A 'Music Valley' is among plans to boost the music industry. But will piracy and tight state control hold back progress?

From the top of a hillside in Pinggu village, an hour's drive from central Beijing, the future of China's music industry doesn't look like much – just a vista of Mao-era farmhouses and parched cabbage fields.

Yet Beijing officials have announced plans to spend more than 10 years and £1.4bn turning the area into the "China Music Valley", a sprawling compound that will be home to recording studios, instrument makers, music schools, five-star hotels and an arena in the shape of a peach.

"Music is such an intangible kind of art," said Zhao Wei, a 30-year-old official who directed the initiative until last month. "Now with this project, we want to turn music into something that you can see, something that you can touch."

China's central government, concerned that progress in the country's film, music and drama sectors lag behind its economic development, has designated culture a top national priority and promised billions of pounds in subsidies for the arts. "Culture is the lifeblood of a nation," President Hu Jintao said at the start of the country's once-in-a-decade leadership transition in November.

While some fields have flourished under state support – its output of films has quadrupled since 2003 – China's music industry is still fledgling, perennially constrained by rampant piracy and a stifling undercurrent of government control. While Gangnam Style cemented Korea's place on the world pop map, China is still struggling with how to keep many of its artists paid. "The industry is so small that we don't have enough writers, enough song creators, enough composers, we don't have enough bands," said Scarlett Li, the founder of music festival promoter Zebra Media.

Analysts say the music industry's problems are primarily economic. The International Federation of the Phonographic Industry has said that the country has a piracy rate of "virtually 100%".

Yet many issues can be traced back to the heavy hand of the state. Television and radio stations are tightly regulated, giving artists little room to experiment with edgy content like the offbeat satire that propelled Gangnam Style's singer Psy to international fame.

Rather than investing in talent, local governments frequently take cultural subsidies as a green light to build opera houses, performance arenas, and other high-profile property projects. "None of the money goes to the artists, it goes to middle men," Li said. "But the middle men are not at the centre of creating content. This makes no sense to me."

Things are improving. Last year, the central government formed a committee for enforcing intellectual property rights laws headed by the vice-premier. Baidu Music and Tencent Music, two leading online free music suppliers, have agreed to begin charging for downloads at the beginning of 2013. China recorded £52m in music sales in 2011, a rise of about 23% over 2010.

Over the past few years, there has been a boom in music festivals, multiple-day affairs rife with Converse footwear, neon-dyed hair and studded leather bracelets. Li said that despite their rough-edged aesthetic, many festivals are encouraged or even sponsored by local governments as a way to boost tourism revenue while increasing their cultural clout.

The official presence at many festivals is unmistakable. Flocks of green-coated security guards stand by the stage and goose-step in formation through the audience. Many ban alcohol.

International music labels are desperate to crack China's potentially massive market – Warner, Sony and Universal all have offices in Beijing. Yet for foreign investors in China's domestic media, the barriers to entry are sky-high.

Take Beijing startup Rock the Web, an online American Idol-style talent show whose winners will record with A-list producers in Los Angeles. According to Ilya Agapkin, the company's Russian co-founder, gaining approval for the show was almost entirely dependent on his ability to navigate an intricate web of government contacts.

"Of course, this area that we are working in is quite sensitive, because the media market is closed to foreign investments," he said. "The regulations are very complicated."

Agapkin's team spent a year acquiring permits. "To be on the internet, you need a special licence. To be an agency you need a special licence. To be a culture company you need a special licence," said Xiong Jialin, the company's music director. Some of these licences require employees to attend classes and pass written tests at government institutions.

The Chinese government has tried promoting folk heroes, with mixed results. In 2011, after a migrant worker duo achieved internet fame with a gruff cover of a Chinese pop song – think grainy mobile phone footage, empty beer bottles, cigarettes – the government invited them to perform at that year's spring festival gala, one of the world's most-viewed performances.

But soon after their debut, the group caved in under the pressures of sudden fame and an unforgiving market.

"People say that I shouldn't be using an iPhone because I'm a migrant worker," guitarist Liu Gang said last winter. "It drives me crazy." In September, Chinese media admonished Liu for driving an Audi and verbally abusing a pedestrian in a traffic dispute.

Despite the odds, some artists have forged their own path. Yan Haisong, the lead singer of the veteran Beijing rock band P.K.14, said his band made a decent living performing at festivals and producing records for up-and-coming artists. Yan added that no one in his professional circle had much interest in projects such as the China Music Valley.

"Combining music and politics is really strange, because the music you get out of it just won't be any good," he said. "If they really want to improve this culture, they need to open up a bit."

© Guardian News and Media 2012

Watch this audition from China's Rock the Web, originally uploaded to YouTube: