The success of the latest Transformers movie in China seems to paint a rosy picture for Hollywood in the mainland, but some industry watchers warn that challenges remain.
Grossing over $96 million on its opening weekend in China, Michael Bay's fourth "Autobot" installment "Transformers: Age of Extinction" broke Chinese box office records and accounted for nearly one-third of the film's global revenue.
American studios are intent on grabbing a slice of the Chinese market, which expanded 30 percent in 2013. By 2015, China will replace North America as the world's biggest movie market, according to U.S-based research firm Rentrak.
However, growth in ticket sales for Hollywood films in the mainland hit a five-year low in 2013, statistics from entertainment research firm EntGroup show. Only three U.S. movies – "Iron Man 3", "Pacific Rim" and "Gravity" – were among the top 10 highest-grossing films in China last year, down from seven films in 2012.
Special effects aren't enough
One reason for the slowdown is a lack of variety. According to EntGroup, the raft of action-packed Hollywood sequels driven by special effects bores some Chinese viewers.
"In China, the top reason to watch a U.S. movie isn't about content but rather special effects," said EntGroup's senior consulting manager Xue Li.
"Chinese audiences, especially the younger generation, watch more exotic films on the internet so they have better tastes than the majority. With lower income, they are also pickier and may prefer to watch a Chinese film, paying much less," she added.
This has benefited mainland productions which are more diverse, analysts said. Chinese films accounted for nearly 60 percent of the mainland's total box office and saw a 55 percent on-year revenue growth in 2013.
Language and culture gaps
The emphasis on visual extravaganza also explains why Hollywood movies are less well-received in second and third-tier Chinese cities where IMAX theaters are not widely available, said Li.
Under Beijing's strict quota system, China only imports 34 U.S. titles annually. Sci-fi and action films make up 77 percent of box office gross while other genres trail behind.
This boils down to the disparity in language and culture which affects the level of connection viewers have with western films, said Li.
What Hollywood is doing right
To be sure, Hollywood isn't exactly facing the doldrums in the mainland.
The likes of "X-Men: Days of Future Past" helped Hollywood snare nearly 52 percent of the total box office for the first half of 2014, data from Artisan Gateway show.
Strategic partnerships between American film makers and Chinese production houses remain the way to go.
"The future of the film world is China, so partnerships between companies like Fosun and Studio 8 are no surprises. These are investments for the future and may bridge the gap and help [studios] maneuver the strict quotas," Paul Degarabedian, senior media analyst at Rentrak, told CNBC.
Having a local flavor also helps. The addition of Chinese locations – which have increased from a view of the Shanghai skyline in 2012's "Skyfall" to a half-hour scene in Hong Kong in "Transformers" – and Chinese starpower like Fan Bing Bing in the latest X-Men series enable the Chinese to relate better to Hollywood.
"Fan only said 'Time's up!' which would have been weird in a Chinese movie," said Han Liu, a 23-year-old in Beijing. "But it's cool to have a Chinese acting in 'X-Men' which is so popular globally."
Moving forward, Rentrak's Degarabedian is optimistic that superhero and action sequels will continue to blaze the trail for Hollywood in the mainland.
"With 'Planet of the Apes' and other blockbusters on the way, we could really turn it around. Everyone is also looking forward to 2015 for the year is shaping up to be the biggest box office year in history, not just in the U.S. but also China, with the next Bond movie and the Avengers, Star Wars installments," he said.