Many of China’s young people have been obsessed with cartoons and other forms of animation from Japan and South Korea for more than a decade. The authorities have tended to view the cartoons as a troublesome counterculture—too violent and lacking in any positive social message. But Beijing seems to have finally recognized it has nothing to fear from spectacles like Hangzhou’s. Several official Chinese media organizations are footing the bill, and the contest took place in a new, state-of-the-art official exhibition center, part of the city’s annual International Cartoon and Animation Festival. As this suggests, China’s leaders have opened their arms to the animation industry in an effort to remake it in their own image.

The Chinese government has begun a deliberate campaign to move the genre away from the foreign and sometimes nihilistic values of the past and use it to stress the continuing relevance of the Communist Party to a young generation. It also hopes to promote what authorities perceive as “Chinese” values. At the Hangzhou festival’s opening ceremony, senior officials lined up to praise animation for its contribution to “socialist development” and spiritual civilization. Sitting beneath a row of inflatable cartoon animals, they applauded politely as an array of characters—giant crabs, pink-wigged and masked women dressed as butterflies, and blue-haired warriors in gold body armor toting silver machine guns—set out on a parade through the city’s streets.

The authorities are promoting cartoons based on traditional Chinese stories, and works using fashionable modern animation to illustrate patriotic themes. One film shown at the festival depicts the Communist Army’s Long March of the 1930s; others focus on the fight of Chinese citizens against Japanese occupiers during the same decade. The idea behind pushing such cartoons, say China experts, is that animation fans will begin to prefer them to the Japanese tales that still predominate. “We don’t oppose importing good products from abroad,” says Jin Delong, deputy chief editor at China’s powerful State Administration for Radio, Film and Television, “but they must benefit China.”

Aside from the propaganda value, Beijing is also aware that animation is a fast-growing and lucrative business—and a potential export industry. Since the 1980s, Taiwanese and Hong Kong companies have used China as a base for processing their own animation, making use of the country’s pool of cheap, well-trained artists. In recent years Hollywood has begun to follow suit. The Chinese authorities are now trying to promote original creations, with the ultimate goal of challenging the United States and Japan in the global market. Several cities, including Hangzhou, have been designated official “animation-industry bases,” with preferential tax policies and official funding for new businesses. The sums involved can be startling. In the small city of Changzhou in Jiangsu province, for example, officials say they are investing more than half a billion dollars to build digital animation focused on online games. The number of animation departments in Chinese universities has quadrupled to more than 400 over the past five years. “We aim to make animation one of the pillars of China’s domestic economy,” said Jin in a speech at the festival’s opening.

China’s entry into the animation market is already paying dividends. “We’ve focused on a multibranding strategy,” says He Mengfan of the Great Dreams Cartoon Group, whose series “Red Cat, Blue Rabbit” has earned an estimated 180 million yuan ($25 million) in sales of related books alone. Last year China’s animation industry topped $2 billion, by some estimates. “China is already tremendously important in terms of outsourcing,” says David Ehrlich, a Dartmouth professor teaching at the Beijing Film Academy. “The issue now is, can they make more original material? I think it can be done.”

The big question is whether the government’s propaganda goals will undermine its business model. Setting out to promote a particular type of official national culture isn’t a recipe for winning over the youth audience. Indeed, Beijing’s embrace of animation has so far been heavy-handed. Last year it announced a ban on foreign cartoons during prime-time television hours. “Some say giving our industry a five- or 10-year protection period is the only way to help it get going in the face of the power of the U.S. and Japan,” says Zhang Xin of the Center of International Cultural Exchange at China’s Ministry of Culture. But some fans have noticed a drop in quality. “I used to love watching a Japanese cartoon series on TV, and then it suddenly stopped,” says Cherry Zheng, a 20-year-old student in Hangzhou. “The things they replaced it with were much less appealing.”

As producers scramble to increase output, quality may be taking a back seat. It doesn’t help that government approval is required to make a five-minute short, which some experts say discourages talent. “We can’t just copy others,” says Shi Minyong of the Institute of Animation at the Communication University of China. “We need to create our own style. If you see a Japanese cartoon, you can immediately recognize it. You can’t say the same for China.”

At Hangzhou, where the winners earn a place in the cosplay finals in Japan, players dressed almost exclusively as Japanese cartoon characters. And there was nothing the uniformed policemen watching from the sidelines could do about it.