Apart from badly shaking the industry, the quota decision plunged filmmakers into almost a state of war with the government with the nation's critics already complaining about the films produced.
At the same time, China is still battling to come up with the magic movie formula to produce films that meets its ambitions to become a global movie powerhouse and which strike a chord with western, Asian and national Chinese audiences alike.
Tuya's Wedding (圖雅的婚禮) from Chinese director Wang Quan'an (王全安) about a Mongolian shepherd family, which took home the Berlin's Film Festival coveted Golden Bear last year flopped badly at the box office in China.
While the sheer size of the Chinese market has made co-productions with China almost a necessary part of filmmaking for many Asian countries, looming large over China's film sector is censorship which appears to become even more rigorous recently.
This includes the censors' demands for cuts to Taiwanese-born director Ang Lee's (李安) Lust, Caution (色，戒), which won the top prize at last year's Venice Film Festival, and a ban on Chinese director Li Yu's (李玉) Lost in Beijing (蘋果), which premiered a year ago in Berlin.
What is more, Beijing's stance on censorship appears to be the one issue hindering any quick moves to draw the three key Chinese language filmmaking worlds - Taiwan, Hong Kong and China.
"In the future Hong Kong cinema will gradually form part of Chinese filmmaking," said acclaimed Hong Kong director Johnnie To (杜琪峰) whose film Sparrow (文雀) is in the running for top honors at this year's Berlinale.
"But as Hong Kong becomes more part of Chinese cinema, I hope that Hong Kong filmmakers will continue to make films that are integral to the local culture," he said with Hong Kong still having the advantage of escaping the heavy hand of Beijing's censors.
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