The thoughts of Chairman Mao (starring Jackie Chan and Jet Li)

There has never been a movie quite like Jiangguo Daye. The blockbuster features nearly 200 of China's top movie stars, including action heroes Jackie Chan and Jet Li plus a host of directors, comedy stars and even journalists. There is Zhang Ziyi of Crouching Tiger, Hidden Dragon, Stephen Chow of Kung Fu Hustle, and Hong Kong heartthrob Andy Lau. Imagine a Hollywood film featuring the entire celebrity audience at the Oscars and you get the idea.

But The Founding of a Republic – the title in English – is not just an A-list extravaganza. It is a stirring propaganda epic, a tale of how 60 years ago, when Chairman Mao's scruffy band of revolutionary warriors overcame Chiang Kai-shek's Nationalist Kuomintang in the civil war to establish the world's most enduring Communist revolution.

The film is a key component in celebrations to mark six decades since the foundation of the People's Republic of China on 1 October 1949. It is also tipped to be one of the biggest hits in China in years. Younger Chinese cinema-goers typically give a wide berth to state-sponsored propaganda. As an example of the genre, this one is up alongside Sergei Eisenstein's Battleship Potemkin, Leni Riefenstahl's Triumph of the Will or Roland Emmerich's Independence Day. But by peppering the picture with stars, its producers hoped to update patriotic cinema for a new generation. If the audience at a preview screening yesterday were anything to go by, they succeeded. They cheered loudly and chuckled when their favourite actors or pop stars appeared on screen.

Anyone visiting China, who wonders why the face of founding father, Chairman Mao Zedong, is still on all the banknotes after the disasters of the Great Leap Forward in the 1950s and the vicious excesses of the Cultural Revolution (1966-76), need only watch this movie.

Mao is played by the startlingly similar Tang Guoqiang, who emphasises his "Great Helmsman" side, a hagiography of the provincial Hunanese turned international revolutionary hero. He is an avuncular father figure, a hero who cares deeply for his troops and the people, devoid of the ruthlessness described by some biographers, most notably Jung Chang and Jon Halliday in their 2005 book Mao: The Unknown Story.

Co-directed by Han Sanping, head of the state film agency China Film, and Huang Jianxin, the movie blends the glorification of Communist China with strong, often sophisticated, drama. At one stage we see Mao teaching children to read the phrase "I am Chinese" and it could be a scene from a film from the 1950s. There are lots of policy debates and unadorned party politics, which makes for clunky viewing as characters outline the formation of endless committees.

But there are also moments of subtlety and what appear to be hidden political messages. In one telling scene, Mao arrives in Beijing, then known as Beiping, and is unable to find a shop to buy cigarettes. The shopkeepers have all fled in fear, and Mao makes a brief speech – as he cadges a ciggie from one of the Politburo – about how it's important not to chase out the capitalists or production will suffer. A sentiment familiar to a generation reared in New China, but hardly a doctrinaire Marxist-Leninist statement. Chiang Kai-shek, the Nationalist leader and Mao's archrival, is sensitively portrayed by Zhang Guoli, best known in China for playing emperors. He shows a troubled man who was a victim of his time, a lonely figure on the wrong side of history. The KMT are depicted as out-and-out gangsters, using Thompson machine guns to wipe out enemies, but there is no effort to demonise Chiang himself.

This may have a lot to do with the current thawing of relations with Taiwan. When Mao learns that Generalissimo Chiang has stepped down as president, his reaction is thoughtful, not exultant.

The prospect of the return of Taiwan to the fold is held out in the way the movie stresses the common bonds between the KMT and the Communists. Both came from the same Soviet-funded roots and were wartime allies against the Japanese.

Liu Jin as Zhou Enlai, the first prime minister of China, makes great use of Zhou's famous bushy eyebrows to show scepticism and concern. When the Communists finally succeeding in clearing the KMT from north of the Yangtze river, a crucial moment in the civil war, Zhou, Mao, Liu Shaoqi – later purged by Mao during the Cultural Revolution – and Mao's ever-loyal general Zhu De get rip-roaring drunk together and sing a Chinese version of the Communist "Internationale".

Some of the best moments are played by three of China's top directors, although, sadly, Hong Kong action king John Woo ended up on the cutting room floor. Chen Kaige, who directed Farewell, My Concubine, wields a rifle as a sympathetic KMT officer with considerable skill. Local favourite Feng Xiaogang plays a brilliant Du Yuesheng, an infamous Shanghai bandit prince, barrelling through the streets in a rickshaw, wearing round black sunglasses and escorted by a team of trilby-wearing mobsters.

Then there is the bad-boy of Chinese cinema, Jiang Wen, who was banned after Devils on the Doorstep for his sensitive portrayal of the Japanese.

Mr Jiang, playing the spymaster Mao Renfeng, sits in the back of a sinister black car in a KMT uniform, and orders the assassination of Zhang Lan, one of the founders of the China Democratic League, an opposition party later effectively subsumed into the Communist Party.

There is a hefty focus on the China Democratic League throughout the movie, and Mao mentions democracy on several occasions, even though the democrats played a relatively small role in the overall picture around the civil war. Is this an effort to portray the Communists as favouring democracy?

The budget was said to be only 30 million yuan, because the stars were offering their services at a special rate. The movie, which opens on 17 September, will appear on nearly half of China's 4,100 screens.

It ends on a predictably patriotic note, with a sea of red flags and messages about how a new China has been created. The question is how this vision of China really goes down with a web-savvy generation raised on mobile phones and capitalism with Chinese characteristics.

Movies with a message Cinematic propaganda around the world

*Commissioned by the USSR for the 20th anniversary of the 1905 revolution, Sergei Eisenstein's Battleship Potemkin is based on the mutiny that played a key role in the failed uprising. Now considered a classic, it was banned in Britain until 1954.

*The 1942 film Mrs Miniver – in which Greer Garson played the eponymous matriarch of a middle-class London family – went on to become a massive hit in both Britain and the United States. Detailing how the family coped during the Blitz, it even won praise from Goebbels, who described it as "an exemplary propaganda film for the German industry to copy". President Roosevelt said it hastened America's entry to the war.

*Triumph of the Will is arguably the world's most famous propaganda film. Leni Riefenstahl's masterful documentary of Hitler's 1934 Nuremberg rally tied her forever to the Nazi party. Before her death in 2003, aged 101, she continued to deny that she was ever a Nazi and claimed that her films were apolitical.

*The director of such classics as Mr Smith Goes to Washington and It's a Wonderful Life, Frank Capra also oversaw Why We Fight, a seven-part series of propaganda documentaries made for the US War Department. An army major at the time, Capra's aim was to lift the spirits and inspire patriotism in both civilians and the military.

*Burma's film industry is "protected" by a law that states all films must "consolidate national unity". That condition has led to such modern classics as 1997's We Will No Longer Be Slaves, and the 2007 hit My Sword, My Blood, My Irrawaddy.