Even before Zhang Yimou's Red Sorghum took home the Golden Bear in 1988, the Berlinale was known as the foremost presenter of films from mainland China on the international stage - which makes their absence in recent years all the more striking. In 1999, for the second year running, the only competition title listed under "China" is actually a Hong Kong production: Ann Hui's Ordinary Heroes, which hopes to repeat Stanley Kwan's success last year with Hold You Tight. From the dozen studios still producing features in China, there's nothing.

There's no doubt that the country's film-makers face huge problems, most of which spring from the government's decision 12 years ago to privatise the industry. Four decades of state control had done nothing to train studio chiefs and producers for the realities of the market, and there was an immediate sharp fall in production. Since then, official attempts to re-regulate the industry have only made matters worse.

The new film regulations introduced in 1996 virtually ended co-productions with companies in Hong Kong, Taiwan and Japan, thereby cutting off both a flow of investment and a useful influx of new ideas and technical skills.

Chen Kaige is still trying to produce a saleable cut of his historical epic Assassins (also known as The First Emperor or Ch'in), while Zhang Yimou has just knocked off two low-budget quickies in the vein of Keep Cool. But most of their "fifth generation" contemporaries have either moved into TV or lapsed into silence.

The studios are struggling to reconcile the demands of the market and China's Propaganda Bureau, which leaves little room for creative innovation. Meanwhile, the prolific independent sector (represented in the Forum by Shi Runjiu's A Beautiful New World) is under renewed attack from the Film Bureau for operating outside state controls and censorship.

Things are not much better in Hong Kong, where the once-mighty film industry last year managed only about 60 features, most of them flops. As the exodus of talent to Hollywood continues and the local audience seemingly grows ever more tired of local productions, the Hong Kong film industry seems likely to shrink to the size of Taiwan's.

Maverick talents such as Wong Kar-Wai, Stanley Kwan and Ann Hui already produce their own work through their own small companies, just as Hou Hsiao-Hsien and Edward Yang do in Taipei. In future, Hong Kong will clearly make even fewer films than it does now, but a higher percentage of them will be artistically ambitious - and potentially internationally marketable. Many film-makers in China are hoping that their film industry will evolve in the same way. Tony Rayns