By Grady Smith
January 02, 2014 at 09:58 PM EST

The Chinese box office continued its remarkable evolution in 2013 — and it thrived thanks to Chinese-made pictures, not just Hollywood films. According to Chinese market researcher Ent Group, the country’s box office revenues reached $3.6 billion last year, up 27 percent from 2012’s $2.7 billion mark. China, which passed Japan in 2012 to become the second-largest movie market in the world, is now poised to surpass the U.S. by 2020 as the most lucrative film market on Earth.

Domestically produced pictures made up the majority of China’s revenues, accounting for approximately 59 percent of grosses. Action comedy Journey to the West: Conquering the Demons was the top-performing film of the year, grossing $207 million total. Only three Hollywood films finished in the Top 10: Iron Man 3 ($121 million), Pacific Rim ($115 million), and Gravity ($73 milion). Notably, all three spectacles made a special point of incorporating Chinese elements into their plots — whether by shooting additional action scenes in China, letting a Chinese fighter-robot punch a slimy kaiju, or by having Sandra Bullock reach a Chinese space station.

Hollywood studios are eager to grow their business in China due to its flourishing prospects, despite the fact that the country is eager to have its own films succeed first and foremost. China’s censors are notoriously difficult to please — more than a few films ran into problems in 2013 — and the government-run China Film Group doesn’t make it easy for American studios to earn returns on their films. American studios only get to keep about 25 percent of their movies’ Chinese grosses (the lowest rate of any foreign territory), and early in 2013, China implemented a surprise tax on the already small American grosses, which led to a drawn out battle with Hollywood.

Despite these struggles, American studios aren’t likely to be dissuaded from working with the country to continue building relationships as we enter the new year. There’s simply too much profit potential for them to ignore. Whether China is equally interested in keeping American studios happy, though, could be an entirely different story.