This movie has its importance in that it a symbol of the fact that Chinese movie industry has finally begun to recover from the disastrous Cultural Revolution.
The movie is based on the folklore and it is somewhat a fantasy. Such things were obviously criticized during the Cultural Revolution as being "feudal superstition" and was banned, and anyone caught mentioning it was jailed or even executed by the Red Guards.
The result is both disastrous and tragic: although the Cultural Revolution had already ended more than a decade ago before this movie was made, it took that long to gather the pieces and recover the story.