Movies and outsourced work can help cultivate skills and techniques, but ultimately they do not offer creative freedom, he said.
So Dans Digital has chosen to create commercials and short films. Most recently it won a series of awards at the prestigious Siggraph conference, which is short for Special Interest Group on Graphics.
Competing with companies that have worked on graphic-intensive movies such as James Cameron's Avatar, Dans was the only Chinese animation house to take home trophies.
To Deng, it's never been about going commercial. He said all he wants to do is tell stories.
While he has his sights set on raising the bar, he said China's animation industry as a whole is facing an uphill battle. "I believe the problems that China's creative industry faces right now aren't about itself alone - it's the social and cultural environment."
"In every nation in the world, once society and economics are stable there will be a period of cultural expansion. There will be an expansion in China, but right now all we can do is wait.
"That doesn't mean do nothing - it means to work on other issues such social issues and values."
A look at the way traditional broadcast animation is produced in China illustrates Deng's point.
For a domestically made animated cartoon to air in China, studios and art houses usually must provide 100 episodes of a show and be able to sell it to Chinese Central Television. Only after the show is picked up by CCTV will it be viable for airing on satellite networks.
That makes it very hard for animation studios to break into the industry. To avoid the roadblock and create interesting work, the duo at Wolf Smoke studios in Shanghai have dropped traditional media in favor of the Internet.
Founded in 2006 by Yang Jinroh and Xie Xianhui, Wolf Smoke has been producing animated shorts for both domestic and Western companies, but their work is their own and not an outsourced product for someone else. They have been winning awards and clients alike.
Last year, Wolf Smoke was approached by Warner Bros to create their take on the iconic Batman property. They brought the caped crusader to Shanghai. It was highly popular.
"We just like to create work with our own values and style so we started making our own original content," Xie said.
Citing issues with Chinese networks about animated programming and how short animated films aren't highly desired on Chinese TV, Xie said the Internet became the medium for Wolf Smoke to share its work.
A current project called Woo Yin is a blend of martial arts fantasy and Chinese ethnic elements. Xie said the idea is to create original projects with a focus on the highest caliber and quality of animation while at the same time blending in some Chinese character.
"China has a long history which gives us endless source material," said Xie. "However the world has limited knowledge of Chinese original animation, so we try with our original work to dig up unfamiliar parts of Chinese culture to bring the audience a special experience.
"We would like to present what has been overlooked in Chinese culture in the form of animation."
Growing up fond of the work by Shanghai Animation Film Studio in decades past, Xie says that Wolf Smoke draws from inspiration from the studio's golden age. "China has excellent classic animations such as In the Heavenly Palace, Nezha Conquers the Dragon King and Conch Girl," said Xie. "But in recent years China has lost its momentum. When we carry on that style, we combine modern popular techniques of expression to create works both innovative and vintage."
Ultimately Xie says she and Yang both feel strongly about the pursuit of original content. "The quality of work is the most important thing," said Xie. "Our competitors aren't from the low-end - we are competing against excellent work from Hollywood and other places."
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