A prequel to the Oscar-winning Chinese martial arts epic Crouching Tiger, Hidden Dragon will be shot in New Zealand this year, Film Auckland said on Tuesday.

The original movie, released in 2000, broke new ground in introducing Western audiences to Chinese cinema and Film Auckland’s deputy chairman Alex Lee said securing the follow-up was a major coup for New Zealand.

“Over the last 18 months it’s been very quiet and it’s nice we’re finally getting traction,” he told Radio New Zealand. “It’s a production that will require a vast number of resources, facilities, technicians and crew.”

New Zealand is no stranger to big-budget movie shoots, providing stunning backdrops for both the Lord of the Rings and Hobbit trilogies.

But Lee said subsidy changes allowing major productions to claim back up to 25 per cent of their budget as rebates were a decisive factor in Auckland winning the Crouching Tiger prequel.

“It’s quite clear that until the decision to increase the incentives for international films to come to New Zealand we were just not competitive,” he said.

Crouching Tiger made $213.5 million (Dh784 million) globally, according to industry website Box Office Mojo, including $128 million in the United States — unprecedented at the time for a foreign language movie.

It also won four Oscars in 2001, including best foreign film, and launched the Hollywood career of director Ang Lee, who went on to win two best director Academy Awards for Brokeback Mountain and Life of Pi.

Film industry publication Variety reported that Malaysia’s Michelle Yeoh will reprise her role as a warrior in the prequel, to be titled The Green Destiny.

It said Hollywood mogul Harvey Weinstein’s The Weinstein Company is co-producing the film with New Zealand’s Iron Knight Productions.

Yuen Woo-ping, who co-ordinated the eye-popping action scenes in the original, will reportedly direct, using a script which has been approved by officials in Beijing.

The green light from Beijing is important because it ensures access to the rapidly growing Chinese market, where box office takings soared 36 per cent to an estimated $1.8 billion over the first six months of 2013.

The Chinese market is expected to overtake the US market by 2020, prompting keen interest from Hollywood.