Four colleges and nine studios, including Beijing Film Academy and Shanghai Animation Film Studio, were designated the main centers of development.

According to www.dongman.gov.cn, more than 1,200 universities and art schools now offer animation-related majors. And cities such as Beijing, Shanghai and Hangzhou have established high-tech zones to nurture viable new animation firms.

Chen points out that some Chinese animation companies have also been participating in the post-production work of Hollywood films.

For instance, Xing Xing Digital Corporation, a company that established a partnership with Walt Disney Co in 2007, was involved in adding special effects to movies including "Twilight", "Fantastic Four" and "Space Buddies".

"The colleges provide the professionals needed in every aspect of an animation production, while the companies' continued cooperation with foreign peers with advanced skills and experience make them more anime-savvy," Chen says.

According to SARFT, during the first five months of 2010, 221 Chinese-made cartoons (more than 270,000 minutes) were produced for domestic television channels, surging past the figure for the same period in recent years.

"We couldn't have made it without the expertise that has created recent comic hits on the big screen such as 'Storm Rider', 'Sergeant Black Cat' and 'Pleasant Goat and Big Big Wolf'," Chen says.

Song Lei, a critic with ACG Review, China's major animation magazine, also applauded "Jinsha" for its utilization of Chinese landscapes as backdrops, including Jiuzhaigou, one of the most popular national parks in China.

The film features hand-drawn turquoise-colored lakes, stone arch bridges and stylish houses resembling southern China's classical mansions, he adds.

"It is a clever and certainly a successful way of highlighting the distinctive Chinese heritage of the movie and received positive feedback when screened at Cannes and the Montreal International Film Festival."

But despite these original elements, Song says, an animated film needs a strong story and this is a challenge facing not just China's animation industry but others too.

"The film fails to make clear how Xiao Long transforms from being a selfish boy to a valiant man who would fight for a strange kingdom full of strange people," he says.

"The story is told in a bit of a rush."

Taking "Pleasant Goat and Big Big Wolf" as an example, Song explains that the reason for its wide popularity is its refreshing storyline.

To anchor the storytelling, the Animation School of Beijing Film Academy (BFA) has now invited top-notch playwright Zou Jingzhi to work on its new project, "Legend of a Kung Fu Rabbit", which is expected to be released in July.

Sun Lijun, dean of BFA's Animation School says irrespective of whether or not "Jinsha" receives a nod for Best Animated Feature, it is already a morale-booster being the first Chinese animation to be chosen by the Oscar committee.

"But if 'Jinsha' does not make it to the next round, it will remind all players in the industry that we must create a sophisticated story and narrate it in an intriguing way."