Mark Osborne, co-director of Kung Fu Panda, attended the animation festival, where he discussed the determination required to make an animated film.

Zhu Yuqi and fellow up-and-coming animator Wu Zheng paid close attention. Wu, a 26-year-old playwright who has been unemployed for more than six months, said: "There is a rosy future for China's animation industry which will belong to us young animators."

Last year Wu had to quit his job at a Shanghai-based animation company when his boss, like many others in the business, decided to work for US and Japanese clients instead of supporting domestic content.

In order to boost the domestic animation business, the Chinese government has adopted a series of helpful policies. In April 2004, SARFT released a policy document stating that domestically produced animation should make up no less than 60 percent of all animated programs aired on Chinese TV stations.

Two years later it enacted another regulation banning the airing of overseas animation on China's domestic channels between 5:00 and 8:00 PM - the peak viewing time for schoolchildren.

In February last year the ban was extended to 9:00 PM, with the minimum domestic production requirement lifted to 70 percent of total output.

"In just a few years, both the quantity and quality of domestic animation has improved greatly," said Jin Delong.

Total domestic animation output reached 130,000 minutes in 2008, up from 20,000 minutes in 2004. In addition, following the establishment of the first national animation production center in Shanghai in 2004, 78 other centers have been set up. Animation channels have increased from the three launched in 2004 to more than 30 today and China now has more than 5,600 animation companies.

"Ninety percent of the animation companies are small workshops," said Lin Yuan, president of Aixun International Animation Training Agency. "They started developing original content but later on started doing animation for foreign firms to make money." Foreign animators have long used Chinese workers as a source of cheap labor.

Zhu's company, which has fewer than 20 staff, does design work for domestic enterprises to make money to support his Matsu story-writing.

Animation is expensive, with costs reaching upwards of 10,000 yuan a minute.

"Small companies are barely able to last long enough to enjoy the preferential policies of the central government and those of local governments, such as the 2,000 yuan a minute bonus awarded if one of their cartoons is broadcast by CCTV," said Anna Sze, general manager of Momo King Limited, a Fujian-based animation company.

Bigger animation companies have a better chance because they have more capital with which to support the creative arm.