Stories about the death of the Hong Kong film industry are premature.

Sure, the mainland China biz is grabbing all the headlines, and while Hong Kong’s annual film production has dropped from more than 300 movies 25 years ago to less than 50 in 2013, the Hong Kong biz now has things to cheer about.

Some of its filmmakers seem to believe that they have found a middle way between a sell-out to the temptations of the mainland or the prospect of extinction at home.

“In the last year, some of our ‘masters’ have produced some of their best films,” says Li Cheuk-to, programmer at the Hong Kong Intl. Film Festival. Li singled out Wong Kar Wai with “The Grandmaster” and Johnnie To with “Drug War.” But it is tempting to also include the recent works of Tsui Hark with his “Detective Dee” duo, Fruit Chan with “The Midnight After,” Dante Lam with his “That Demon Within” and Herman Yau with “Ip Man: The Final Fight.”

Critics point to the arrival and growing success of new talent. Flora Lau’s freshman film “Bends” debuted in Cannes’ Un Certain Regard section last year. Musician-turned-filmmaker Juno Mak sparked love-it-or-hate-it reactions with his debut effort “Rigor Mortis” and Adam Wong struck all the right moves with his (third) film, “The Way We Dance.” That youth-driven, indie-produced picture was a breakout hit in Hong Kong of sufficient scale that it has now earned itself a release on the mainland too.

“I don’t think the numbers are telling the full story,” says filmmaker Gordon Chan. “The number of films produced may be down, but their budgets are up and their box office is improving.”

Indeed, the available data paints a mixed picture, which bears careful interpretation. According to the Motion Picture Industry Assn., the number of Hong Kong-made films produced and released in 2013 dropped to 42 from 52 a year earlier. (The Hong Kong Film Awards, which Chan chairs, says that H.K. produced 49 films in 2013 that are eligible for its awards this month.) But, despite the lower number of releases, box office for Hong Kong films held steady with a 22% share of a fractionally growing market, and gross receipts nudging ahead at HK$353 million ($45.5 million) compared with $44.5 million in 2012.

But drawing borders around films discounts the importance of cross-border co-productions between Hong Kong and China, which over the past 20 years have become the norm; Hong Kong-backed mainland films are considered local in B.O. terms. (Official Hong Kong sources provide no analysis of the origins of finance for H.K.-qualifying films, nor the number of co-productions, nor the scale of production budgets.)

But some anecdotal evidence suggests that H.K.-Chinese co-producing has recently slowed down.

“At first, a co-production meant a drop in quality as directors gave up a lot in order to meet mainland censorship requirements,” Li says. “Later, in 2005-08, more experienced directors walked a high wire between the censors, the market and self-censorship. Peter Chan, Tsui Hark and even Johnnie To all went north — with mixed results.”

Chan’s “Wu Xia,” Tsui’s “All About Women” and To’s “Romancing in Thin Air” — all Hong Kong-China co-prods — were unsuccessful compromises.

“More recently, they have achieved a good balance — pleasing censors and Hong Kong audiences,” Li says.

Some other H.K. filmmakers have found that movies closer to the territory’s traditional genres (comedy, crime, action) can still be successful, such as crime thrillers “Eye in the Sky” and “The Viral Factor,” which played in Hong Kong and H.K.’s traditional Southeast Asian export territories.

“Hong Kong filmmakers now realize that shooting a co-production in the mainland doesn’t do them any good. Hong Kong audiences don’t like the co-production look. But now we see a reverse trend of mainland money coming in to make H.K. movies,” says Wellington Fung, secretary general of Hong Kong’s Film Development Council.

“Films like ‘Overheard’ and ‘Cold War’ were all very strong H.K. films that had Chinese financing.”

A mix of newcomers and older hands are now taking a low-budget approach. “The Way We Dance” hit a youth vibe and earned $1.76 million, in an era in which a hit is defined as passing HK$10 million, while veteran Fruit Chan made the post-apocalyptic “After Midnight” on a relative shoestring.

There may be limits to how far these filmmakers can go as Hong Kong still lacks much of an indie or arthouse distribution circuit.

But Li and others draw encouragement from the fact that new directors are still finding a place.

“I’m pretty happy with the way that H.K. is going. We had 14 new directors make feature films last year,” says Gordon Chan, who will now take his optimism to Media Asia, where he was this month appointed head of film division.