China's box-office dominance was accelerated by the pandemic and it has big implications for Hollywood's future

• China is projected to be the box-office champion of the future in the wake of the pandemic.
• The Chinese theatrical industry will continue to grow as the US box office slowly recovers.
• Local movies have put China over the top, but experts say there's hope for Hollywood releases.

China had for several years been projected to dethrone the US as the world's largest theatrical market. But the coronavirus pandemic accelerated its ascent, and pushed it over the top, as it surpassed North America last year with $2 billion.

Before the pandemic, the research firm Ampere Analysis had projected China to overtake the US by 2022. Now, it expects China to remain the No. 1 market in the world indefinitely, as the US theatrical market slowly recovers from the pandemic.

The company projects the Chinese box office to earn $6.9 billion this year compared to $4.5 billion in the US. By 2025, it sees China being well ahead of its pre-pandemic numbers with $13.7 billion while the US falls short of $8 billion.

It's a remarkable turnaround for the Chinese theatrical industry. In early 2020, as the coronavirus began to spread throughout the world, China's 70,000 theaters shut down for months. But the region has been able to recover faster than the US. And while the recent release of "Godzilla vs. Kong" showed hope for the US box office, no movie is reaching the hundreds of millions of dollars in one weekend that some locally produced Chinese movies have.

Hollywood is hoping that its blockbusters can roar back to life this summer with the help of China, but they will face stiff local competition.

Local productions have accounted for more and more of the box office in China in recent years, and that trend came to a head during the pandemic when few Hollywood movies were being released in the region. The top 10 movies at the Chinese box office in the last year were local films. While that's a product of the pandemic's impact, it also presents potential long-term changes for the dynamic between Hollywood and China.

Insider talked with industry experts about China's dominance during and after the pandemic, the success of locally produced films, and what it all means for Hollywood's reliance on the Chinese market, which was seen as a reliable box-office stronghold for many Hollywood tentpoles (from Marvel movies to the "Fast and Furious" saga).

China's theater business will keep growing

"The previously stable US market will reduce in size following the pandemic," said Richard Cooper, the Ampere Analysis research director. "This is largely due to a forecast downturn in film financing and the fact that some US cinemas will shutter permanently."

Cooper said China's theater business, on the other hand, will keep growing.

That growth is exemplified by Imax Corporation, the film technology company that specializes in high-quality cameras and projection systems. Richard Gelfond, the company's CEO, told Insider that China is its biggest market with 750 Imax theaters in the country (there are 400 in the US). It expects that number to grow to more than 1,000 in the next few years.

"As China's cinema buildings programmes swing back into action post-pandemic, the availability of cinema in the country and the volume of ticket sales will rise as will the Chinese revenues of US films," Cooper said. "Whilst this doesn't mean Hollywood's returns will increase in-line, it will still have a positive impact on revenues generated in China by US films."

That's at least some much-needed good news for Hollywood.

There's still hope for Hollywood blockbusters

As China's theatrical industry started to rebound from the devastation brought by the pandemic, Hollywood blockbusters were underperforming.

Warner Bros.' "Wonder Woman 1984" and Disney's "Mulan" and "Soul" all flopped in the region as locally produced movies thrived.

The outlook was bleak. Then "Godzilla vs. Kong" happened.

Warner Bros. and Legendary's monster mashup grossed $69 million in China in its debut weekend from March 26 to March 28. It fell just 37% in its second weekend with $43.5 million. The movie has so far earned more than $285 million worldwide, $136.5 million of which is from China.

"When there are global releases that open up in a traditional way you'll see similar box office in China to what you saw before," said Gelfond, the Imax CEO.

Experts said "Godzilla vs. Kong's" performance shows that there is still strong interest in China for Hollywood blockbusters. Gitesh Pandya, the editor of BoxOfficeGuru.com, noted that many of Hollywood's most anticipated blockbusters that might do serious business in China, like "Fast and Furious 9," have been postponed to later this year.

"There's certainly plenty of hope in Hollywood that China will still be a crucial market," Pandya told Insider. "The right movie is still going to sell."

Still, though "Godzilla vs. Kong" is performing well in the coveted Chinese market, there has been a shift in consumer behavior in the region that can't be ignored.

Local movies are boosting the Chinese box office

The low-budget local drama "Sister" dethroned "Godzilla vs. Kong" at the Chinese box office over the weekend. It cost just $4.6 million to produce and earned nearly $53 million in its debut.

It's the latest Chinese movie to excel domestically during the pandemic. No Hollywood movie entered the Chinese box office's top 10 grossing films from April 1, 2020 to March 29, 2021, according to data provided to Insider by the analytics company Comscore.

The top two Chinese movies in that time period, "Hi, Mom" and "Detective Chinatown 3," have earned $823 million and $691 million there, respectively, since debuting this February.

That doesn't mean that Chinese films didn't perform well in China before the pandemic. They absolutely did (in 2019, the Chinese films "Ne Zha" and "The Wandering Earth" were the two highest-grossing movies there). But locally produced movies have accounted for more and more of China's box office over the last five years.

Local films accounted for nearly 85% of China's box office in 2020, according to the research firm Ampere Analysis, propelled by a diverse array of releases like the war movie "The Eight Hundred" ($439 million in China) and the anthology film "My People, My Homeland" ($419 million).

Local movies accounted for just under 60% in 2018 and 50% in 2016.

As Pandya pointed out, many major Hollywood releases were benched during the pandemic. But China's ability to release its own films in that time, and audiences' interest in them, could set the stage for a more competitive market in the future between Hollywood and Chinese productions.

"There was a strong demand for locally produced Chinese films [out of lockdown]," Pandya said. "But before the pandemic, Chinese films in China were doing gangbusters. As Hollywood players start coming in, you might see more of a mix."

Here were the top 10 highest-grossing movies at the Chinese box office from April 1, 2020 to March 29, 2021, according to Comscore:

1. "Hi, Mom" - $823.6 million
2. "Detective Chinatown 3" - $691.2 million
3. "The Eight Hundred" - $439.3 million
4. "My People, My Homeland" - $419.1 million
5. "Jiang Zi Ya" - $232.1 million
6. "A Little Red Flower" - $217.9 million
7. "Shock Wave 2" - $200.2 million
8. "Sacrifice" - $166.6 million
9. "A Writer's Odyssey" - $158.3 million
10. "Warm Hug" - $131.5 million