BEIJING — Taiwan cinema is booming, reaping the benefits of closer cooperation with mainland China as well as government funding and a surge of creativity inspired by the success of pics from the self-ruled island.

Films such as “Monga,” “Cape No. 7,” and “Seediq Bale: The Warriors of the Rainbow” have scored well in the region, while the Taiwanese rites-of-passage pic “You Are the Apple of My Eye,” an autobiographical movie by Taiwanese novelist Giddens Ko, was an enormous success, sweeping regional kudos fests and breaking B.O. records in many territories, even though it cost less than $2 million to make.

“Taiwan’s market is too small to financially accommodate its film industry,” says Chu Wen-Ching, director of the Government Information Office motion picture unit. “Mainland China and Hong Kong, which share the same language and similar cultural heritage with Taiwan, rightly serve as the major export destinations for Taiwanese films.”

While language and culture may be similar, the two nations remain politically far apart. Beijing still considers breakaway Taiwan a renegade province, an inviolable part of its territory since the KMT lost the civil war to Mao’s communists and fled across the Formosa Strait (now the Strait of Taiwan)in 1949.

But the Taiwan government of Ma Ying-jeou has done much to foster closer relations between the two countries, resulting in an unprecedented cross-national flow of coin and talent.

The Cross-Strait Films Exchange Committee was established in April 2009, and since October 2010, Taiwanese films have been exempt from China’s quota restrictions.

But along with the growing presence of Taiwanese film in mainland cinemas are other reasons for the biz’s recent success, including local government incentives and a maturing local talent base that understands the best way to make the most of its regional niche.

In 2008, the government introduced a box office rewards program, which entitles any Taiwanese movie earning more than NT$200 million ($6.8 million) in local grosses to claim 20% of its total gross.

The payout can amount to up to $1.7 million and must be used in the shingle’s next production.

“This has encouraged filmmakers to produce bankable works,” Chu says. “The rewards have helped make the business sustainable as well.”

Among recent productions that have received Taiwan government funding are Ang Lee’s “Life of Pi” and Jackie Chan’s “Zodiac,” both of which are slated for release in 2012.

“Seediq Bale” was the first and arguably the biggest beneficiary of the measure. Helmer Wei Te-sheng’s small-budget blockbuster “Cape No. 7” earned $18 million in Taiwan, which qualified Wei for the maximum payout in making “Bale.”

In fact, “Cape No. 7” inspired a renaissance in the Taiwanese biz. In the following three years, production grew to 40 to 50 films per annum. And last year, “Seediq Bale,” “Apple” and “Jump Ashin!” garnered a historic 17.5% market share at the Taiwan box office, a 316% increase on the previous year.

U.S. producer Steve Chicorel, who lives in Taiwan, believes the government has been supportive in other ways as well. For instance, those who purchase equipment overseas can bring it through customs tax free.

Chinese thesp Huang Lu, who first came to prominence in Li Yang’s “Blind Mountain,” and has just finished shooting a film with a first-time helmer in Taiwan, believes the variety of movies being made in Taiwan on modest budgets is one of its strengths.

“Taiwan has the advantage of making small, fresh films,” Huang says. “They give more support to young directors, and if they have a good script or story, it is very possible for them to get subsidies to make a film. Taiwan filmmaking is purer. On the mainland, people often only want to invest to make big money, but maybe they are forgetting the real meaning of movies.”

Moreover, the current generation of filmmakers has less censorship to deal with, while many, such as Jimmy Lin, the helmer of “Starry, Starry Night,” were educated overseas. It’s a trend that appears to be continuing.