“The Age of Micro-Dramas”: China’s State-Backed AI Entertainment Boom Shakes the Traditional Content Ecosystem

China actively incorporates AI technology into its cultural industry policies
AI supercharges China’s rapidly expanding micro-drama market
Local media production ecosystem loses ground to AI technology

China’s entertainment industry is being reshaped around artificial intelligence (AI). As the Chinese government steps up support for the integration of AI across the cultural, tourism and audiovisual industries, AI-generated content is rapidly gaining influence, particularly through formats such as micro-dramas—ultra-short serials produced as one- to three-minute episodes for vertical smartphone screens. The traditional content production ecosystem that once drove the market is consequently facing a structural shock as AI reduces both the volume and value of available work.

China Rolls Out Policy Support for AI Content

On July 16, Hong Kong’s South China Morning Post reported that China is building an AI-based entertainment ecosystem by combining robust legal guidelines with state-backed policy support. The Chinese government has already incorporated AI into its national growth strategy rather than treating it merely as an individual technology within the cultural industry. Under the “AI Plus” initiative announced last year, China’s State Council established the principle of applying AI across all areas of the economy and society, while the Ministry of Culture and Tourism began soliciting applications in March for a separate “AI Plus Culture and Tourism” pilot program. Eligible projects include the use of AI in music, art and theatrical creation; stage, lighting and sound design; performance simulations; automated cultural content generation; digital exhibitions; and audience interaction.

The China Film Administration also emphasized during this year’s National People’s Congress and Chinese People’s Political Consultative Conference that AI could be deployed throughout the film industry’s entire value chain, including script development, filming, visual effects, marketing, exhibition and merchandise development. The National Radio and Television Administration has designated micro-dramas as an emerging industry capable of driving employment, audiovisual industry growth and the overseas dissemination of Chinese culture. It is also explicitly encouraging productions that combine AI with web novels and online games. Projects selected for recognition can gain access to a “green channel” that expedites the administrative procedures required for production and distribution, along with preferential placement on major platforms and algorithmic recommendations.

More recently, the scope of AI adoption has expanded to theater operations and the consumer experience. On July 3, the China Film Administration and the State Administration for Market Regulation released guidelines outlining plans to transform movie theaters from simple screening venues into multipurpose cultural consumption spaces. The initiative provides an institutional framework allowing theaters to generate revenue beyond ticket sales through AI-powered experiential content and merchandise. Under the plan, vacant auditoriums and lobbies at Chinese theaters are expected to accommodate AI guides, virtual reality and gaming booths, intellectual property merchandise stores, and exhibition and performance facilities.

The Growing Influence of Micro-Dramas

Supported by this government policy drive, the market is expanding at an explosive pace. The most prominent segment is micro-dramas, which the National Radio and Television Administration has been actively promoting. China’s micro-drama market began growing in earnest as demand for contactless video entertainment surged during the COVID-19 pandemic. It subsequently became a core pillar of the Chinese entertainment industry through its integration with the recommendation algorithms of short-form video platforms such as Douyin and Kuaishou. According to the China Netcasting Services Association and other industry bodies, the micro-drama market is expected to exceed $16.7 billion this year. That would be 1.8 times the projected size of China’s entire theatrical box-office market over the same period, estimated at $9.4 billion.

The micro-drama sector’s growth engine lies in its distinctive production structure. Episodes are short, while the number of filming locations and characters is limited. Multiple production crews frequently share the same sets, costumes and actors, completing an entire series within several days or weeks. It is also common for a single production company to release between 10 and 20 titles simultaneously in one month. As a result, production costs are far lower than those of feature films or television dramas. These advantages have become even more pronounced with the introduction of generative AI. Chinese micro-drama producers are now using large language models (LLMs) to restructure popular web novels into dozens of short episodes, while employing video-generation models, voice-synthesis tools and automated editing software to produce content. Tasks previously handled directly by specialists in scriptwriting, filming, dubbing, visual effects and post-production editing are beginning to converge into a single “AI production pipeline.”

Underpinning this transformation are the high-performance video-generation models introduced by Chinese technology giants. The country’s advanced video-generation models focus on minimizing distortions in characters and backgrounds while producing natural movements and camera work. Models commonly used in production include ByteDance’s Seedance 2.0, Kuaishou’s Kling 3.0 and ShengShu Technology’s Vidu. ByteDance and Kuaishou, in particular, are reported to have leveraged the immense volumes of video data generated by the world’s largest short-form platforms, which they operate directly, to train their AI systems on a scale that competitors struggle to match.

AI Upends China’s Entertainment Industry

The rapid rise of AI-powered micro-dramas has shaken China’s entertainment market to its foundations. When a drama is filmed using conventional methods and human personnel, production companies must pay lead actors between approximately $56,000 and $69,000 per title. Set construction and prop rental can cost tens of thousands of dollars, while producers must also cover the wages of dozens of crew members working in lighting, cinematography, sound, makeup, wardrobe and production support. Post-production editing, color correction and music composition require substantial additional investment in both money and time. AI, by contrast, can generate virtual actors, filming locations, costumes and props while automating a significant portion of the production process, delivering overwhelming reductions in both costs and production time.

China’s media industry is therefore restructuring its entire business model around AI. In one prominent example, the country attracted widespread attention in March when AI actors Lin Xiyan and Qin Lingyue signed exclusive contracts with a production company. In addition to appearing in dramas, the two AI actors are expected to promote their productions and interact with fans in the same way as human performers. AI has thus evolved beyond a simple cost-cutting tool to become a new pillar of the entertainment industry.

The traditional media market, however, is facing a deepening chill. According to China.com and other local media outlets last month, the number of shoots conducted at Chinese drama production bases plunged by more than 70% year-on-year in the first half of this year. “At this time last year, seven or eight crews would be filming simultaneously and the corridors were packed with people, but now they often remain empty all day,” one member of a local production crew said. The impact on related industries is also becoming increasingly tangible. Revenue at lighting equipment rental shops has fallen by approximately 60%, while one-third of specialist costume stores have closed. Working conditions for background actors have also deteriorated sharply. Daily pay for extras in China, which stood at approximately $21 to $28 last year, has fallen to just $4 to $7 this year. Compensation for short-form voice actors has reportedly plummeted from approximately $16 per minute to about $6.