The Motion Picture Association and the China Film Distributors and Exhibitors Association have released a study that says the film and TV business contributed $15.5B to China’s economy in 2011. Commenting on the report, Mike Ellis, president and managing director of the MPA for Asia Pacific, said, “Chinese audiences are seeking out and enjoying a variety of films, whether they are made locally, internationally or co-produced through collaborative international partnerships.” While box office is predicted to keep building regardless of where films come from, figures released recently by China’s film watchdog confirm what could be a disturbing trend for Hollywood: Local movies are taking a big bite out of ticket sales. The State General Administration of Press, Publication, Radio, Film and Television said last week that homegrown films accounted for 69% of mainland box office revenues in the first quarter of 2013. The shift began with the late 2012 release of comedy Lost In Thailand, which broke about every record possible, went on to become the highest-grossing Chinese title of all time and gave a kickstart to 2013. But despite that movie’s eleventh-hour arrival, local pics still finished 2012 at a four-year low with a market share of only 48%. In the first three months of this year, however, Chinese films made 3.6B yuan ($582M) and six films broke the coveted 100M yuan ($16.2M) barrier. The top film was Stephen Chow’s Journey To The West: Conquering The Demons, which earned 1.25B yuan ($202.2M).

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Last year, four foreign films were responsible for 56% of total sales in the first quarter. But this year, the only Hollywood pictures to punch above 300M yuan ($48.5M) were Skyfall and The Hobbit: An Unexpected Journey, the Xinhua news agency reported. They were followed by A Good Day To Die Hard, Cloud Atlas and Resident Evil: Retribution.

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In total in 2012, Chinese box office hit $2.74B for a 30.18% jump over 2011. A state official expressed concern last November that an increase in Hollywood movies playing at Chinese theaters had “shaken” the local industry, but now the landscape appears to be shifting. There are a handful of factors at work. The head of China’s film bureau Zhang Hongsen last week cited a waning appetite on the part of the Chinese for the “homogeneous” tendency of imported films, according to Xinhua. There is also a 5% “bonus” that the state authority said last year it would begin doling out to theater owners if local films perform better than international titles. An exec calls it “a nice motivator” for homegrown fare to be pushed harder by exhibitors. If the local pics don’t do better than 50%, the incentive is administered on a sliding scale. There are also the unofficial blackout periods during which no U.S. films are programmed, although one China exec recently suggested to me that sometimes the blackout periods backfire by building hunger for Hollywood movies.

The past several months have also seen some U.S. titles scheduled head-to-head by the state-owned China Film Group which oversees the release of imported movies. They included The Dark Knight Rises vs. The Amazing Spider-Man and Ice Age: Continental Drift vs. The Lorax. Interestingly, that same official who was concerned about local pics losing ground said in November that the government “will never impose a schedule to any film or release.” But as screens continue to multiply throughout the mainland at the rate of some 10 per day, a real issue is what films are being released into 2nd and 3rd tier cities. More people are going to the movies in the suburbs and Zhang noted those folks “might not be as interested in Hollywood blockbusters as their metropolitan counterparts.”

In December, another official from the film bureau of the body formerly known as SARFT, said, “China’s film industrialization is still far from other film powers, and there is plenty of room for improvement in Chinese movies’ variety and diversity.” The Chinese movies that have been working of late are roundly comedies including Journey To The West, Say Yes!, A Wedding Invitation and Finding Mr. Right.

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The next big tentpole to bow in China will be Iron Man 3. It does not yet have an official date, but is expected to be closely timed to the U.S. release on May 3. Marvel and its local partner DMG have been doing a massive marketing push on the picture which will be an interesting one to watch given it has Chinese elements and will even have its own China-only version that will include bonus footage.