China started making animated films almost at the same time as Japan. The first full-length Japanese anime color film, Hakujaden (The White Snake Enchantress), an adaptation of the famous Chinese legend of the white snake, was released in 1958. Before that, The Magical Pen, a puppetoon film based on Chinese children's book Ma Liang With the Magical Pen produced by the Shanghai Animation Film Studio in 1955 had won multiple international prizes.

However, in the following years China's animation industry fell behind and in the 1990s when Japanese and U.S. animations entered the domestic market, most domestic animation companies became contractors of their foreign counterparts.

But in recent years, China's animation industry has seen fast growth. For instance, recently Ne Zha, loosely based on the tale of a namesake mythological figure from the Ming Dynasty (1368-1644) novel Fengshen Yanyi, or The Investiture of the Gods, achieved a box office of 5.6 billion yuan ($787.5 million) as of September 10, becoming the highest-grossing domestic animated film and the second-highest grossing film of all time on the Chinese mainland.

The new wave of animation craze is led by companies such as Coloroom Pictures, a subsidiary of Beijing-based studio Enlight Media, founded in 2015. However, in spite of the huge amount of capital poured into the sector, there are concerns that the bubble may burst if animated works' quality doesn't improve. The industry should be propelled by creativity, rather than by capital, Lu Wei, producer of Monkey King: Hero Is Back, said.

(This is an edited excerpt of an article originally published in Caixin Weekly on September 16)