Until last week the Internet-based films -- made by everyone from first timers to established directors -- existed in a grey area in terms of censorship, with content screened by host Internet portals.
But with the phenomenon seeing two years of rapid growth, Beijing has tightened scrutiny, vowing to prevent "unhealthy content".
The impact of the new restrictions in China's already heavily regulated cyberspace remains to be seen, with mainland filmmakers having come to see the micro movies as a haven from box-office pressure and a means of artistic release.
"This type of film allows almost anyone to be a director," veteran mainland Chinese filmmaker and Academy Award nominee Gu Changwei, 54, told AFP.
"I can present what I think and the story I wish to tell -- like a blogger who can publish their own articles," said Gu, nominated for an Oscar for his cinematography on Chen Kaige's 1993 hit "Farewell My Concubine".
He added that micro films, which tend to be no longer than 30 minutes and are broadcast across China on portals such as Youku and Sohu, instantly reach a massive audience.
Jean Shao, director of communications at Youku, said the micro film movement first caught the public's attention with the release of "Old Boys" in 2010, a film that has been viewed more than 47 million times.
It formed part of the Youku-sponsored "11 Degrees" series of 10 micro films, which has been seen by 120 million viewers combined.
Directors say the films give them an opportunity to connect with their viewers in a nation where video-sharing website YouTube is blocked.
"I can see feedback right after people have watched and I am able to know what is good, and what can be improved," said Gu. "Micro films present a real, direct communication between the director and the audience".
He is one of four Asian directors to contribute to the "Beautiful 2012" micro film omnibus supported by the Hong Kong International Film Festival Society and Youku, which has screened at festivals in Asia since March.
It includes the mesmerising "Walker" from Taiwanese director Tsai Ming-liang, which charts a monk's journey through chaotic Hong Kong streets.
Tsai's short film helped close Critics Week at this year's Cannes Film Festival.
Gu's contribution to "Beautiful 2012" was "Long Tou", which sees its characters ruminating on the meaning of beauty.
According to US investment managers Needham & Company, China has become the world's largest market for smartphones.
Some 33.1 million of the devices were sold in the first quarter, compared to 25 million sold in the United States, while China's State Administration of Radio, Film and Television (SARFT) has claimed that 325 million Chinese regularly watch videos online.
"We have witnessed how fast mobile technology has developed in the past few years," said Tang Liujun, managing director of the Shanghai International Film Festival (SIFF).
"It has changed the way people obtain their information and entertain themselves. Almost everybody holds such a smart handset, and our interest in using the device is increasing, just as people move from TVs to PCs. It's very cool that we can watch films even on the go."
SIFF -- held each June -- has been at the forefront of promoting micro films with its sidebar Mobile Film Festival.
"A growing number of people are trying to make a micro film themselves," said Tang.
"A lot of people consider 2012 as the official start of the micro film movement. Young grass-roots filmmakers can now start to make their own shorts. These shorts are covering a very wide range of topics as they come from different people with different backgrounds."
Micro films add another dimension to a Chinese film industry that last year saw box office receipts total more than US$2 billion for the first time, making it the world's second largest behind North America.
Industry estimates have meanwhile put the number of micro films produced in China last year at more than 2,000, compared to around 500 mainstream movies.
"Once a normal movie has been screened, it is gone," said Youku's Shao.
"But when a film goes online it is always there and people keep going back. It is giving filmmakers an opportunity they never had before."
Previously, the content produced by the micro film movement was monitored by the likes of Youku, but an increasingly wary Chinese government last week vowed to step up its management of the craze.
Unlike television or films shown in cinemas, online series and short films had existed in a relatively uncensored world.
Beijing imposes strict rules over what films are allowed to be seen by the public, banning what it sees as any negative portrayal of contemporary politics or issues it says might lead to social unrest.
State media reported last week that SARFT called on Internet video service providers to ensure "unhealthy content" was not screened and urged them to form an association of censors to ensure content was more controlled.
However, those in the micro film industry say the ruling will have little impact because filmmakers already rely on web portals that employ people to pre-screen all content uploaded to the site.
The mostly dramatic content is also seen as relatively inoffensive.
"There are certain rules the filmmakers have to follow -- like no porn -- as there are in mainstream Chinese cinema," said Youku's Shao.
"But there is more freedom in working for themselves, making the films they want to make, not like a studio. This platform also generates debate -- we found Tsai Ming-liang's Walker had about 30,000 comments after its first day online."
For the likes of Gu, the movement has so far presented a unique window of opportunity.
The films are self-funded or funded through collaborations between regional festivals and Internet portals, for whom the films are much cheaper to buy than regular movies or TV shows.
"It has given me more freedom to show my own message," said Gu. "I received a lot of feedback for 'Long Tou' from the public, and as I don't have any pressure from the box office with this type of film, I can think to myself, 'why don't I shoot something different?'"
