film at the regulatory agency SARFT, says the Chinese industry is gradually opening up. "This is Chinese government policy, and it is our ambition to co-operate with the rest of the world."

As those inroads by Korea, Japan and others attest, that means not just with Hollywood.
-Nielsen Business Media