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Is there really money to be made in Chinese movies?

Actor Jing Boran, singer and actress MoMo Wu and actress Bai Baihe attend the press conference for director Xu Chengyi's new movie 'Monster Hunt' on June 3, 2105 in Beijing.
ChinaFotoPress | Getty Images
Actor Jing Boran, singer and actress MoMo Wu and actress Bai Baihe attend the press conference for director Xu Chengyi's new movie 'Monster Hunt' on June 3, 2105 in Beijing.

On the numbers, China's cinema-goers look like a sure bet, but investors may need to look under the hood.

Nomura forecasts the mainland's box office will rise to about 66 billion yuan, or nearly $11 billion, in 2017, overtaking its $10.4 billion forecast for North America that year and making China the world's largest movie market.

In a note earlier this month, the Japanese bank predicted China's box office would be worth about 100 billion yuan ($15.7 billion) in 2020. That's assuming per capita movie admission rises to two times a year in China from 0.6 times currently, still lower than the 3.6 times a year North American movie fans visit the cinema.

In 2014, North America's box office was worth about $10 billion, down 5 percent on-year, while China's rose about 36 percent on-year to roughly $4.8 billion, according to Variety.

Read More 'Monster Hunt' passes 'Furious 7' to take China box office crown

It's numbers like those that are spurring a rush of interest in the industry. For example, earlier this month, Warner Brothers announced it had formed Flagship Entertainment with China Media Capital to make Chinese-language movies.

But these ambitious growth expectations need to be taken with a grain of salt, some experts caution.

"Ninety percent of Chinese films are losing money," Peter Shiao, chief executive of production and finance company Orb Media, told the Milken Institute's Asia Summit last week.

While officially only about 50 percent of the Chinese box office takings are from imported Hollywood movies, he estimates the real figure is closer to 80-90 percent.

Read More Who's betting big on China's growing box office

It's Hollywood blockbusters "putting butts in seats," he said.

"Regulators are actually keeping the number down with blacked-out dates and other things," Shiao added referring to a quota that limits the number of foreign films imported to Chinese cinemas to 34 per year. There are also concerns that tickets sales may not be correctly attributed to the film movie goers actually attended.

For example, locally made Monster Hunt officially became China's highest grossing movie of all time earlier this year, taking in more than 2.4 billion yuan and topping the mainland's previous highest earner, Fast & Furious 7. But analysts claim there was government interference in ticket sales, including how long Monster Hunt played in theatres and the timing of its showings. There were reports that Monster Hunt, a 117-minute movie, had showings apparently starting every 15 minutes in some cinemas.

China's movie industry is also less skilled than Hollywood at capitalizing on its films.

"Ten billion dollars in box office in North America translates into something like $50 billion when you have all the ancillary revenue streams," such as home video, Ellen Eliasoph, chief executive of Village Roadshow Entertainment in Asia, said at the Milken conference. "Ten billion dollars in box office in China translates into maybe $11 billion."

She noted that Chinese companies often prefer to invest in Hollywood movies over domestic ones as there's a bigger potential payoff.

There's another reason Chinese films aren't generating much income: They don't travel well. Hollywood films get around 60-70 percent of their revenue outside of their home market of North America, an option not often available to Chinese films, Shiao noted.

All of those factors play into why analysts advise looking to the cinemas, not the films, to play on China's emerging group of moviegoers.

Wanda Cinema's net profit rose 50 percent on-year in the first half of this year as it quickly expanded its theater network, with box office sales beating the company's target by 38 percent, Deutsche Bank said in a note this week; it rates Shenzhen-listed Wanda Cinema's stock a buy.

Nomura also advises playing the sector via Wanda Cinema, rated at buy, citing concerns China's movie studios lack a quality content library and the ability to monetize their films' intellectual property.

A new play on China cinemas could hit the market soon. IMAX China, a unit of IMAX Corp., filed this week for a Hong Kong initial public offering (IPO), Reuters reported. In the first half of this year, IMAX China saw its revenue rise 57 percent on-year.

But Deutsche Bank is concerned that China's film producers could let the cinema-owners down.

"China currently has a quota on the number of foreign films and the supply of high-quality domestic films is still limited. A lack of high quality films could hurt the box office revenue," it said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1