By PATRICK E. TYLER

ENGDIAN, CHINA, December 1, 1996 (NYT) -- Come over a rise on the dusty dirt road west of this small industrial town near Hangzhou, and the scene of the crime suddenly appears: an antique city reflected in a dark lake, built to replicate the waterfront of mid-19th-century Canton, where opium dens and teahouses were the languorous backdrop of a coarser era.

The giveaway that this is a movie set is the cranes, the reflectors, the megaphones barking at hundreds of extras, and, in the midst of it all, Xie Jin, the director, in coolie chic: a broad peasant hat to shade his ample girth, which is covered by a Chinese tunic with cut-off sleeves, shorts and beat-up Nikes. He is trying to convey to a group of British actors, through an interpreter, that they should accentuate the imagery of their evil, their conniving and their inhumanity toward the Chinese, whom they are poisoning with opium in the name of British mercantilism. When they get it right, he nods enthusiastically and says, "Hao, hao, hao!" ("Good, good, good!") The interpreter interprets: "Director Xie says the performance is good."

At 73, Xie Jin (pronounced syee-eh JEEN) is almost unknown in the West; he made his name largely inside China, playing to domestic audiences with sentimental films about the suffering of the common man, though he was always scrupulous not to blame the Communist Party or any of its leaders. Mr. Xie never pushed the limits of his craft like the younger, so-called Fifth Generation directors, who emerged from film school as China was emerging from the chaos of the Cultural Revolution and Mao Zedong's last decade in power.

In the early 1980's, while Mr. Xie was making humanistic films that unfailingly carried the aroma of the Communist Party line, directors like Zhang Yimou ("Raise the Red Lantern") and Chen Kaige ("Farewell My Concubine") were out on the edge, probing China's backwardness in this century, its tyrannies and follies.

Now Mr. Xie, never a darling of the international film set nor a mentor to China's film prodigies who followed him, sits in the catbird seat with a $10 million epic while many of the most innovative directors are out of work, going abroad or hardly working under the heel of the most tenacious censorship campaign imposed in this decade. Even the Walt Disney Company, which has grand expansion plans for China, has run afoul of official views on politics and entertainment because of a subsidiary's links to a Martin Scorsese film on the Dalai Lama.

Millions of Chinese are likely to see Mr. Xie's "Opium War," but this film has even wider ambitions: it is the first Chinese attempt to reach an international audience. The film tells the story of how the British Empire promoted opium addiction in China and used Chinese efforts to smash the British opium trade as a pretext for war, allowing Her Majesty's Government to extract reparations. Thus Queen Victoria and her duplicitous foreign secretary, Lord Henry John Temple Palmerston, ripped the gem of Hong Kong and its deep, natural harbor from the bosom of the Chinese motherland.

After 150 years of British rule, Hong Kong reverts to Chinese sovereignty at midnight on June 30, 1997. And on July 1, Mr. Xie's "Opium War" will make its world debut as an unsubtle piece of Chinese propaganda dedicated, as his shooting script states, "to a great moment in history," the return of the Emerald City that Hong Kong has become.

This moment also places Mr. Xie in the vanguard of artists willing to stoke the flames of nationalism in the service of the Communist Party as China reassembles the territories lost in the last century and goes, not so gently, into the new era that will follow the death of Deng Xiaoping.

And while Mr. Xie prospers he has a stake in the private company that owns the film much of the rest of the industry has come to a standstill as nationalism defines a new standard in Chinese film making.

Directors Are Warned: Do as We Say, or Else

Last April, the party's chief propagandist, Ding Guangen, called film industry leaders to Changsha, the capital of Mao's home province of Hunan, and read them the riot act: spiritual pollution was threatening to undermine the socialist values of the Chinese, he told them.

Mr. Ding, a rising star under President Jiang Zemin, told studio managers and directors to start making more patriotic films of high quality. Directors who tried to avoid censorship or to export their film without permission would be fined as much as 10 times their investment in the film. This amounted to a threat to financially ruin any director who did not put himself in thrall to the propaganda apparatus of the party.

"Film has always been a propaganda tool in China under the system where the Ministry of Propaganda controls everything," says Ye Daying , director of "Red Cherry," the most popular film produced in China this year, about Chinese living in Moscow during World War II. "There has never been pure art. Of course the artists strive to pursue art, but one must always serve the interest of the party and the state."

Mr. Ye, the son of a senior space scientist, grew up in the bosom of the party, so his bluntness about censorship is surprising; his words probably reflect the views of many directors who chafe under the new regimen but are unwilling to express them so candidly in public.

"What is really disgusting is when Government officials, for the purpose of protecting their own positions, just implement a bunch of new rules, and the artists don't know what can pass censorship and what cannot pass," he said. "Even harmless films cannot be passed these days."

Some directors report that state-controlled film studios were hit last spring with a wave of personnel changes. More ideological managers replaced those deemed lacking in socialist enthusiasm. At the same time, censors simply stopped approving scripts and started holding up films already in the censorship pipeline.

Censors Kill a Film During Shooting

"The operations of the film bureau have almost come to a halt," said Wang Shuo, one of China's most popular novelists. His earthy stories were headed for the screen until last spring. "People have been waiting months for scripts to be cleared, but they just sit there," Mr. Wang said.

His comedy, "An Awkward Life," was in midproduction when censors at the Ministry of Radio, Television and Film, which reports to the Minister of Propaganda, simply ordered shooting to stop. Even his novels have disappeared from book stalls. Mr. Wang believes that in the wake of the Changsha conference, censors feared they would be rebuked by party leaders if they allowed his story of an adulterous love triangle to be filmed.

"They just killed my film," he said, shaking his head, in a conversation over coffee at a West Beijing hotel. "This is the first time that a movie is killed in the process of making it. My investors are crying."

The film bureau is where the dirty work of censorship is done. The bureau's power is all-encompassing, and no director can get through post-production or compete in international film festivals without its approval. But it is rare for a film simply to be shut down. The usual torture is when "they don't pass any movie and they don't kill any movie," Mr. Wang said.

"This is a game without laws, without logic. We can do nothing about it."

Zhang Yimou, a Fifth Generation film maker whose "Raise the Red Lantern" has been accused of pandering to Western tastes, said, "The Changsha conference made it clear that there would have to be a number of patriotic films made every year."

Weighing his options in a conversation at a Beijing teahouse last summer, Mr. Zhang said: "The situation now is more difficult than at any time since 1990. The pressure is invisible. I don't know on which day I will stop making films because I can no longer compromise. What is most important is to respect oneself."

A week later, he announced that he was going to Italy to collaborate on a production of the opera "Turandot." Mr. Zhang would not say that he was fleeing China, but, given the context of earlier remarks, he seemed to be.

Meanwhile, Chen Kaige's "Temptress Moon," poorly received by critics at this year's Cannes festival, got an even frostier reception from censors, who refused to release it in China's domestic market. He is also having trouble getting scripts approved.

Stoking Nationalism, Jockeying for Power

What is really at play here is the shifting tectonic forces of Communist Party politics. The return of Hong Kong confers more legitimacy on China's Communist rulers than almost anything they have accomplished since taking power in 1949.

In two more years, Portuguese Macao will revert to Chinese rule. Then, as the Communist leadership has put the world on notice, Beijing will turn its attention to "reunification" with Taiwan, by peaceful or other means.

Equally important is the health of China's paramount ruler, Mr. Deng, who has turned 92. The prospect of his passing from the scene has incited a younger generation of Communist Party leaders to an intense jockeying for power as they demonstrate a willingness to defend Chinese sovereignty at all costs.

Party bosses want to be seen as protecting the motherland from "splittists" in Tibet, "separatists" in Taiwan and pro-democracy "counterrevolutionaries" everywhere. The masses may not fully approve of the Communist regime, which is still judged to be corrupt and incompetent in much of the country, but their patriotism is resonant with the themes and slogans the Government is articulating.

Stoking this latent nationalism, in part by bashing foreigners, has become something close to official policy. After all, it was foreigners who seized trading ports from the disintegrating Qing Dynasty in the last century, and it was foreigners who invaded China in 1931, when the Japanese Imperial Army raped and pillaged its way across the countryside. Thus Mr. Xie is rampant on a field of artistic wreckage. Having joined the Communist Party late in life, it is difficult for him to hide his sentimentality toward the Deng era of economic reform and "socialism with Chinese characteristics," Deng's code for loosing the forces of capitalism.

"My art serves socialism and the people," he says unapologetically. "And my movie is about the two largest empires, and it has a lot to make people think, such as why a strong empire like China could not defeat Britain, which only sent a dozen ships and 10,000 or 20,000 people to defeat the Chinese Army.

"An important message," he continued, "is that backwardness leads to defeat."

Mr. Xie saw this new wave of patriotism coming. In March 1995, he deftly announced to his fellow members of the Communist Party Political Consultative Conference that he would make an epic film about China's humiliation in the Opium War.

In the brochure that he prepared for potential Chinese investors in his film, a large photo shows him standing with President Jiang, his longtime friend and patron from Shanghai, his hometown. The two are flanked by Mr. Ding, the propaganda chief, and Zeng Qinghong, director of the General Office of the Communist Party Central Committee.

The caption says, "Xie's proposal was encouraged and supported by Jiang Zemin and Ding Guangen, Minister of Propaganda, and President Jiang has shown his personal care to the production of the film."

Still, Mr. Xie insists that he is not making a propaganda movie and that the Government is not involved in either the financing or the production. But several actors said that most of the extras in the film were dragooned from local units of the People's Liberation Army and that the Chinese Navy provided extensive logistical support for naval combat scenes.

"I think the movie is just and objective," Mr. Xie said at the end of a day of shooting, before he uncorked a bottle of fiery white liquor for his late-night meeting to plan the next day's shooting. "This was the biggest drug trade in world history and some British people say it is a shame that they sold opium to China."

'Not Too Many Heroes in This Film'

Shame is a theme of the film. In the original script, a British opium trader named Denton passed the time during the voyage by shooting sea gulls with his daughter. They playfully fired away while crossing the balmy Pacific. But by the time the film got into production, the scene had changed to underscore the opium trader's callous disregard for life: he blasts a virgin white sea gull out of the sky, and the bloodied carcass plops down on the deck in front of the horrified daughter.

Bob Peck, who played the dinosaur keeper in "Jurassic Park," helped Mr. Xie create the Denton character.

"I came here full of naive optimism that I would be able to mold a more sympathetic and balanced character with some humanity, but I don't think that's possible," Mr. Peck said during a break in filming.

He and most of his colleagues in the British troupe involved in the film say they are resigned to the fact that they are participating in a project that has a strong propaganda component. "At this point, there is nothing I can do about that," Mr. Peck said. "The history is pretty damning, and there are not too many heroes in this film."

In another scene, Mr. Peck's character is smitten by Rong'er, a stunningly beautiful Cantonese prostitute played by Gao Yuan. Rong'er embodies Chinese virtue assailed by foreigners who have invaded the Celestial Kingdom. But she rejects the Englishman's advances, saying, "I don't sleep with foreigners."

Never mind that her rejection is out of character for an opium tart who plied her trade in those long, low stretches of vice that Canton had become by 1840. One can imagine that next year, when she is forced to submit to British lasciviousness on the big screen, all of China will feel her shame through Xie Jin's lens.

An Interregnum Until Well After 1997?

In the end, perhaps it doesn't matter whether the film is judged to be propaganda or not. British behavior toward China in the last century was hardly exemplary. And even if the making of "The Opium War" were a paragon of objectivity, the act of making and promoting it during the season of Hong Kong's return to Chinese sovereignty panders to the nationalistic instinct rising in China. It encourages xenophobia and a dark sense of national grievance.

Regrettably, the emphasis that China leader's are placing on Xie Jin's film, along with the draconian new controls being imposed on the industry, add to a sense of an interregnum in the development of Chinese film.

"If you are making a film, you have two choices," said Jiang Wen, one of the country's best-known actors, who has turned director. "If you don't want to compromise, you don't make a film," he explained. "If you want to make a film, the question is how. I try as much as possible to do what I want, and that is why for one year my latest film could not be shown in China; only after one year and many revisions did it get shown."

Mr. Jiang, and many other directors, believe that the crackdown on the film industry will last perhaps into the fall of 1997, when the Communist Party will hold its 15th Party Congress. After that, and after the position of China's new generation of leaders is more secure, they may loosen up. Until then, he said, Chinese film makers will bend under the invisible gale of party pressure.

"The problem in China is that we are not dealing with any law here," he said. "If there was a law, we would know what is O.K. and what is not O.K. But here we are facing a concept.

"There are no criteria for censorship. You can't find a reason. There is only psychological pressure" to make films the party will like.

"Some films that some directors would like to make simply cannot be made during this period," Mr. Jiang continued, "but the directors and actors are individuals. They have never stopped thinking about some sensitive topics in reality. They have never stopped thinking."