Roll up, roll up for the all-singing video launch of Mao Tse-tung's favourite mineral water.

The venue: last Saturday morning at the newly-opened Shaoshan Mao Family Restaurant in Peking, whose proprietor, Tang Ruiren, has built a thriving business on the basis of a half-hour meeting with the Great Helmsman in June 1959. This is the second of Mrs Tang's restaurants: the first, on a site in the village of Shaoshan itself, opposite the Mao ancestral home, was opened in 1986 to tap the market provided by the growing number of pilgrims visiting the Chairman's birthplace.

Among the cast at Tang's, Peking: the water expert from the Mineral Resources Administration Department for Shaoshan, on stage to vouch for the water's essential elements ('people who live there and drink the water never suffer from cancer and are famous for their longevity'). The audience: a motley crew of Peking hoteliers and entrepreneurial shop-owners who might be persuaded to order the precious elixir favoured by Mao, scourge of 'capitalist-roaders'. These latter-day capitalist-roaders seemed less than enthusiastic when, at the end of the promotion, the compere brought them to their feet to sing the revolutionary marching anthem, 'Dong Fang Hong' ('The East is Red').

It's the 100th anniversary of Chairman Mao's birth on Sunday, and in the land of 'socialism with Chinese characteristics', reconciling the Great Helmsman's centenary with the profit motive has proved relatively easy for China's burgeoning class of entrepreneurs. Far from serving as an embarrassing reminder of shifting ideological sands, the occasion is regarded as a straight-forward commercial opportunity. In Liaoning province, with a view to future tourism revenues, two more mountain peaks have officially been identified as resembling Mao's profile. Among the mountains of kitsch Mao memorabilia in China's street markets are pink plastic yo-yos, adorned with Mao's face, with flashing lights and, yes, in case you have not guessed, they play 'The East is Red'. Last month, an 18-carat gold, jewel-encrusted Mao badge was rocketed into space on board a satellite to maximise its value before being auctioned; sadly, technical problems mean the satellite - and the badge - will never return to Earth.

For the Chinese Communist Party (CCP), which seeks to maintain an iron control over society, there was a seemingly impossible circle to square: how to mark the centenary of the founder of the People's Republic just as the country is finally jettisoning the remnants of his philosophy of central planning in favour of the free market reforms of Deng Xiaoping.

In the early Eighties, the CCP tried to come to terms with Mao's ambiguous legacy. The official verdict on his life and career was that 70 per cent of the time he had been correct and 30 per cent of the time he had been mistaken. But the economic transformation in China since then, under the leadership of Deng Xiaoping, makes the Mao equation even harder to calculate. However, contradictions can be resolved: it transpires that Mao all along was preparing the ground for today's economic transformation.

Caught between the profiteers and the propagandists are the mass of the Chinese people. While Peking urbanites sneer at the Mao anniversary, some 5,000 visitors an hour, mostly from the provinces, have in recent weeks been filing past the embalmed corpse which lies in the Mao Mausoleum in Tiananmen Square. The patriotic Chinese revere Mao as the founder of the People's Republic, but millions of families suffered terribly during what are now officially described as the Chairman's two serious 'mistakes': the Great Leap Forward of the late Fifties, and the Cultural Revolution a decade later. They too must reconcile mixed emotions.

For the ideologues, the study of Mao Tse-tung Thought continues, despite a Chinese population increasingly familiar with stock market indices. Last year the Department of the History of the CCP, founded in 1956 at the People's University in Peking, extended its Mao ideology course to undergraduates as well as graduates. One of the teachers explained: 'In the past, because this is a CCP history department, we put more emphasis on history. Now we find students need to learn things that are more relevant for contemporary life, so we made some adjustments to the courses. Research on this topic (Mao Thought) is relevant to building socialism today.'

The department is commemorating the anniversary in the same spirit as that which guides its curriculum. Scholars of Mao Tse-tung Thought are holding a seminar; some of the 12 professors are publishing papers; students are organising a revolutionary song competition; and, on the day I visited, four people who once worked for Chairman Mao, including his secretary and guard, were addressing the department about 'The Chairman Mao I knew'.

Across town, deep at the heart of the party, is the Mao Tse-tung Study Group of the CCP Central Committee's Research Centre of Party Literature. Its head, Wang Yuyao, said that Mao's two biggest mistakes 'did bring some disastrous results for the country and some bad things for the people'. Asked if people could forgive Mao, Mr Wang said: 'They will re-analyse these questions and put them in a historical context.' He added later: 'So, from the whole of his life, his contribution is much greater than his mistakes.'

In the run-up to the great day, there has been a new emphasis on the CCP propaganda line: presenting Mao, the supreme anti-Capitalist, as having sown the seeds for Mr Deng's wholesale shift to a free market economy. The party mouthpiece, the People's Daily, this week described the reforms since Mao's death in 1976 as 'the continuation of explorations which started from Mao'. According to Mr Wang, even before 1949 Mao was talking about China learning in economic and technical spheres from foreign countries. 'Mao used to say we can also attract foreign capital to develop our own country. Mao's thought is very liberated, he always advocated reforms. Unfortunately, for various historical reasons, these thoughts were not implemented,' he said.

The sophism that allows ideologues to praise Mao as Mr Deng's liberated forerunner conveniently means that the Mao centenary can also be used to bolster Mr Deng's reform programme. Earlier in the year, the Dengist camp feared that the Mao festivities might be hijacked by party hardliners who want to slow down the reforms.

But at the Great Helmsman's mausoleum, Politburo factionalism seems beside the point to the thousands of people who queue to see Mao's wax-like, preserved corpse. As they shuffle past the body, what do these people think? Mr Wang told one story: 'I heard some old cadre who had been persecuted in the Cultural Revolution talk about his feelings. He said: 'I cannot deny the greatness of Mao because of my own suffering'.' A friend of mine had less complex emotions: 'I hate Mao for what the Cultural Revolution did to my mother. I will never forgive him.'

Amid such contradictory views, celebrating the anniversary has been problematic enough for the state. Even more politically charged will be the question, as yet unvoiced, of when to remove the body from the mausoleum and give the Great Helmsman a decent burial.

Meanwhile, the mineral water promotional video - it features shots of a new, six-metre high bronze Mao statue unveiled on Monday in Shaoshan, Hunan province. According to the company general manager, when it was moved into position on 5 December, flowers inexplicably bloomed in the winter frost and the sun and the moon could be seen simultaneously in the heavens.

(Photographs omitted)