As of Wednesday, China’s 2021 box office revenue had reached 20.1 billion yuan ($3.09 billion), according to film data provider

Maoyan Entertainment

(ticker: 1896: Hong Kong). Last year’s 12-month total was 20.31 billion yuan ($3.13 billion).

Nine of China’s top-grossing 10 films so far this year are domestic productions, with only “Godzilla vs. Kong”—produced by Legendary Pictures and distributed by Warner Bros. Pictures—edging into the front pack. That translates to domestic Chinese productions comprising roughly 90% of local receipts.

China has three annual holidays that draw big ticket sales: Jan. 1, Spring Festival in February, and October’s National Week. Ticket-sales records were broken for the first two of those slots this year. In fact, February’s 12.3 billion yuan ($1.9 billion) haul was the highest-grossing month ever in China, according to Maoyan. Experts predict National Week will be no exception.

Beijing-based film producer Nancy Wu of BASE Media told Barron’s several factors drove the sales.

After months of lockdowns, “suppressed moviegoing desires have driven audiences to return to the cinema,” she said. “Moreover, Chinese audiences are increasingly drawn toward local productions. They tend to deal with more relatable subject matters, and emotionally resonate with local audiences.” And production quality and storytelling techniques are improving, she added.

Other sales records loom. Local production “Hi, Mom” has made 5.4 billion yuan ($831 million) in roughly two months in cinemas, just shy of China’s highest-grossing film ever, 2017’s “Wolf Warrior 2,” which made $875 million.

“Detective Chinatown 3,” which premiered in February, broke the largest single-market opening-weekend record, at $396 million, besting 2019’s “Avenger’s: Endgame,” at $357 million.

The disappointing result of recent Hollywood movies is partially due to the lack of heavy-weight releases, many of which have been pushed back due to the pandemic, Wu said. “In any case, China’s booming theatrical market means huge opportunities for both the local industry as well as Hollywood,” she said.

Chinese tend to pay for cinema tickets for big-spectacle fare, which Hollywood still does better than others.

“If a Hollywood release is strong and interesting, Chinese audiences will continue to support it,” Wu said. “The success of ‘Godzilla vs Kong’ is a good example.”

“Godzilla vs. Kong” has made more than $80 million in the U.S. since it opened there three weeks ago. That is no small feat since it is currently screening at roughly 3,000 cinemas, according to Box Office Mojo. It’s made $180 million since its March 26 release in China, the best performance of a Hollywood production in China since the pandemic—though that is spread among 38,000 theaters.

In a March 28 press release, Rich Gelfond, CEO of giant-screen movie theater chain IMAX, said that “‘Godzilla vs. Kong’ is helping drive “market share gains for IMAX and proving there is real business to be done for Hollywood blockbusters.”

IMAX

(IMAX) is “particularly encouraged by the film’s strong debut in China, where audiences turned out in a big way for this Hollywood franchise.”

IMAX shares are up about 15% so far this year.

As with other industries, China was early to relax coronavirus control measures because it was the first to experience the pandemic and locked down more broadly than many other countries, bringing its official number of new cases down to near zero by March, just two months after its January explosion.

Strict social-distancing rules persisted, and the lockdown hurt not only local and Hollywood film companies in China—it hit cinemas that rely on ticket sales but more importantly on food and beverage revenue. For most of last year, even when cinemas reopened, rules limited the capacity of screening rooms and prohibited the sale of concession items.

The rules have only relaxed somewhat. Last month Barron’s visited a cinema in the western metropolis of Chengdu and was told food and drink could not be purchased at the concession counter. “But you can go downstairs and buy stuff at one of the stores and bring it in,” a worker at the ticket counter said. “Just nothing that has a bad odor.”

The pandemic accelerated a trend that was years in the making. China had been expected to overtake North America as the world’s largest box office market within a decade or so. China easily surpassed North America in 2020, with $3.1 billion versus $2.1 billion in revenue, respectively, according to data from Maoyan and Box Office Mojo.

The latter half of 2020 proved that Chinese cinemas can do just fine without the help of big-name U.S. blockbusters. It is unclear if the trend will hold once American production companies and cinemas get fully back on their feet. Rapid inoculations in the U.S. have coincided with the limited reopening of theaters—with positive early results.

In China, New Line Cinema’s “Lord of the Rings” trilogy is getting a second life—and may be a bellwether for the Chinese market’s taste for Hollywood fare.

The rerelease of “The Fellowship of the Rings” in China has hobbled to $14.7 million at the box office over five days, though its slow start was blamed on Chinese regulatory mismanagement. The film did not get permission for release until one day before its planned opening, resulting in constrained marketing and delayed delivery of the remastered prints. The franchise’s other two films are set for China rereleases as well.

Tanner Brown covers China for Barron’s and MarketWatch.