Hollywood is now facing a challenge from Chinese domestic blockbuster movies in a battle to win over the world’s second-biggest film market, industry insiders say.

“On the heels of Operation Red Sea, Detective Chinatown 2, Wolf Warrior 2 and The Mermaid, The Wandering Earth continues to prove that China’s film industry has truly cracked the code with entertaining their own domestic market.  Hollywood, be warned,” said Chris Fenton, a California-based producer and a trustee of the US-Asia Institute.

The Wandering Earth, China’s first sci-fi blockbuster, has been another unexpected success, earning $539 million by Sunday since its release on Feb 5, according to Chinese online-ticketing platform Maoyan.

The film has taken over last year’s homegrown film Operation Red Sea as the second in Chinese film history, only behind the 2017 film Wolf Warrior 2, which is China’s highest-grossing movie, hitting about $839 million in box office sales.

“Now its (China’s) consumers are losing interest in Hollywood content — a result of quality local-language competition and negative US sentiment caused by the ongoing ‘trade war,’” said Fenton, who produced or supervised 20 films, including Looper, Iron Man 3 and 47 Ronin.

Chinese box-office receipts stood at $8.6 billion in 2017, with domestic movies accounting for about 54 percent of the total, according to a 2018 report by the Chinese Film Association and the Film Art Center of China Federation of Literacy and Art Circle.

Though the figures of 2018 are yet to be released, insiders expect another year of solid growth for the Chinese film market.

Last year, Chinese-language filmmaking was on the rise, while Hollywood’s position was unsteady, as reflected by the latest reporting of film industry consultancy Artisan Gateway in December, according to a report by The Hollywood Reporter.

Revenue from US studio films released in China was down 16.5 percent year-on-year, while sales for China-made movies climbed 21.6 percent last year, according to the report.

“If China can make movies like this for themselves, they won’t need Hollywood imports as much. This is where China has been heading for the last several years,” said Scott Mendelson, a film reviewer in an article published by Forbes on Feb 8.

Helped by steadily improving production and storytelling quality, homegrown Chinese films are connecting strongly with Chinese audiences, said Stephanie Xu, president of US-Asia Innovation Gateway, a Silicon Valley-based organization committed to advancing economic and cultural opportunities between the US and Asia.

Part of the success of The Wandering Earth lies in the story, and good stories will help drive the Chinese film industry, said Xu, who is helping produce several ongoing Hollywood projects in China.

“Visual effects are important, but only good stories can strike a chord with audiences for a long time,” Xu said.

She recently led a delegation of four Hollywood writers to the inaugural Golden Week Conference for Chinese Scriptwriters last month in Beijing.

During the conference, Hollywood and Chinese writers were invited to discuss and comment on each other’s works. “They (Hollywood) told me they were really impressed by the Chinese films – the way the story is told and the characters are built,” said Xu.

Since 2015, Xu has organized four “Hollywood Masters’ China Trips” to connect US filmmakers with their Chinese counterparts and to find inspiration from Chinese cultural traditions.

From Mulan to the Kung Fu Panda franchise, Chinese folklore and culture have proved to be great sources for developing films that engage a global audience, Xu said. One of her current projects is an animation feature film on China’s Terracotta Warriors.

“The Silk Road will be the theme of a series of our projects,” she said. “Local-language films have great potential to sell big tickets, as Chinese audiences are more receptive to their own culture and resonate with Chinese elements in films.”