There are several reasons that could explain why vfx companies are not quite interested in outsourcing to China or setting production departments in China.
The first is the competitive offering from all over the world. When we talked to the HR manager in DNeg, he says when DNeg was considering setting up a quarter around the world, many representatives from around the global, including India, Mexico, Japan, Korean, Singapore were exploding his telephone to attract DNeg. At last, DNeg selects Singapore. The success of Hollywood film has taught every country to make some offer to this creative industry, including tax reduction, free office, visa-free etc. Not even these emerging countries, London, as the largest visual effects base in the world, is still offering the tax reduction to this industry. Therefore, Chinese government has to compete with all these countries, and that is not an easy task.
The second is the lacking of talents. The vfx eduction in China is a total failure in the sense of Hollywood production. That's why only some basic processes are out-sourced to China, such as rotoscoping, modelling, a bit of texturing and animation. If the company cannot recruit good talents from inside China, he has to get more people from outside. Then the visa appears to be a major problem. Unlike Singapore, people from most countries need to receive a visa before coming to China, which brings inconvenience to them. The culture is totally different for them.
The third is the living expenses are growing rapidly in China, which diminishes its advantages in labouring prices. And this living expenses are still believed to rise in the coming future.
The fourth is the concern about confidentiality and intellectual property. These two issues are the most sensitive ones inside this industry. Once you let out the secrets of the production, you are mostly likely to be kicked out from this industry. It's difficult to judge the confidentiality in Chinese partners. But it is definitely quite difficult to solve the problem of intellectual property. The pirate software in China is so common that makes the studio vulnerable to charges from giant software companies, and no studios want to face with these legal issues.