BEIJING’s Forbidden City pulsed to lasers, lights and the music of Jean Michel Jarre last Sunday. A crowd of 15,000 watched as the French star played hits such as Oxygene against a background of huge inflatables and a high-tech light show.

Beamed live across China — a first — the audience for the concert was conservatively estimated at more than a billion.

The concert was another sign that after years of mistrust, the Chinese authorities are more open to the music industry — and the world’s top music labels are lining up to get in.

“Ten years ago the Chinese went through the buying-a-fridge stage. Now they are into entertainment,” said Lachie Rutherford, president of Warner Music. Rutherford said China is the opportunity of a lifetime for the music industry.

The Chinese market is small. Last year, legitimate sales were $198m (£110m) compared with $3.2 billion in Britain, according to the International Federation of the Phonographic Industry (IFPI). But China’s sales grew 22% last year while sales in the developed world were flat at best.

Rutherford, who oversees the Asia-Pacific region, said there has been no parallel in our lifetime for the rate of growth in the country.

“The closest parallel is 19th-century America when the cities were exploding and railways expanded at breakneck speed. When I first came to China, it had no middle class. Now it’s bigger than in Germany, France and Belgium put together,” he said.

But beneath that growth are real problems for the music industry. Some 90% of CDs and tapes are pirated. The government is cracking down, and there are signs that sales growth in the legitimate market is faster than in the pirated market. But it remains a huge problem.

Paul-Rene Albertini, head of Warner International, said: “The Chinese authorities have given a more concrete sign that they are willing to help. It is getting slightly better, but I think the Chinese market will evolve in a different way to what we have seen in the west.”

Albertini said that in China, music and film are closely linked, movie stars are often singers and vice versa. Hit songs often feature in a star’s films, and the market is closer to old variety shows than the west’s fragmented market of pop, R&B, hip-hop, rap and so on.

“If the money we invest in an act cannot be recouped through selling physical products (such as CDs), then we have to look at other areas,” said Albertini.

China is a nation obsessed by mobile phones. The market for musical ringtones is worth more than £1 billion. But new ways of doing business bring new risks.

The leading music companies have sunk millions into China and have yet to see their dreams fulfilled.

Albertini thinks the day of reckoning is fast approaching. China’s most popular acts now often come from Taiwan. Before that it was Hong Kong.

Warner has appointed Samuel Chou to hunt for local talent on the mainland. “Pop is a Mandarin market,” said Chou. “Ten years ago Hong Kong was the centre. Now it’s Taiwan. Based on previous trends — say the movie industry — I would expect mainland China to be next.”

And once those acts get started, as well as their huge domestic base they will have a global audience in Chinese expatriate communities.

Albertini said Chinese music needed a Quentin Tarantino to champion it in the way the film director has made Asian films hot property worldwide. The Chinese film industry has just produced an American box- office smash in Hero, now showing in Britain. The film was championed by Tarantino. A similar pattern could emerge in music, said Albertini.

Jay Berman, IFPI chairman, said: “China is an area of enormous potential. Piracy is still the defining issue, but I think the authorities are beginning to see now that they could have an export industry here. There is a lot of talent.”