Chinese cities offer subsidies and cheap computing to lure AI film studios

Local governments across China are competing to attract AI filmmakers with subsidised rent, living allowances and cheap computing power, Reuters reported on Friday.

Zhu Zhili set up an AI film studio in Shenzhen two years ago. He told the agency that officials from big cities and small towns now call him every day, asking him to move his technology or his company to them.

He also runs the AI-generated content department at China Wit Media, a Shenzhen production company.

The incentives follow the playbook China used to build its electric vehicle, solar and robotics industries.

In May, Shanghai started giving computing capacity and hosting AI models to micro-drama producers. Beijing has set up a 260 million yuan ($39 million) fund for film and video technology.

Beijing’s Huairou district, a centre of the Chinese film industry, also hands out vouchers that cut computing bills for AI short dramas. Shenzhen, for its part, offers technical support and cheaper rent to AI film talent.

Production costs have dropped fast. According to state broadcaster CCTV, making a minute of AI short drama cost 5,000 yuan at the start of 2026 and only a few hundred yuan by mid-year.

Pan Xiaojun, a film-directing student in Hainan, told Reuters he could create a surreal wedding scene with AI for 1,400 yuan, against 60,000 yuan for a conventional shoot. Local subsidies and rent waivers brought his computing costs down further.

Streaming platforms have joined in. iQIYI chief executive Gong Yu said in August that the company was going all in on AI, and it now subsidises some creators who publish AI content on its service.

The National Film Administration has also cleared Sanxingdui: Future Memories, a 90-minute science-fiction film from Bona Film Group, for cinema release. No other AI film from a major Chinese studio has received that approval.

Supply may already be outrunning demand, however. Between January and June, 221,900 AI shows went up on Douyin, ByteDance’s Chinese TikTok. Only 1,055 of them passed 100 million views, according to data firm DataEye.

The backlash is growing too. Actors worry about the use of their likenesses, voice actors fear for their jobs, and viewers complain about plagiarism. Some saw the box-office success of Niu Lai, a crudely animated film made without AI, as a reaction against the trend.

China already requires AI-generated content to carry clear labels, but it has yet to set copyright rules. Filmmaker Cao Yiwen, who premiered an AI-animated film in Cannes in April, told Reuters that Europe is waiting to see whether China writes those laws.