US film giant DreamWorks has announced a plan to invest 330 million US dollars to set up a US-China joint production company in Shanghai.

The most successful animated film in Chinese history was American and its hero was one of China's most beloved exports. Kung-Fu Panda 2 took in around $100 million in China.

Chinese Vice President Xi Jinping delighted his Hollywood hosts by raising the cap on the number of U.S. films that can play on Chinese screens each year from 20 to 34-the additional 14 films being 3-D and large format IMAX movies. The DreamWorks joint venture aims to take advantage of China's existing pool of talented animators.

Michael Pachter, entertainment analyst, said, "The animation industry in China is pretty good. They're really good at video games and it's the same skill set, so the same kind of artists and the same kind of computer design."

The Chinese film industry is the third largest in the world after the U.S. and India; and the kind of movie that Chinese fans like to watch is no secret. Like their U.S. counterparts, Chinese fans like blockbusters. The biggest draw in 2011 was Transformers Dark Side of the Moon, pulling in more than $145 million at the Chinese box office.

Clayton Dube, Executive Director of US-China Institute, Univ. of S. California, said, "Films that are primarily story driven, with fewer special effects, tend not to do well in the Chinese market. In part it's because a cinema ticket in China is really quite expensive."

Chinese films have achieved critical acclaim around the world, but haven't yet broken through at the foreign box office in a big way. DreamWorks and its new Chinese partners aim to change that.