China's box office sales hit 17.07 billion yuan (2.74 billion U.S. dollars) in 2012, surging 30.18 percent year on year and making the country the world's second-largest film market.
Chinese filmmakers produced 893 films last year, including 745 feature films and 33 animated films, according to data published on Wednesday by the State Administration of Radio, Film and Television (SARFT).
"China is now the world's third-largest film producer and second-biggest film market," said Tong Gang, head of the SARFT's film bureau.
However, ticket sales for imported movies totaled 8.8 billion yuan, or 51.54 percent of gross ticket revenue, ending domestic films' nine-year dominance at the box office.
The revenue of domestic films surpassed that of foreign films for the first time in 2003, when China initiated reforms to boost its fledgling film industry, and continued to do so through 2011.
"Though the domestic movies' box office outcome was no match for that of imported movies, the 48.46 percent share still exceeds market expectations issued earlier this year following the signing of a new China-U.S. film agreement," said Tong.
Under the agreement, China increased its annual import quota of Hollywood blockbusters from 20 to 34 and lifted their share of revenue from 17.5 percent to 25 percent.
As a result, 14 American films hit Chinese theaters in the first half of 2012. These came among 38 overseas films that raked in two-thirds of total ticket sales in the first six months of the year.
Despite this "severe situation," many Chinese films such as "Painted Skin II," "1942," and "Lost in Thailand" were still box office successes, according to Tong.
The top 20 domestic movies each saw ticket sales exceed 100 million yuan during their runs, a feat achieved by few Chinese movies just several years ago. Six films took in more than 200 million yuan and three generated over 700 million yuan in ticket sales.
The low-budget comedy "Lost in Thailand," which debuted on Dec. 12, took in an unprecedented 1.2 billion yuan in less than a month, out-earning "Avatar" and "Transformers: Dark of the Moon" to become the highest-grossing movie ever shown in Chinese theaters.
The strong performance of "Lost in Thailand" is also believed to have helped boost domestic films' share of total ticket sales in 2012.
Apart from the fact that more imported blockbusters joined the box office race last year, Tong said another important reason for domestic movies losing share is a lack of core creativity.
"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," said the top film official.
He also noted Chinese producers' digital production technologies are quite weak and lag behind high-tech trends in film.With wealthier Chinese swarming into theaters to catch movies, great commercial opportunities have emerged for film producers both at home and abroad.
But for Zhang Huijun, president of the Beijing Film Academy, domestic films can hardly rival those from Hollywood in visual experience due to immature 3D shooting technologies.
Zhang said China's openness to the competitive overseas blockbusters will promote Chinese filmmakers' pursuit of better story-telling and film quality.
While the world's number-two economy keeps expanding its theater coverage by adding an average of 10.5 screens each day, it saw a 48-percent drop in Chinese movies' overseas sales in 2012, according to the SARFT statistics.
Regarding this decline, Tong urged filmmakers to better express Chinese images and stories in line with the international film mainstream as well as enhance their publicity methods.
Tong added that his bureau will focus on supporting film-related projects between China and Africa this year.
He said, within three to five years, China will strive to make Chinese movies available on major TV media in all African countries that have established diplomatic ties with China.