China is building an AI movie factory, one subsidy at a time

AI-generated videos were mostly relegated to meme territory, often called AI slop. For the most part, nobody took those creations seriously, apart from a few useful exceptions. But China might be getting ready to build an entire industry around it.

Local governments across China are competing to attract AI filmmakers, studios, and startups with everything from subsidized computing power to cheap rent and financial support. Reuters reports that cities are using a familiar industrial-policy playbook, similar to the approach China previously used to accelerate industries including electric vehicles, solar power, and robotics.

AI filmmaking is getting pretty cheap

During the first half of 2026, the average cost of producing an AI short drama in China fell from around 5,000 yuan, or $747, per minute to just a few hundred yuan, according to figures from state broadcaster CCTV cited by Reuters. Film student Pan Xiaojun offered an even starker comparison. A wedding sequence that could cost around 60,000 yuan to shoot conventionally could be created with AI for roughly 1,400 yuan. Pan added that local government subsidies and rent waivers helped push his computing expenses down further.

Shanghai is offering computing resources and cloud AI models to short-drama producers. Meanwhile, Beijing has established a 260 million yuan audiovisual technology fund, while Shenzhen is subsidizing rent, providing production, and visual-effects support. Chinese streaming giant iQIYI has also gone “all-in” on AI and is subsidizing some creators whose AI-generated work appears on its platform.

China already has some serious AI video technology to feed that ecosystem. ByteDance’s Seedance 2.0 went viral earlier this year for its increasingly convincing results. Another example is Kuaishou’s Kling, which has helped Chinese companies become major players in generative video.

The numbers are already concerning

Cheap production has ended up creating a new problem. Since the barrier to entry is much lower now, everyone can take up such projects. Reuters reports that 221,900 new AI shows appeared on Douyin during the first half of 2026, yet only 1,055 crossed 100 million views. This raised concerns that the industry could already be heading toward the same overcapacity problems that have hit other heavily subsidized Chinese sectors.

The jump from phone screens to cinemas is another major shift. China’s National Film Administration has approved Sanxingdui: Future Memories, a 90-minute science-fiction movie, for theatrical release. This is expected to be the first AI film from a major Chinese studio to receive a public-screening license in the country.

On the other hand, actors have raised concerns about their likenesses being used in AI productions, while viewers have complained about plagiarism and repetitive content. China requires AI-generated content to be labeled, but the copyright rules around such creation remain unfinished.

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