The U.S. majors enjoyed a big comeback at the Chinese box office in the first half of 2014, after stumbling in 2013 — but with the local B.O. growing by 25% over the same period in 2013, there’s enough upside for local filmmakers, too.

China has been growing at this pace for the past five years,” says Y.C. Chu, g.m. of Hong Kong’s Emperor Motion Pictures. “We see no reason to think it will stop any time in the next five years, and if you have good cinemas, we can see growth continuing for seven years.”

Indeed, Emperor has redoubled its bet in the territory, recently diversifying from production, finance and distribution into mainland Chinese exhibition for the first time, inaugurating a 12-plex in the Guangdong Province city of Foshan just last month.

The Chinese box office delivered a cumulative gross of RMB13.6 billion ($2.2 billion) in the January to June period, up from $1.75 billion in the same period last year, with Hollywood leading the charge. Imported films (almost entirely from the U.S.) rebounded strongly, with their gross revenues surging 71% from $684 million in the first half of 2013 to $1.14 billion in the same period this year.

In the first half of 2014, Chinese-made films saw a drop in domestic market share, and a 7% decline in B.O. gross. The cumulative gross for Chinese pictures was $1.03 billion, compared with $1.17 billion in the first half of 2013.

At the six-month mark, 2014 saw imports account for 53% of the market.

Hollywood had a hard time in 2013 competing with a wave of Chinese filmmakers whose pics eschewed tired historical dramas and martial arts pictures for more contemporary subjects and genres that connected with China’s new audiences. “Tiny Times” centered on a group of twentysomethings in contempo Shanghai, and drama “American Dreams in China” followed the rise and fall of local tech
biz kings.

But a soft December — normally the biggest cinemagoing month of the year — was down 12% on the same frame in 2012, and served as a reminder to Chinese producers that they must keep innovating. A number of the biggest films and filmmakers, notably Feng Xiaogang’s “Personal Tailor” and Jackie Chan’s “Police Story 2013,” which delivered $116 million and $86.3 million respectively, fell below expectations.

In the new year, local films couldn’t compete with a Hollywood slate that seemed tailor-made for the Chinese market — particularly so in the case of “Transformers: Age of Extinction,” which has proven, since the first film in the franchise in 2007, to be an enduring hit in the territory. The latest pic has set B.O. records in the country, grabbing $262 million since its June 27 rollout.

The majors also have been getting savvier with their Chinese marketing money, spending more and harnessing the power of the massive online community via Youku Tudou, LeTV and China Central Television’s portal. The first half of this year saw Hollywood studios increasingly add to the marketing budget of China Film Group, which is the official importer and distributor of revenue-sharing imports, and is normally responsible for P&A costs. Understanding the power of stars on Chinese ticketbuyers, Hollywood flew in Angelina Jolie, Brad Pitt, Samuel L. Jackson, Johnny Depp, Scarlett Johansson, Chris Evans, Nicole Kidman and Mark Wahlberg to tubthump their films.

Despite the drop in market share and the stark reminder of Hollywood’s muscle, there were several positives for Chinese filmmakers.

The impressive figures for the Chinese New Year holiday period in February, dominated by fantasy and family films, delivered strong grosses, including two Hong Kong-Chinese productions: “The Monkey King,” which scored $168 million, and “The Man From Macau” (aka “From Vegas to Macau”), with $84.7 million.

In total, 33 movies passed the RMB100 million mark ($16 million), which is considered a badge of success. Of these, 15 were Chinese-language, while Chinese-language films managed four of the top 10 chart places and nine of the top 20.

Another reason for local filmmakers’ cautious optimism is the growing sophistication and strength of a group of home-grown distributors. Aside from China Film Group and Huaxia, which distribute all the revenue-sharing imports, half a dozen Chinese firms are consistently playing to local auds.

They include Wanda, which also owns the largest private-sector cinema chain (as well as North America’s AMC), and vertically integrated companies Bona Film Group and Huayi Brothers Media. This group also encompasses pure-play distribs Enlight Pictures and
Le Vision Pictures.

Chinese audiences continue to love 3D movies — in fact, the number of Imax screens in commercial operation in China has leaped 38% in the past 12 months from 106 to 146.

Most forecasters predict a continuation of the recent Hollywood dominance through the third quarter, with pics such as “How to Train Your Dragon 2” set for Aug. 14 and “Hercules” some time in August, while “Expendables 3,” with Jet Li and is skedded for an August release. The fourth quarter boasts the last installment of “The Hobbit” trilogy, Christopher Nolan’s “Interstlellar” and “Hunger Games: Mockingjay Part 1.”

The Chinese biz also is stepping up to the plate in the fourth quarter, aiming to beat Hollywood with the biggest-budgeted and most star-laden local films of 2014 —  Jiang Wen’s “Gone With the Bullets”; Tsui Hark’s “Tracks in the Snowy Forest”; part one of John Woo’s “The Crossing”; and $65 million Jackie Chan vehicle “Dragon Blade” (if it doesn’t drift to early 2015).

All in all, it should be a happy new year for both Hollywood and China.