By Michael Martina
BEIJING (Reuters) - China's films are taking a hit from a trade deal that allows for more U.S. movie imports, the country's broadcast regulator said on Sunday, with their share of the box office take sliding even as the industry's total revenues outpace those of last year.
The movie pact, which exempted 14 films from China's annual quota of 20 foreign films per year, was hammered out in February during a trip to the United States by Vice President Xi Jinping, the man expected to take the ruling Communist Party's top spot after a congress held this week in Beijing.
After signing the deal, the number of American films in China and their proportion of revenues have increased by a "large margin", Vice Minister of the State Administration of Radio, Film and Television Tian Jin said.
"The past dominance of domestic films in the Chinese market has been shaken," Tian told a press briefing on the sidelines of the congress held once every five years.
China's 2012 box office revenues reached 13.27 billion yuan ($2.12 billion) at the end of October, Tian said, already outpacing revenues from all of 2011. But the share of revenues for domestically produced films was only 41.4 percent, constituting "a huge drop".
Tian said the U.S. film industry is reaping massive profits while domestic producers are under greater pressure, mainly because Chinese movies cannot compete with the Hollywood spectacles.
"The competitiveness of Chinese-made films must be raised," he said.
Chinese film industry experts have said that Hollywood's looming shadow means Chinese producers need to focus on quality if they are going to elevate their appeal to a Chinese audience.
February's deal stemmed from a victory in a 2009 U.S. World Trade Organization case that challenged Beijing's restrictions on import and distribution of copyright-protected materials.
The U.S. movie industry has long complained about China's tight restrictions on foreign films, which they say helps fuel demand for pirated DVDs that are widely available in China.
It also argued that it was being boxed out of a booming market, as the fast-growing Chinese middle class spends more money in theatres.
The Chinese film market is seen as one of the largest potential markets for Hollywood, but it has also been tightly controlled by the state-owned China Film Group.
Chinese films frequently compete for international awards, but winners overseas are often not those supported by China's government, which tend to fan nationalist and patriotic sentiment.
(Reporting by Michael Martina; Editing by Nick Macfie)