I wonder if the white powder is the skim coat. It is high in lime here, and quiet alkaline. If so, the walls are ready to paint.

As for price, have you seen the price of wallpaper? About 400rmb/sqm. You could buy a roll of good quality paper for that back home. About 2006 I saw woodchip for sale at 100rmb/roll, special offer in B&Q Shanghai.