Huge United States media conglomerate Time Warner is spearheading the Chinese cinema market, paying nearly half the cost of a luxurious multiplex cinema in Shanghai, reported Xinhua News Agency.

The new 28.5 million yuan (US$3.4 million) cinema has been preferentially permitted to show Warner's latest blockbuster production Matrix II one week earlier than any Shanghai cinema, said Xie Baoxin, general manager of the Shanghai Yongle Co, Time Warner's Chinese partner in the milestone deal.

Shanghai Yongle will hold 51 percent and Time Warner 49 percent of the shares of the cinema.

Local film business insiders say the deal will be a step forward in opening China's movie industry to the world as part of the country's World Trade Organization commitments.

Time Warner's entry into the domestic market is a strategic investment plan, leaving behind other US heavyweight competitors such as 20th Century Fox Corp, Columbia Studios and MGM (Metro-Goldwyn-Mayer), Xie noted.

Located at the Xujiahui shopping center in downtown Shanghai, the jointly funded cinema with top-class audio-visual equipment and facilities will eventually consist of 11 cinemas of various sizes, the biggest seating 350 and the smallest 110, said Xie.

The cinema sector is generally regarded as the retail market of the movie industry, and is currently worth less than 1 billion yuan (US$120 million) annually in China.

But the population of 1.3 billion and its increasingly rising economic strength make it a potentially huge market, likely to be intensely-targeted major international movie businesses.

In the general manager's view, Time Warner's investment was not for immediate return, but to set up a model of international standards for Chinese cinemas, with returns to follow in the future.

Chinese analysts said that such investments would encourage China's cinema industry to become more and more involved with the international market and force local cinemas and operators to modernize.

Time Warner and Shanghai Yongle were both committed to keep each other the preferential partner in seeking cinema-building programs in China.

The Chinese firm holds the largest share of box office revenue in the nation, controlling 57 cinemas in Shanghai and neighboring Jiangsu and Zhejiang provinces, Xie said.

The two partners will jointly establish technical services company for entertainment facilities, offering renovation engineering technologies to domestic multiplex cinemas and management training programs.

US movie operators first moved into China's film distribution market back in 1929. Warner set up its own distribution company as early as 1932, but had not input investment in cinemas.

In 1994, China's movie authorities initiated a reform adopting a profit-sharing policy between the government, distributors and cinemas, and the first foreign film imported under this policy was a Warner production -- The Fugitive.