By Ben Rand
Democrat and Chronicle

SHANGHAI (June 25, 2000) -- Zhu Yongde knows why the movie-making business at his Shanghai Film Studio is struggling, but don't expect to find him cursing his luck.

The state-run studio, China's oldest, used to produce about 25 films a year, but that has fallen to fewer than 10. The reason: The Chinese government insists on making less popular propaganda and documentary films.

To cope, studio president Zhu is pursuing new businesses and new ideas -- a promising situation for Eastman Kodak Co. as it tries to sell more movie film in the world's most populous country.

Shanghai's parent company has opened a multimillion-dollar digital imaging studio to add special effects to movies and television shows and to produce computer animation. It is the second digital studio in China.

Zhu and his staff also are considering making some English-language movies for export to other parts of Asia and -- perhaps -- to U.S. cities with large Chinese populations, such as San Francisco and New York.

China's 30-some other movie studios face the same problem. The studios produced about 70 movies last year but production this year is expected to fall to about 50.

The box office take by cinemas is an estimated 130 million Renminbi ($15.7 million), down from 250 million ($30.2 million).

Despite the movie slowdown, Shaghai Film Studio is by no means a ghost town.

It produces 200 to 300 episodes of television shows a year and has been seeing greater demand for making TV commercials as more Chinese open their own businesses.

Kodak has benefitted from that growth in TV production, particularly since the Chinese industry now works primarily with film.

In recent years, TV shows and commercials were shot largely on lower-quality videotape, said David Sanderson, general manager of entertainment imaging for Kodak's Greater China region.

In the short term, though, Kodak's largest movie-making opportunity will not involve Shanghai Film or any of the country's other studios.

To gain entry into the World Trade Organization, China has agreed to double the number of films it imports from Hollywood annually from 20 to 40. Roughly 90 percent of all U.S. feature-length movies are shot on Kodak film.

President Zhu at Shanghai Film Studio appreciates the challenge the agreement provides: ''Just like playing sports, if you always play the weak teams, you cannot improve. We want to play the strong teams.''

Kodak is doing its part to stimulate the industry.

The company plans to open a unique Kodak-branded movie theater in Shanghai, probably in September.

China has about 10,000 cinemas, but about one-third are in remote areas and ''are like clubs or associations that have a movie projector,'' Sanderson said.

Kodak figures that if consumers see movies the way filmmakers intend, they will go more often. The Kodak theater will offer stadium-style seating and other amenities, as well as state-of-the-art projection technology to put the best possible image on the screen.