Animation industry is one of several sections of cultural industry, the major growth industry in china. This study is to analyze the characteristics of development of Chinese animation industry in two categories of governmental policy and economy. First, development of animation industry is characterized by the governmental policy. Chinese animation industry is currently experiencing a rapid developmentbased on the various policies and support. On the statement of ‘Plans for Promotion of Chinese Film & Animation Industry’ by State Administration of Radio, Film, and Television (SARFT) in 2004, governmental support on the section has begun. Starting in 2006, China’s 11th five-Year Plan for National Economic and Social Development (FYP) has enhanced the development of the animation industry. With governmental support, Chinese animation industry has been broadening its boundaries through development of new cultural contents. Second, in economic aspect, derivative products have been developed by the progress ofthe animation industry. Governmental support has brought an industrial conversion focused on Research & Development and Creation, and income increase has resulted in an increased spending on culture. Those changes have led to the development of derivative industries such as animated film, accessory, animated publication industries. Success of the animations has promoted development of the derivative products and enlarged the market size. As a higher value-added business with these huge economic impacts, Chinese animation industry will continue its growth.