Xinhua was founded and controlled by
Shankun Zhang(张善琨), who had previously worked in the
Peking opera scene. By 1934, Zhang had made enough money to create his own movie studio named "Xinhua" or "New China." Zhang proved to be an excellent promoter, and within three years, Xinhua had transformed from a minor newcomer to a major industry player. In 1938, the film company was split into two subsidiaries, Huacheng and Huaxin because of a franchise agreement with distributors. In 1939, Zhang incorporated Xinhua into an American owned company named Zhongguo lianhe or "China United Pictures" (not to be confused with "United China", a common translation of the unrelated Lianhua Film Company or "China United Productions, Ltd., Xinhua's eventual successor). This was done mainly to escape from Japanese meddling of Xinhua business. As a result of Zhang's business dealings, Xinhua managed to produce twenty-four films in 1939 alone, making it the largest production company in Shanghai. Zhang Shankun's cooperation in this venture would eventually lead to his arrest by Chinese nationalist forces near the end of the war, ironically occurring shortly after he was arrested by the Japanese for suspicion of divided loyalty. Zhang would eventually move to
Hong Kong after being freed by the Nationalists after the war. == Important Xinhua productions ==