While China has plenty of investment capital, monetary incentives for international film production companies, including production cost rebates, are an area that needs to be improved, said Coote.
"You have to make it worth their while," he said. "In Australia, the government will cut you a 40 percent rebate. In Malaysia, it's 30 percent. There are no incentives to go to China."
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But it's about more than dollars and cents. Censorship is also a factor.
"How much does the political landscape impact the content that's being produced?" asked David Bank, an equity research analyst at RBC Capital. "Hollywood is a pretty free market, so can you have success in content production without having an open and free media market?"
Another question, Bank says, is whether China, with its ongoing push to increase its "soft power" and disseminate its own culture, can make films that will resonate with international audiences.
"The global franchises that work are culturally neutral," said Bank. "What culture does 'Pirates of the Caribbean' touch on? What cultures do the 'Batman' series and Marvel series touch on? These are culturally neutral."
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Townsend Buckles, an analyst at JPMorgan, also sees culture as an issue.
"The challenge is exporting some of the Chinese cultural elements that you would imagine would be part of some of these films, and making them broadly appealing to foreign audiences," said Buckles. "I don't think you've seen too many films step into that realm."
Building a "new Hollywood" looks daunting from any angle, said Vasily Karasyov, a research analyst at Sterne Agee. Daunting doesn't mean impossible, he said, but it will take time, at the very least.
"It's like someone on an island in Florida somewhere saying we're going to build a new Hong Kong," said Karasyov. "It sounds difficult to achieve."
—By CNBC's Adam Molon.