Culture and entertainment expected to surge

China's culture and entertainment industry is predicted to grow at 20 percent, and could be worth 5.5 trillion yuan ($887 billion) within the next seven years, a study by business consultancy giant Deloitte has predicted.

William Chou, Deloitte's national managing partner for the technology, media and telecom industries, said the film industry in particular is set to experience unprecedented growth, after generating 17.1 billion yuan in box office earnings in 2012, a 30 percent increase from 2011.

As earnings continue to grow, Chou said Deloitte's China's Culture Industry 2013 predicts earnings from China's film industry are expected to surge to 23 billion yuan this year.

"As GDP per capita approached $6,100 in 2012, Chinese people will spend more on personal entertainment and culture activities.

"I believe the cultural industry will see fast development in future," he said.

Chou attributed the massive growth in film revenues to improved infrastructure and distribution channels, which will help the sector grow by 30 percent over the next five years.

Last year, another 3,800 new cinema screens were built, bringing the total number to 13,118, the report showed.

The other fastest growing sector was online games, according to data from iResearch, a Beijing-based consultancy, which showed that total sales were 58.3 billion yuan, up 22 percent on 2011.

Polly Lee, a partner with Deloitte, said China presents a huge potential market, both for online and mobile games, predicting that in the next five years the sector will see 15 percent annual growth.

According to ChinaVenture Group, a research and consulting institute focused on China's investment market, financing for the sector has been healthy.

It reported 156 mergers and acquisitions over the past year, with a total transaction value of $9.6 billion, a 246 percent growth. Of those, 12 were investments made out of the country.

However, there were only eight IPOs in the culture industry last year, which generated total financing of $740 million, an 85 percent drop, or $4.1 billion, compared to 2011.

Lee said the slowdown was mainly due to more stringent regulations enforced by local authorities last year.

"The investment atmosphere in the US was also unsatisfactory, which set many companies back," she added.

Lee said she expected 2013 to be a better year, with an estimated 116 investment funds looking to invest in the culture industry.

"In the coming two or three years, over 100 billion yuan of capital will seek exit from the culture industry."

Lee said that with financial and policy support from the government, China's culture industry will keep growing, becoming more active in digital and Internet fields.