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The record-breaking run of ‘Ne Zha 2’ may seem like a surprise. It shouldn’t be

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Chinese animation blockbuster Nezha 2 was released in late January alongside several other films for the local Spring Festival holiday period. 

Vcg | Visual China Group | Getty Images

BEIJING — For someone who’s lived in China since before the pandemic, the success of the animated film “Ne Zha 2” marks more of an industry milestone than a surprise.

The steady drumbeat of homegrown animation had picked up in 2023, just after the end of Covid-19 restrictions, with popular releases such as “Chang An” — a re-telling of Chinese poet Li Bai’s life from the perspective of his friend. It raked in about $250 million as the only animated film in China’s top 10 movies for the year, according to box office data from Maoyan.

The team behind “Chang An,” Light Chaser Animation, works largely out of an old white building in the sleepy outskirts of Beijing. The ceilings are high; stairs wind through the building to connect multiple floors and rooms — and a gym.

When I visited this week, some animators — working on their computers in the dark — were racing to finish cinematic lighting effects on scenes for this summer’s movie. Others designed historical Chinese robes, detailed eyebrows and re-created buildings.

“This place is no longer big enough,” Yu Zhou, president of the studio, said in Mandarin, translated by CNBC.

He said the 380-person company needs to hire at least 100 more people in the next year to keep up with its new production plan: two movie releases annually starting from 2026, up from one a year currently. AI, he said, can only be a tool for now. Light Chaser plans to move to a new office in the second half of this year.

Beijing-based Light Chaser Animation had more than 380 employees as of February 2025.

The studio sticks to a three-year production plan for all the movies it’s making simultaneously. It tries to imagine the future, and whether 20 million to 30 million people will watch it when the movie comes out, Yu said. “Will this story work in three years?”

This film slated for this summer, “Curious Tales of a Temple,” re-tells “Chinese ghost stories,” Yu said. The studio is in talks with “Hollywood mainstream players” for releasing the movie in theaters overseas, including in North America, at the same time as the planned China launch, he said.

Alluding to the studio’s appeal among global audiences, Yu claimed Light Chaser’s “Green Snake” — which is a rendition of a Chinese legend sets it partially in a futuristic city — did well on Netflix after its 2021 launch, remaining in the top 10 non-English content for three weeks.

Among the other animated features in the works, video-streaming company iQiyi is developing “Master Zhong” that’s expected to be released in China this year. Ya Ning, a senior vice president at the firm, said Chinese animation had started to break its “childish” image and was turning into an industry, expanding into movie merchandise and games as well.

A recent history

Chinese animated films have only started to make a splash in the last 10 years.

“In the history of Chinese animation, there has never been a film like “Big Fish and Begonia.” … as far as the Chinese industry goes, this bold and breathtaking fantasy adventure stands alone,” entertainment industry magazine Variety wrote after the movie’s 2016 release.

The film was made by Beijing Enlight Media. That’s the same producer behind this year’s “Ne Zha 2” and “Ne Zha 1” that came out in 2019 — it had topped China’s box office that year.

“Deep Sea,” from Beijing studio OctMedia, won acclaim in early 2023 with its fantastical pastel-colored rendering of a young girl’s journey of healing following her mother’s abandonment.

While popularity hasn’t always turned into box office sales, “Ne Zha 2” was able to succeed in part because it appealed to all ages, Liu Anxing, manager at a movie theater in Chengdu, told CNBC. While Liu said he was proud of Chinese animation industry’s achievements, he didn’t expect another “Ne Zha 2”-like blockbuster in the near future — at least not until “Ne Zha 3” comes out in 2028.

“Ne Zha 2” came out in China in late January as one of six movies for the week-long Spring Festival holiday — and took half the box office for the period, according to Maoyan. After its release in North America on Feb. 14, Maoyan data showed the movie beat Pixar’s “Inside Out 2” as the top-grossing animated film worldwide with more than 13 billion yuan ($1.79 billion) in ticket sales.

Strategy and plans

In contrast to Light Chaser’s focus on in-house production, the makers of “Ne Zha 2” relied on various studios. The director came from Chengdu-based Coco Cartoon, while Beijing Enlight Media was the primary producer and distributor. Chinese state media said nearly 140 businesses contributed to the production.

State media also highlighted how government subsidies from Chengdu to Qingdao have helped support domestic animation. Beijing in 2021 laid out a national plan for “building China into a major cinematic player” by 2035 that included a call for producing 50 films a year with box-office sales of at least 100 million yuan each.

Jonathan Clements, author of “Anime: A History,” cautioned that over-production of films could unpleasantly shock studios and investors. “Animation consumers are themselves a resource that needs to be carefully managed,” he said.

Clements added that in contrast to how Disney blockbusters made more than $1 billion in box office sales across multiple countries, “Ne Zha 2” has done so primarily due to sales in China. “You don’t have to worry about whether your story, or your characters, or your attitudes will play in other countries.”

China’s plan also specified that domestic films should account for at least 55% of the country’s annual box office sales.

Hollywood films, when allowed into China, have seen waning interest from domestic audiences. “Godzilla x Kong” was the only one to crack the top 10 last year, according to Maoyan. “Oppenheimer” failed to enter China’s 20 top-grossing movies in 2023, and “Barbie” was even further behind.

Back in 2019, “Avengers: Endgame” ranked third by domestic box office, according to Maoyan, just behind Chinese sci-fi sensation “The Wandering Earth” and the first “Ne Zha” film.

The characters and plots of many Chinese animated television series have come from stories written online by relatively unknown authors. China Literature, the operator of a major app for user-generated content, said 15 of the top 20 most watched online animated series in the first half of last year were based off content on its platform — in the last few years it’s also started putting the adaptations on YouTube as it strives to broaden its audience.

Chinese creators are also leveraging generative AI for filmmaking. Short-video streaming app Kuaishou is releasing a seven-part mini series, “New World Loading,” that’s largely created using the company’s Kling AI for video generation. Director Chen Xiangyu said the team just fed the AI model simple scripts, instead of having to draw characters.

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China may see ‘flying taxis’ in three years, Ehang predicts

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A flying taxi displayed at the China Telecom booth at SNIEC in Shanghai, on June 26, 2024, during the opening of Mobile World Congress 2024.

Nurphoto | Nurphoto | Getty Images

Flying taxis will become a viable method of transportation in China in the next three to five years, according to a senior executive at Ehang, a company that makes autonomous aerial vehicles (AAVs).

The prediction by Ehang’s Vice President He Tianxing comes days after the company became the first company, along with its joint venture partner Hefei Heyi Aviation, to obtain a certificate to operate “civil human-carrying pilotless aerial vehicles” from the Civil Aviation Administration of China.

Ehang said the certification clears the way for commercial operations of its vehicles, allowing for paid human-carrying services and any other low-altitude use cases the company develops.

At first, Ehang’s AAVs will be used for tourism, with passengers able to ride along designated routes in Guangzhou and Hefei by the end of June, He told CNBC in an interview translated from Mandarin.

The company will gradually explore air taxi services as its tourist operations progress. He named Hefei and Shenzhen as examples of some of the first cities expected to get air taxi services.

Ehang’s EH216-S, which received the certification, is a fully electric, pilotless two-seater aerial vehicle that features 16 propellers, according to Ehang’s website. It has a maximum design speed of 130 kilometers per hour, with a maximum range of 30 kilometers.

He expects to get certifications to operate in additional cities this year and next, with the second set of locations for tourist operations expected to include Zhuhai, Shenzhen, Taiyuan, Wuxi, Wenzhou and Wuhan.

For the forthcoming Hefei and Guangzhou locations, he declined to share the price per ride but hoped it would be reasonable enough to encourage more people to try out the pilotless aerial vehicle.

The experience should be “just like riding in a car,” added He, noting that no helmet or parachute is required. He said the initial length of rides offered by the company would vary from around three minutes to 10 minutes.

When asked about global markets, He said overseas partners had actively reached out since news of the certification, and he expected Ehang could expand overseas in the next few years.

Early lead

According to technology analysts, China’s allowing commercial use of passenger AAVs signifies its innovation and leadership in transportation and mobility. 

“This is a major development and shot across the bow from China showing technology innovation is accelerating,” said Dan Ives, global head of technology research at Wedbush Securities. 

China has already established itself as a global leader in electric vehicles and autonomous driving. Flying taxis, meanwhile, represent “one of the next frontiers for the auto and tech industry,” said Ives, adding that China already has created a clear lead in that space. 

Beijing first released rules for unmanned aircraft flight — vehicles without a pilot on board — in June 2023. The U.S., on the other hand, has yet to roll out comparable regulations.

Instead, Washington’s Federal Aviation Administration last year unveiled general rules for “powered-lift” vehicles, which includes some electric vertical takeoff and landing (eVTOL) aircrafts. 

eVTOL encompasses electric-powered aircrafts designed to carry passengers and take off and land vertically without the need for runways. However, the FAA has focused on those that are manually piloted.

Tu Le, founder of auto industry consultancy Sino Auto Insights, told CNBC that the U.S. has been falling behind China and even the EU in eVTOLs due to this lack of favorable policies, chalking it up to overregulation, lobbying from competing industries or “just plain politics.”

Meanwhile, China has been backing eVTOL technology as part of its “low-altitude economy,” the development of which has become a major policy goal. The term refers to economic activity taking place in airspace below 1,000 meters, well under the around 9,000 meters most commercial planes cruise around.  

In addition to flying taxis and other eVTOLs, examples of the low-altitude economy include unmanned drones for delivery and helicopter-operated air shuttle routes.

The term was recently included in China’s annual work report for 2025, with the government promising to promote its development. Beijing has also committed to boosting consumption in the low-altitude economy, notably in low-altitude tourism, air sports, and consumer drones, as part of a special action plan in March.

Already, China’s low-altitude economy is one of its fastest-growing industries, with it projected to be worth 1.5 trillion yuan ($205 billion) by 2025, and almost double that by 2035, according to a report by the research group Hurun

Competition ramping up 

Sino Auto Insights’ Le also credits China’s progress in the eVTOLs sector to a high degree of domestic competition. 

China has seen a major ramp-up of prospective players in recent years, as companies prepare for a high-tech future that was once confined to science fiction. 

Firms investing in the space have included electric vehicle makers like GAC, Geely and Xpeng.

Xpeng’s flying car division, Xpeng Aero HT, last week, completed a maiden flight of its “Land Carrier” product — a van paired with a 2-man quadcopter, the company told CNBC. 

Xpeng Aero HT said it will hold a pre-sale launch event and complete the construction of its mass production factory in the second half of the year. It also aims to obtain certifications for airworthiness by the end of the year.

Last month, XPeng Motors CEO He Xiaopeng told state media the company plans to mass-produce flying cars by 2026, as China’s low-altitude economy is boosted by supportive policy.

However, despite China leading in eVTOL regulation, it is expected to face competition from international companies also investing in and building various types of air vehicle technologies. 

Some of those companies include international companies like America’s Boeing, France’s Airbus, and the Brazilian firm Embraer, which have taken steps to take advantage of future flying car demand. 

Numerous startups, including Joby Aviation, Archer, and Wisk, in the U.S. are also planning on launching various commercial air taxi services over the next few years. 

According to Wedbush’s Ives, the global electric vertical takeoff and landing (eVTOL) aircraft business could grow into a $30 billion market opportunity over the next decade.

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China’s response to U.S. tariffs will likely focus on stimulus, trade

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Chinese national flags flutter on boats near shipping containers at the Yangshan Port outside Shanghai, China, February 7, 2025. 

Go Nakamura | Reuters

BEIJING — China’s reaction to new U.S. tariffs will likely focus on domestic stimulus and strengthening ties with trading partners, according to analysts based in Greater China.

Hours after U.S. President Donald Trump announced additional 34% tariffs on China, the Chinese Ministry of Commerce called on the U.S. to cancel the tariffs, and vowed unspecified countermeasures. The sweeping U.S. policy also slapped new duties on the European Union and major Asian countries.

Chinese exports to the U.S. this year had already been hit by 20% in additional tariffs, raising the total rate on shipments from China to 54%, among the highest levied by the Trump administration. The effective rate for individual product lines can vary.

But, as has been the case, the closing line of the Chinese statement was a call to negotiate.

“I think the focus of China’s response in the near term won’t be retaliatory tariffs or such measures,” said Bruce Pang, adjunct associate professor at CUHK Business School. That’s according to a CNBC translation of the Chinese-language statement.

Instead, Pang expects China to focus on improving its own economy by diversifying export destinations and products, as well as doubling down on its priority of boosting domestic consumption.

Watch for cascading tariffs as tariffs reroute trade within Asia, says economist

China, the world’s second-largest economy, has since September stepped up stimulus efforts by expanding the fiscal deficit, increasing a consumption trade-in subsidy program and calling for a halt in the real estate slump. Notably, Chinese President Xi Jinping held a rare meeting with tech entrepreneurs including Alibaba founder Jack Ma in February, in a show of support for the private sector.

The policy reversal — from regulatory tightening in recent years — reflects how Beijing has been “anticipating the coming slowdown or even crash in exports,” Macquarie’s Chief China Economist Larry Hu said in a report, ahead of Trump’s latest tariff announcement. He pointed out that the pandemic-induced export boom of 2021 enabled Beijing to “launch a massive regulatory campaign.”

“My view stays the same,” Hu said in an email Thursday. “Beijing will use domestic stimulus to offset the impact of tariffs, so that they could still achieve the growth target of ‘around 5%.'”

Instead of retaliatory tariffs, Hu also expects Beijing will focus on still using blacklists, export controls on critical minerals and probes into foreign companies in China. Hu also anticipates China will keep the yuan strong against the U.S. dollar and resist calls from retailers to cut prices — as a way to push inflationary pressure onto the U.S.

China’s top leaders in early March announced they would pursue a target of around 5% growth in gross domestic product this year, a task they emphasized would require “very arduous work” to achieve. The finance ministry also hinted it could increase fiscal support if needed.

About 20% of China’s economy relies on exports, according to Goldman Sachs. They previously estimated that new U.S. tariffs of around 60% on China would lower real GDP by around 2 percentage points. The firm still maintains a full-year forecast of 4.5% GDP growth.

Changing global trade

What’s different from the impact of tariffs under Trump’s first term is that China is not the only target, but one of a swath of countries facing hefty levies on their exports to the U.S. Some of these countries, such as Vietnam and Thailand, had served as alternate routes for Chinese goods to reach the U.S.

At the Chinese export hub of Yiwu on Thursday, businesses seemed nonchalant about the impact of the new U.S. tariffs, due to a perception their overseas competitors wouldn’t gain an advantage, said Cameron Johnson, a Shanghai-based senior partner at consulting firm Tidalwave Solutions.

He pointed out that previously, the U.S. had focused its trade measures on forcing companies to remove China from their supply chains and go to other countries. But Chinese manufacturers had expanded overseas alongside that diversification, he said.

“The reality is this [new U.S. tariff policy] essentially gives most of Asia and Africa to China, and the U.S. is not prepared,” Johnson said. He expects China won’t make things unnecessarily difficult for U.S. businesses operating in the country and instead will try harder to build other trade relationships.

Since Trump’s first four-year term ended in early 2021, China has increased its trade with Southeast Asia so much that the region is now Beijing’s largest trading partner, followed by the European Union and then the U.S.

The 10 member states of the Association of Southeast Asian Nations (ASEAN) joined China, Japan, South Korea, Australia and New Zealand in forming the world’s largest free trade bloc — the Regional Comprehensive Economic Partnership (RCEP) — which came into being in early 2022. The U.S. and India are not members of the RCEP.

“RCEP member countries will naturally deepen trade ties with one another,” Yue Su, principal economist, China, at the Economist Intelligence Unit, said in a note Thursday.

“This is also partly because China’s economy is likely to remain the most — or at least among the most—stable in relative terms, given the government’s strong commitment to its growth targets and its readiness to deploy fiscal policy measures when needed,” she said.

Uncertainties remain

The extent to which all countries will be slapped with tariffs this week remains uncertain as Trump is widely expected to use the duties as a negotiating tactic, especially with China.

He said last week the U.S. could lower its tariffs on China to help close a deal for Beijing-based ByteDance to sell TikTok’s U.S. operations.

But the level of new tariffs on China was worse than many investors expected.

“Unlike some of the optimistic market forecasts, we do not expect a US-China bilateral grand bargain,” Ting Lu, chief China economist at Nomura, said in a note Thursday.

“We expect tensions between these two mega economies to worsen significantly,” he said, “especially as China has been making large strides in high-tech sectors, including AI and robotics.”

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