A taut wartime thriller, Red Crag: Life in Eternal Flame anticipates the paranoia and violence of the imminent Cultural Revolution while harking back to the aesthetic splendour of the Golden Age Shanghai cinema of the late 1940s. (This opulence is largely due to the work of cinematographer Zhu Jinming, the master visual stylist of Shangrao Concentration Camp and other key "Seventeen Years" films.) The film concerns a hard-boiled woman working in the Chongqing Communist underground during World War II, whose commitment to the guerrilla cause is only intensified after she witnesses her husband's head mounted on the city walls by the Nationalist forces.
At a Shanghai apartment, Mr Hou, a Nationalist official, gets ready to move to Taiwan upon the imminent defeat of the KMT during the Civil War. Mrs Hou gives an ultimatum to the rest of the tenants to move out on behalf of her husband, who is the "owner" of the flat and who is now planning to sell it. From the conversations with the rest, we find out that Hou has been a Hanjian during the Sino-Japanese War and that he has since taken over the apartment by force from the old landlord, Mr Kong. The tenants, including Mr Kong, Mrs Xiao, Little Broadcast (alias Mr Xiao, played by Zhao Dan) and a schoolteacher, Mr Hua, and his wife, initially plan to band together, but circumstances force them to find other ways out. Mr Hua tries to find a place to stay at the KMT-sponsored school he is teaching in. Little Broadcast and Mrs Xiao invest in black market gold. As the situation escalates, Mr Hua gets arrested by KMT agents and his young daughter falls desperately ill.
After a break-up, a college professor, Xiao, molds his maidservant, Yu, into an independent, modern woman, then marries her. However, their relationship is interrupted by the war - Yu insists on volunteering her help, while Xiao longs for a stable family life.
Wang, a bankrupt farmer joins his cousin, Wu, in Shanghai, but finds that he is poor too. One day, Wu stops a woman - Zhang, a drug runner - from being run down by a car, and is hospitalized. During his recovery, Wu slims down due to the amount of drugs he is prescribed, which inspires him to create and sell a weight loss medicine.
Four students in Shanghai have recently finished university. All are unemployed. Xu contemplates suicide but his friend Zhao talks him out of it. Zhao lives in a shabby room with just a flimsy wall of planks separating him from the room behind. Miss Yang, in town to take a factory job, moves in behind. Her nails into the wall knock Zhao's photos down. The unseen neighbours start playing tit for tat... Zhao gets a job as proofreader at a newspaper. He sees that pretty girl on the tram to work every day. He doesn't know her, but it's Miss Yang... Zhao is assigned to cover labour conditions for the paper. He is sent to a factory, the one where Miss Yang works...