Although China is seeing massive growth in box-office receipts in recent years, the world's second-largest movie market needs "space" for art-house filmmakers, says award-winning director Lu Chuan.

Lu's comments came as he and Toronto International Film Festival CEO Piers Handling held a conversation about the Chinese movie industry's "current state and future challenges" on Tuesday night at the Canadian embassy in Beijing.

"It's the best time for Chinese filmmakers, but also the worst time for art-house directors," says Lu, known to global audiences for his Nanjing massacre-themed movie City of Life and Death.