Director Diao Yinan is enjoying unprecedented domestic success with his gritty thriller "Black Coal, Thin Ice", but says he could achieve more if it were not for the restrictions censors impose on him and his fellow Chinese art-house filmmakers.

Diao's film went on release in March and has become the first art-house production to break the RMB100 million ($16 million) mark at the Chinese box office, which is dominated by commercial blockbusters.

Although the film about a former policeman ensnared in a mysterious series of murders is an unvarnished portrayal of modern China, Diao said the true reach of the nation's filmmakers and storytellers was being stymied by stringent censorship.

"Chinese filmmakers are not lacking in imagination and if we manage to get more freedom, we could certainly reach the level of US directors," said Diao, talking to AFP at the Far East Film Festival in the northern Italian city of Udine where "Black Coal, Thin Ice" was showing.

"It is like Hollywood filmmakers and Chinese filmmakers are playing the same game of soccer but they play to different rules," said Diao.

China's communist authorities impose strict rules over what films can be seen by the public, banning what it considers any negative portrayal of contemporary politics or issues seen as potentially leading to social unrest.

Rules governing censorship in China are opaque and reasons are not given for why cuts are made. Few films escape the censors unscathed, unless they offer a particularly flattering depiction of Chinese people.

Last year Jia Zhangke's "Tian Zhu Ding" ("A Touch of Sin") was nominated for the Palme d'Or and won Best Screenplay at the Cannes International Film Festival.

A violent, four-part story that took real life events as its inspiration, the film dazzled critics worldwide. But it has not yet been given clearance by China's censors.

In contrast, Diao says censors required only minor cuts to his film.

- Overseas recognition -

"Black Coal, Thin Ice" is a slow-paced but gripping thriller that presents the seedier side of modern China as seen through the lives of characters who live on the fringes of society, seemingly untouched by modern China's rapid economic success.

It has garnered awards overseas, including the "Golden Bear" for best film at the Berlin International Film Festival in February, where its star Liao Fan also won the "Silver Bear" for best actor.

"The awards were extremely important for this movie," said Diao.

"Most of the audiences in China have not appreciated my earlier films but since it won the Golden Bear, they have all wanted to watch this movie. The cinema scene in China is expanding."

It is Diao's third effort as a director following dramas "Uniform" (2003) and "Night Train" (2007), and the 44-year-old is considered one of the leading lights of a fast-growing contemporary Chinese cinema industry.

This year will also see mainland China's first competitor for the Palme d'Or for short films at the Cannes film festival since 1965, with 31-year-old artist Ran Huang's "The Administration of Glory" in the running.

Wang Chao's drama "Fantasia" is screening as part of the Un Certain Regard competition while veteran director Zhang Yimou's period drama "Coming Home" is screening out of competition.

- '14 new screens opening daily' -

Despite the restraints imposed by censorship, the success of "Black Coal, Thin Ice" illustrates a shift in China's film market, says Diao.

"The gap between the amount of commercial films being made and the number of art-house films is getting closer and closer," he said.

China's market is the fastest growing in the world, with the $3.6 billion collected from the box office last year a rise of 21 per cent year-on-year.

It is second only to the North American market's estimated $11 billion -- which China is expected to surpass by 2020.

There are on average 14 new screens being opened each day across China as the market looks to capitalise on the country's growing wealth and hunger for entertainment options.

"All of a sudden they have understood that the cinema industry produces great profits," said Diao.

The producers of "Black Coal, Thin Ice" secured a deal that saw the film released across 2,000 screens, a previously unheard of amount of exposure for a non-commercial film.

"That is an amazing amount of screens for this type of film and it is a game-changer. It is a breakthrough feature," said Michael Werner, whose Fortissimo Films has the worldwide sales rights for the film.

Werner said there were plans under way in China to open up an art-house circuit of cinemas he hoped would offer further support.

"Not everybody wants to see romantic comedies all the time. So there are opportunities coming through for people making these types of (art-house) films."