HENGDIAN, Zhejiang Province: When Hollywood built a full-scale film set of a 1930s geisha district on a field in a Los Angeles suburb, Xu Yong'an thought it could have been done in his hometown in East China's Zhejiang Province.

The story of "Memoirs of a Geisha" is set in Japan, but it was an international production, based on an American book with a mainly Chinese cast. If the set of the US$85 million movie had been built in Hengdian, noted Xu, the cost would have been much lower with no sacrifice to quality.

Xu, chairman and president of Hengdian Group, oversees a few hundred enterprises, ranging from electronics to pharmaceuticals, but he or, rather, the name Hengdian is best known for its mammoth movie backlots.

In mountainous Zhejiang, far from China's entertainment-production hubs of Beijing, Shanghai and Hong Kong, lies a cluster of a dozen backlots, each recreating a certain period in Chinese history. Unlike a typical movie set, the structures in Hengdian are made up of not facades, but full-scale buildings.

Each movie backlot also functions as a theme park, drawing in a growing number of tourists who want to see replicas of famous structures, as well as locations of their favourite movies and TV shows. Total traffic flow in 2005 reached 3 million people, bringing in 300 million yuan (US37.5 million) to Hengdian's entertainment business.

But not a penny of the money came from rentals of the sets and backlots. Starting from 2000, Hengdian made a surprising decision to give free access to all productions, domestic or foreign.

On a typical day, there are about 10 crews shooting on the various lots. Except for epics directed by Zhang Yimou or Chen Kaige, most allow tourists to watch as long as they do not interfere with the production.

Visionary or madman?

Hollywood Reporter, a trade publication, has called Hengdian "Chinawood." But it is hard to believe that China's largest backlot, the world's most crawded, did not exist until 10 years ago.

In 1996 venerable director Xie Jin was looking for someone to build a giant set of 1850s Canton for his epic "The Opium War." Just when he was at his wit's end, Xu Wenrong came to his rescue.

Xu, father of Hengdian President Xu Yong'an, founded his business empire in 1975, when operating a factory was still an ideological taboo in the country. Fortunately, his business, named after the 200-household village where it originated, blossomed in the sunshine of the reform and opening-up policy.

But Xu always carries the moniker of "farmer entrepreneur" (farmer-turned-entrepreneur), which has a connotation of a member of the nouveau riche with no culture.

Xu brought in 120 construction crews and built the 20-hectare set in three months. That feat impressed the filmmaker so much that he recommended the location to Chen Kaige, who was then scouting for his "The Emperor and the Assassin" film.

For that costume drama, another province had promised to build a Qin Dynasty (221-206BC) palace, but there was little to show after four years. In desperation, Chen implored Xu to help.

Eight months later, a palace with 27 buildings had been built in erstwhile hilly terrain. "We used up more dynamite than this county had used in its whole history," Xu recalled. "But it was not easy. There is so much water underground that we couldn't ignite the dynamite. In the end, we had to put it inside condoms. We bought up all the condoms in the neighbouring counties."

Even then, some of the hardest rocks could not be removed. Inside some structures, all full-scale, there are no chambers, but hidden giant boulders that are part of the original mountain.

This 40-hectare palace later became the location of Zhang Yimou's "Hero," making Hengdian a household name not Hengdian the conglomerate, but Hengdian the imposing backlot. About one-third of the country's costume dramas have had shoots here.

While Xu was endearing himself to the film- and TV programme-making community, people in Hengdian, most of whom are his employees, were alarmed. Even his top managers did not think this was a prudent investment.

The building spree produced a haemorrhaging of cash that could not be offset by the revenue, whether it came from crews or tourists, they said. "Hero" reportedly cost US$30 million, but according to a Hengdian executive, only a pittance of 3 million yuan (US375,000) was spent in the town.

But Xu was adamant. The economy of scale would develop only when more and more productions were moved there. To make that happen, he had to build more set-cum-theme parks. He added an old Hong Kong street to complement the Canton scene. A Song Dynasty (960-1279) town, based on an ancient scroll painting, was also recreated.

The most ambitious project is the 100-hectare re-creation of the Forbidden City, home of the Ming and Qing emperors. "The real palace charges 30,000 yuan, or US$3,750, an hour," Xu said. "Over here it is free and has more variety of scenes than the real place."

The son also rises

In 2004, Xu Wenrong handed the reins of the company to his son, Yong'an, who brought in new ideas and management expertise from beyond the Hengdian area.

"I'm still doing what my father started, but I have tried to expand on it," said the new boss.

The biggest change he wants to make is to "let film-makers come gladly instead of reluctantly."

"We cannot compete with Beijing on human resources. We have to provide one-stop services," he said.

Now Hengdian has built a state-of-the-art soundstage and added rental units for props and wardrobe. "They even provide a warehouse for your props," said Yue Youxin, a producer of a Ming Dynasty (1368-1644) television drama that was being shot in the copycat Forbidden City in mid-August.

"For sets of Ming and Qing imperial courts, you don't really have much to choose from. Hengdian is the only feasible option."

Aspiring actors also come here for their big breaks. But these "Hengdian drifters" (heng piao) usually get only roles as extras that do not require too much acting skill. "We need better actors who can fill in supporting roles," said Xu Yong'an.

For that purpose, Hengdian set up an acting school that has already enrolled 200 students.

Xu said that when Hengdian World Studios, as the backlot/theme park is collectively known, first started, his father did not have a clear role model in mind. He did not intend to imitate Run Run Shaw, Walt Disney or any other movie mogul. But now the son is intent on borrowing the "Sundance model" created by Robert Redford.

In fact, Hengdian has already invested heavily in the film industry, from urban movie theatre chains to a joint production company with China Film and Warner Brothers, which released this summer's hottest low-budget movie, "Crazy Stone."

"What would the film industry be like if we had 20 pictures like that?" he asked rhetorically. But budding film-makers are constantly starved of financing and support.

Xu intends to set up a fund, patterned after the Sundance Institute, that will give these newcomers a head start. "These movies do not have to be made in Hengdian, but they could be scripted, financed and promoted here," Xu said. "We can have a special film festival to promote them.

"We have built all possible sets for history-related Chinese programming. Now we'll need to put in a mechanism that can produce the talent that can galvanize the industry. We can have only one Zhang Yimou, but we'll need an army of foot soldiers who can fill in all the roles, such as script writers and producers, who can operate the business with competence and skill."

Xu still wants to build more sets, but he doesn't want to go it alone. "I can only guess what will be needed, but the film-makers have in mind what exactly they want," he said. "Hengdian would like to partner with production companies. We can chip in with some of the cost. But if you want to be the sole investor, you can participate in profit sharing when the set opens for tourism."

Xu Yong'an is eager to attract international productions with their deep pockets and technical expertise. "Projects with China-themed plots are ideal," he observed.

He understands that for international productions to invest here, they have to overcome the inconvenience of geographical, language and cultural barriers, and he has to provide enough incentive to make the arrangement palatable.

"If they don't see an overall cost benefit, they won't choose Hengdian over places such as Australia, Canada or the Czech Republic," he said.

Xu Yong'an wants Hengdian, now a sizable town of 100,000 people, to be the next Hollywood.

"It won't be easy," he said. "It cannot be done by one person or one company. We must have the support of the government and society. Only when foreign producers swarm here will we move closer to our goal of becoming the movie capital of the East."