China needs to open up its market to foreign movies to match the country’s increasingly sophisticated film market, Dan Glickman, chairman and CEO of the Motion Picture Association of America, told an audience of biz leaders at the Shanghai Film Festival on Sunday.

China needed to “make the most of the collective economic opportunity by nurturing the health and growth of the legitimate marketplace,” Glickman said.

A record 406 films were made in China last year and the box office take, excluding the rural market and factory screenings, rose 30% to $635 million.

However, to help boost local movies, the screening of foreign movies is tightly controlled in China. There is a quota system which permits only 20 foreign films a year to be released, although Chinese co-productions are exempt from this rule.

“As more countries pursue their own innovation economies, I believe we will see rising global support for these efforts and for intellectual property rights generally,” Glickman said.

“A healthy film industry and vibrant marketplace can bring great economic opportunities to both of our countries, and these opportunities serve as the foundation that keeps this vital artistic and creative medium vibrant … allowing the next stories to be told and shared with audiences around the world,” he said.

China is the world’s fastest growing major film industry, but it is also the worst offender when it comes to film piracy — a study by the MPAA showed that member companies — which includes all the Hollywood studios — lost $6.1 billion to worldwide piracy in 2005. Of that lost revenue, some $1.2 billion came from piracy across the Asia Pacific region.