Chairman Mao's portrait still decorates many households in Yaoli, a former communist guerilla base in China's Jiangxi province. But what mesmerizes the people these days is television. On a typical Monday afternoon, two children sit transfixed before their family's flickering set watching a tangled romantic drama from Hong Kong. A few doors down, a retired couple giddily tell visitors about the various provincial stations their local cable provider carries. "We get Shanghai, Zhejiang, Anhui, Hunan," says the husband with evident pride. "We have 12 in all."

All of China, it seems, is channel surfing on a wave of new entertainment. Cable networks charging $1 or $2 a month have wired up all but the smallest hamlets, and satellite dishes, ostensibly illegal, adorn rooftops across the heartland, netting free programming from as far away as India. A generation ago, just one in 10 rural Chinese households owned a TV set. Today penetration is almost universal, as are the costume dramas, urban soaps, cop shows and cooking classes that compose the typical programming fare. Admen pepper these offerings with edgy pitches for skin-whitening creams, disposable diapers and Big Macs.

China may be late to the television age, but that hasn't dampened the drama of its arrival one iota. Almost overnight, the government has turned provincial TV stations--once essentially conduits for propaganda--into cash-rich conglomerates that compete with one another for viewers. Technology is eroding national monopoly broadcaster China Central Television's grip on what someday will become the world's largest media market. The latest innovation--digital television--could render CCTV's vast terrestrial infrastructure obsolete by 2015, the year China has promised to end analog broadcasts. Someday, Beijing hopes, strengthened provincial networks may compete with international channels like CNNand Star TV. "Turning [provincial] conglomerates into competitive entities is actually what the state promotes," says University of Illinois researcher Ruoyun Bai. But, she adds, "there is still a contradiction between the impulse to commercialize and the impulse to control."

As the past 50 years of Western culture attests, the socioeconomic impact of television is broad and powerful--and it goes beyond anything censors could ever hope to contain. Already the industry's crass commercialization has begun to change China's image of itself as an egalitarian, peasant society. Today's hottest programs (and ads) portray the country as urban, capitalist and upwardly mobile--the future China aspires to attain. "It's all very beautiful men and women living in very big houses," says Sun Wei, executive director for international relations of Shanghai Media Group, a provincial conglomerate. Which is to say it's all about money. Against a backdrop of break--neck economic and social change, television has emerged as a key driver of both; it is at once a case study in successful market reform and a tool that's reshaping the nation's self identity.

As such, television is defining the better future millions of Chinese are striving for. At its core lies a powerful dynamic that is familiar in the West, but brand-new in China. Programmers eager to maximize ad revenues and producers yearning to create the next hit show are catering to every potential advertiser's target demographic: the urban consumer. Yet what they deliver goes out to a far wider audience--the 800 million Chinese who don't yet live in coastal cities. Television is "the source of cultural aspiration today," says Joseph Chen, a media scholar at the Chinese University of Hong Kong. "It reinforces myths about urban areas' being places of affluence and abundance."

As with so many facets of China's post-Mao revival, television's transformation began as a simple accounting exercise. Taking cues from neighboring Hong Kong and Taiwan, leaders in Beijing crafted a strategy to shore up what had become a vast and costly propaganda apparatus of provincial and city-level TV stations, which before the reforms often provided little more than reruns of the same programs broadcast on national TV. All major provincial channels, for example, still relay China Central Television's 7 p.m. news broadcast live. Beijing's plan was to create more interesting programs, attract new viewers and sell ads for the shows. Following that Western script, China's TV stations came to see themselves as entertainment vendors, not mouthpieces for the Communist Party. "This commercial logic has become the fabric of Chinese television," says Chen.

The new formula yields programming like Guangxi Television's recent hit drama, "Love of the Aegean Sea." Set in Shanghai, it chronicles a love triangle between the daughter of wealthy industrialists, her fiance (a dapper lad being groomed to take over her family's business empire) and a "poor" Shanghai girl he encounters on vacation in the Greek isles. Unfolding in a world of lavish villas, uniformed maids, world travel and long limousines, the story revolves around characters with floppy Taiwanese-style haircuts for whom money is apparently no object.

As Bai notes in her authoritative study "The Political Economy of Contemporary Chinese Television Entertainment," Chinese programming shifted in the early 1990s from wenyi, or "literature and arts" to yule, "entertainment." Not coincidentally, paramount leader Deng Xiaoping had just launched his campaign to hasten economic reforms, strengthening a nascent advertising industry and allowing media to become more commercial. A few years later China allowed independent firms to create shows for state television and gave 34 provincial networks permission to launch a satellite channel each.

Those reforms allowed provincial networks to expand, via satellite, to rich coastal audiences. Hunan Television, in central China, was quick to capitalize on this opportunity; several shows became national hits in the late 1990s. Advertisers soon caught on; leading provincial stations became budget alternatives to CCTV.

Like programming, commercials cater slavishly to urban sensibilities. To sell its suds, for example, Shanghai's Reeb Beer shows yuppies drinking in a garden. Toothpaste maker Crest creates a boy-meets-girl encounter in a glass-and-steel office tower (which predictably goes awry in an elevator due to the young man's garlic breath). Nike presents teenagers in long shorts and baggy shirts who dribble basketballs on Shanghai's Bund, and McDonald's features hip-hop teens on skateboards. In a spot for a popular Chinese exercise machine, a woman pinches her belly flab and confides: "I've had this stomach since I had my baby." Her friend dutifully suggests the device, saying "it makes you feel better--and, of course, more sexy."

A decade ago, such ads might have bred resentment in the hinterland. Not today, says Viveca Chan, chairman of Grey Global Group China. "We're seeing very city-driven trends," she says, "things that would have been too radical even five years ago." Television has become a tool for reorienting people toward a more urban future, be that through educational programming like cooking classes (popular with would-be chefs in the countryside as a tool for finding work in the city) or ads that give cues on the latest fashion trends. "There's more mobility," she says. "So what's happening in the cities is much more relevant [nationally]."

Even when the product is a top-of-the line imported SUV. Last year, Chan helped Volkswagen launch its $100,000 Touareg in China with a dramatic campaign. The star: adventurer and Chinese real-estate mogul Wang Shi, who describes his 2003 Mount Everest ascent as the muscular VW traverses Tibetan wilderness. Wang, an avid mountaineer, recounts his agonizing climb as monks chant, prayer flags snap and Himalayan gales howl. "It's hard, really, to define passion," he muses. "I guess it's when you're never satisfied with life."

Despite the success of the provincial stations in bringing in fresh programming and advertising, they're not yet real threats to CCTV, whose 900 million viewers dwarf provincial audiences. Says Aaron Tsoi, media-planning director for MediaCom in Beijing, half of all TV ad spending in China targets the 10 largest cities. Provincial satellite channels face an uphill battle against CCTV's 12 stations and high ratings. "In principle, one satellite channel can cover the whole country, but the reality is that they're not yet that significant," he says.

One prominent upstart aims to change that. The Shanghai Media Group, established in 2002 when the city's television radio stations were merged, has since invested heavily in new technology and to rebrand constituent stations. Its fashion network, "Channel Young," runs trendy dramas, fashion shows and celebrity news targeting teens and young adults. Its satellite channel--Dragon TV--combines provocative talk, live sporting events and CNN-style news coverage.

Like a handful of leading provincial conglomerates, SMG has national ambitions beyond what leaders in Beijing currently allow. "Of course the state has industry-management policy and regulations," says SMG's Sun Wei, "but we hope that our channels can gradually move out to a national audience." Many experts think that China will give provincial stations more leeway in the future, following reforms already made in the print media. SMG, in fact, has already acquired a second satellite channel, ToonMax, as well as a stable of international partners including the U.S. business channel CNBC, Viacom's kiddie channel Nickelodeon and South Korean home-shopping channel CJ. The tie-ups put SMG in good stead to become a leading provider of ready-made programming, which is then sold to other networks.

Beijing is not yet ready to make the sweeping regulatory changes that would allow SMG to deliver more of its own material to a national audience, such as upping the limit on satellite channels, allowing provincial stations to merge and reducing CCTV's monopoly powers. But officials are making it somewhat easier for provincial stations to reach a wider audience. This year, SMG beat out CCTV to win China's first license for IPTV, television streamed on the Internet. SMG is also ahead in the potentially revolutionary area of digital pay television. It recently began selling a package of 16 digital channels to local cable operators across China, which previously could access only its two satellite stations. Though still an embryonic market, SMG claims it has signed up two thirds of an estimated 1 million DTV households nationwide, putting it ahead of CCTV's competing venture. Says Fang Meiqin, a new media analyst at the consultancy BDA in Beijing, "Digital TV will help the smaller players compete."

SMG's Sun Wei isn't forecasting a miracle. "You can't suddenly turn all the things you've given people more or less for free into something they have to pay for," he acknowledges. His solution: sell a different product. "Quality content. Dramas, movies--and in the future, interactive services," he muses. "Maybe reality shows where viewers can choose the winner."

The censors in Beijing may not approve. Their recent decision to ban popular police dramas (reportedly because the tales of graft and corruption hit too close to home) shows that television remains fettered. But like so much else in today's China, the industry is a riveting work in progress.