This scholarly article delves into the dynamic interplay between mythological narratives and digital innovation in Chinese cinema. By scrutinizing the amalgamation of traditional story arcs with modern cinematic techniques, it casts light on how digital advancements enrich narrative complexity and enhance visual allure. The methodology merges traditional film critique with digital analytic tools, underscoring the profound influence of digital technology on storytelling. Central to this discourse are case studies like "Ne Zha," which exemplify the modern reinterpretation of mythological themes. The paper contrasts how mythology is depicted in mainstream versus independent films, shedding light on their distinct narrative approaches. Additionally, the analysis extends to understanding the diverse reception of these mythological stories among domestic and international audiences, with particular attention to motifs of nostalgia and youth. In its concluding section, the article contemplates the wider ramifications for the film industry, explores challenges in audience engagement, and discusses the intricacies of copyright in the digital era.