Buoyed by the popularity of Asia’s most acclaimed movie in the West in years, Hong Kong’s film industry is . . .

Only a year ago, the world’s fifth-largest filmmaking center languished in the wreckage of Asia’s 1997 financial crisis, but grabbing the tail of “Crouching Tiger, Hidden Dragon”--and other Asian productions--the Hong Kong film industry is poised for recovery.

European films nabbed more honors at this year’s Cannes International Film Festival, but outside the official competition it was clear that Hong Kong filmmakers were on a roll.

The gathering in the South of France brought a new scramble for rights to movies made in the land of Jackie Chan and Jet Li and a record number of distribution deals with U.S. and European partners. Buyers spent $20 million--double last year’s amount--to pick up a crop of fresh and not-so-fresh Hong Kong pictures, according to Hong Kong’s Trade Development Commission. Data compiled by the commission show that contracts worth $25 million more are under negotiation.

For executives, filmmakers and critics in the territory, it was proof that the Western appetite for Asian productions continues to grow in the aftermath of the region’s most acclaimed film in years, “Crouching Tiger, Hidden Dragon.” (The film was from Taiwan.)

The Hong Kong production house Media Asia, for example, received $1 million from Western distributors, including Miramax, for DVD rights to late 1970s Hong Kong action classics and older Chan pictures culled from the company’s vaults.

And while distributors continue to scour the festival circuit and orchestrate the overdue U.S. release of hits of yesteryear, local industry insiders say there is evidence that the heightened interest extends beyond Hong Kong’s trademark action movies.

The trend is pushing Chinese-language films into a wider arena and setting the stage for a new group of Hong Kong talents to showcase their particular breed of filmmaking in the West. Hollywood has been harvesting Hong Kong action directors and their techniques--the comic-book tempo, the fast editing--for more than a decade, but the crossover appeal of “Crouching Tiger” has emboldened U.S. investors to scout Hong Kong for other kinds of films that could make the jump into mainstream success.

Notably, in the last few years, imports from South Korea, Japan and Thailand have also begun stirring interest among U.S. distributors. “Chunhyang” became the first Korean film in recent memory to earn a general release in the U.S. “In the Mood for Love,” a minimalist art-house picture by Hong Kong’s Wong Kar-Wai, received excellent notice when it opened in February.

This trend has been many years in the making, according to Woody Tsung, head of the Hong Kong Motion Picture Industry Assn., but “Crouching Tiger” provided the final push into the limelight. The film has grossed more than $125 million so far in the U.S., took home four Oscars this year and also became the first Chinese-language production to win best foreign-language film.

The win “has a symbolic significance,” Tsung said. “It created the atmosphere for Hong Kong and Asian films to more easily penetrate the U.S. market.”

In its heyday in the 1980s until the mid-’90s, Hong Kong was churning out more than 200 pictures per year. When the 1997 financial crisis hit, Southeast Asian investors withdrew their backing and sent local film production into a tailspin. In 1998, the number of releases slumped to an all-time low of 92. Since then, output has been slowly inching back up, although it remains hampered by DVD and video CD piracy.

Gaining Access to U.S. Funding

But thanks mostly to the box-office success of “Crouching Tiger,” projects that in the past used to rely on financial support from countries such as Taiwan, South Korea and Japan have gained access to U.S. coffers and distribution channels.

Hoping to capitalize on the windfall, the territory’s government has also launched its own initiative to revive Hong Kong’s position as a market leader.

This year the cream of Hong Kong movie stars and directors, accompanied by 200 film business executives, was whisked to Cannes in a PR blitz mounted by the Hong Kong Trade Development Commission to promote the home-grown film industry.

The effort culminated in Hong Kong Night, a $1-million gala held during the festival, in which more than 1,000 guests, including 600 Western buyers, rubbed shoulders with the likes of Chan and Michelle Yeoh.

“They tried to promote Hong Kong film, but I think they were more successful in promoting Hong Kong tourism,” joked Freddy Wong, who attended the event as a delegate of Hong Kong’s Film Critics Society.

Locally, efforts to sustain the momentum sparked by “Crouching Tiger” continue at full tilt.

Four films in production are riding at least in part on the film’s tail. Zhang Yimou, the legendary director of “Raise the Red Lantern,” is doing one. Hong Kong maestro Tsui Hark is wrapping up “The Legend of Zu,” a martial arts epic set in ancient China that has already been snapped up by Miramax for U.S. distribution. Hong Kong production house Golden Harvest also announced ambitious plans to turn “Sun Tzu’s Art of War” into what it called a “mega-movie.”

Director Peter Chan, who splits his time between Los Angeles and Hong Kong, where he runs a production company called Applause Pictures, said there are increasing opportunities for local filmmakers to start packaging Asian-themed movies with international money.

“American distributors are looking at every possible next ‘Crouching Tiger,’ from every single country in Asia--and it doesn’t need to be an action picture only,” he said. “The minute 2,000 theaters in the U.S. showed a film in the Chinese language, the possibilities became limitless.”

He is currently adapting the novel “Waiting,” by Chinese-born author Ha Jin, for the screen.

“It’s set in ‘60s, ‘70s and ‘80s China, and it will be an international co-production,” Peter Chan said. “But it’s not an action film--it’s about relationships.”

It is telling that in Cannes, Miramax took home for U.S. release not only the ominously titled “Flying Dragon, Leaping Tiger,” but also “Shaolin Soccer.” The latter is a non-action comedy starring Stephen Chiau--an actor dubbed Hong Kong’s Jim Carrey.

Another upcoming project, “The Touch,” generated persistent buzz among buyers, according to local film industry executives present at the festival.

For “The Touch,” Hong Kong production house Media Asia brought together two “Crouching Tiger” alumni, Yeoh and Oscar-crowned cinematographer Peter Pau, for a caper about a family of circus artists in contemporary China. Pau will direct and Yeoh will be on double duty as star and producer in a film that seems dreamed up to bank on the success of last year’s sleeper.

“There were a lot of buyers from the States competing for it,” said John Chong, executive director for Media Asia. Even though “The Touch” is being made and packaged for an international market, Chong said, “we are not giving up the characteristics of Chinese and Hong Kong filmmaking.”

“I heard that some audiences in the U.S. could not [follow] the subtitles when they first went to see ‘Crouching Tiger,’ so they returned to view the film several times,” he said. “Such audiences were drawn in by the Chinese philosophy, the Chinese music, not just the action scenes.”

A French distributor, M6, has already picked up “The Touch” for European release, even though Chong says there is still tinkering going on with the script and shooting hasn’t started yet.

Such confidence in Chinese-language films would have been unthinkable a year ago, Hong Kong film industry insiders say.

“The success of ‘Crouching Tiger’ encouraged big American studios to give local productions a green light,” said director Jacob Cheung, a 20-year veteran of Hong Kong film. “Five years ago, if you wanted to produce a film with Sony Columbia, there would have been more than 18 months of just talking.”

But the “Crouching Tiger” phenomenon has changed that, giving quicker go-aheads.

“Hong Kong is too small a market to sustain its own film culture. Our films need to be commercially successful abroad,” he said. “In the past we did films for Southeast Asian investors. Now that role has been taken up by Americans, so we do something that fits their market.”

Fruit Chan, an independent filmmaker, said “Crouching Tiger” has made things easier even for someone like him--a fringe player whose pictures steer clear of the typical action features with proven box-office appeal in the West.

“Investors who have guts are more willing to believe in me,” said the director, whose offbeat works rooted in Hong Kong’s recent political transition from British to Chinese rule have won attention at international film festivals and played well in Europe as art-house releases but have failed to move U.S. distributors in the past.

“After the success of ‘Crouching Tiger,’ ” he said, “there is now a better opportunity for audiences to realize there is another side to the Hong Kong style.”