Six months after the collapse of the Soviet Union, thirty-four of America's brightest foreign policy strategists gathered at Stanford University to develop 'a new organizing principle for thinking about the world and how to act in it'. Their hope was to replace George Kennan's Cold War doctrine of containment and deterrence with a new philosophy for a post-Cold War world. Out went old concepts like the imperative of military build-up, the balance of power, the spying and secrecy of the Cold War. In their place, a new big idea: building a regime of 'co-operative security' that would allow all countries to benefit from a peace dividend. Unlike alliances such as NATO, which were aimed at a single opponent, 'co-operative security' would be about building trust between nations through transparency and mutual surveillance.

As the idea gained greater currency, it caught the eye of Yan Xuetong. He told me that he was excited by 'the novelty of the idea that military co-operation does not need to be aimed against another power (unlike NATO which was set up against Russia). That makes it less threatening.' He began to wonder if co-operative security could provide a mechanism for China to modernize and build up its military without attracting the suspicion of its neighbours - precisely the opposite of what the concept's original authors had in mind. At this stage he was working as a researcher at the Chinese Institute of Contemporary International Relations - the think-tank affiliated to the State Security Ministry - and he assembled a group to refine the concept. Their work led to a body of ideas that would eventually come to be known as the 'New Security Concept'.

The 'New Security Concept' makes a distinction between 'traditional' security threats (the danger of invasion by other countries) and 'non-traditional' ones (terrorism, secessionism, environmental destruction, pandemics). Yan Xuetong correctly believed that the military alliances of the future could be arranged around these inchoate 'non-traditional threats' - bringing states together against abstract nouns such as 'terrorism' rather than hostile nations. Behind Yan Xuetong's 'New Security Concept' was a strong impulse that China should abandon its hostility to multilateral institutions. China was starting to benefit from globalization and preparing to join the World Trade Organization. And Yan Xuetong argued that it should be possible to recast the relationship with China's neighbours around similar institutions. It was not long before Yan Xuetong's theory became a reality.

The first move was towards China's western neighbors. Four years after the end of the Soviet Union, China came together with Russia, Kazakhstan, Kyrgyzstan and Tajikistan to develop a 'co-operative security arrangement' called the 'Shanghai Five'. They started by negotiating treaties demilitarizing the 4,300-mile border that they share and gradually expanded their co-operation to include security and trade. In 2001 Uzbekistan joined, and they turned this nascent grouping into the 'Shanghai Co-operation Organization' (SCO). The new organization has already established a 'regional anti-terrorism structure' in Uzbekistan, a 'business council' in Moscow and a permanent secretariat in Beijing. It has organized co-operation on economic, border and law enforcement matters, as well as two combined military exercises. India, Pakistan, Mongolia and Iran have all joined the SCO as observers. The USA is rightly concerned about this development: if at some point the observers joined as full members, the SCO would boast four nuclear states, three major economies and vast energy resources.

The Shanghai Co-operation Organization is unique. It gives the lie to the idea that only Western countries can establish successful multilateral organizations. It bears the name of a Chinese city. The values it enshrines are those of the Chinese state. Although there are differences of emphasis between Beijing and Moscow, with Russia focusing more on security, and China trying to use the organization to get access to Central Asian oil and gas, both of the bloc's superpowers are united in their commitment to traditional notions of sovereignty and authoritarian rule.

One of the attractions of the SCO for Russia, China and the Central Asian republics is the prospect of halting any new democratizing 'color revolutions', such as the Rose revolution in Georgia, the Orange revolution in Ukraine, and the so-called 'tulip' revolution in Kyrgyzstan. Moscow and Beijing both gave strong political support to the Uzbek president Islam Karimov when he suppressed pro-democracy demonstrations in Andijan in May 2005, while China has organized counter-insurgency training for several Central Asian police forces.

In political and military terms, the SCO is already showing the potential to turn into a potential rival to NATO in Central Asia: at the 2005 summit in the Kazakh capital of Astana, the SCO members signed a declaration which asked the USA to set a deadline for the withdrawal of its forces from Central Asia. At the 2006 meeting of the sca - which marked the fifth anniversary of its establishment - sca members signed a series of agreements on energy co-operation - as well as cocking a snoop at the West by publicly embracing the Iranian leader Mahmood Ahmadinejad. In the long term the sca could become the kernel of an 'alliance of sovereignty' designed to frustrate Western attempts to interfere in the affairs of other countries to protect human rights or spread democracy. The attractions of its philosophy of 'non-interference' to regimes in the Third World are clear.

Beijing was initially suspicious of regional integration in East Asia, because it feared that the USA would use these groupings to encircle China. But once the Chinese realized that the USA prefers to deal with each of its allies in East Asia - Japan, Australia, the Philippines, Korea and Thailand - individually rather than collectively, it spotted an opportunity for China to emerge as a champion for Asian unity. In 1996, Yan Xuetong persuaded the Foreign Ministry to suggest that the 'New Security Concept' be adopted for the Asian Pacific Region. Qian Qichen, who was foreign minister at the time, made a formal approach to the ASEAN Regional Forum, a grouping led by the ten countries of South-East Asia. Since then China has become increasingly keen on deepening its relationships with its neighbors; its leaders even talk about creating an Asian equivalent of the European Union. In 2004 China called for an ASEAN-China Free Trade Area and to help build an East Asian Community complete with a single currency by 2020.

Yan Xuetong thinks that regional integration will put China's rivals in Asia - the USA and Japan - on the back foot. The USA has become increasingly hostile to regional integration, which it correctly views as a mechanism for China to develop bodies which exclude the USA. American hostility also creates a conundrum for Japan as America's closest ally in the region. Yan Xuetong argues: 'To sustain its special relationship with the United States, Japan has adopted a policy undermining the establishment of the East Asian Community. This policy is similar to that adopted by Great Britain with regard to the European Union. Japan's policy against East Asian regionalization may ultimately weaken its political influence in East Asia.' Yan Xuetong argues that Japan, like Britain in the European context, will always be a reluctant partner wasting valuable political capital on trying to slow the process down, rather than leading from the front in a direction from which it would benefit.

China's liberal internationalists are every bit as keen on the 'New Security Concept' as the neo-comms - but for the opposite reasons. When Qin Yaqing, a rising star among liberal internationalists, was invited to make a presentation to the Politburo in early 2004 he used this rare opportunity to make the case for Chinese engagement with multilateral institutions. But where Yan Xuetong is looking for a mechanism to allow China to project power, Qin Yaqing sees East Asian integration as a way of allowing China to ease the power rivalry with its Asian neighbors - in the same way that the European Union allowed Europe's great powers to trade their bellicosity for harmony.

Qin Yaqing compares China's relations with its neighbors to a giant dealing with dwarves. In the book Gulliver's Travels, the diminutive Lilliputians tie down the giant Gulliver with hundreds of tiny cords. Qin Yaqing argues that the same thing needs to happen in Asia. But rather than waiting for the diminutive countries of Asia to take the lead, China needs to tie itself down in order to be able to free itself from suspicion that it is intent on becoming a regional bully. Qin Yaqing sees East Asian integration as the best way for China to bind itself in a series of norms and rules that will not just make it seem less threatening; it will make it lose the will to be threatening: 'Once [China] joined regional co-operation and was no longer a hostile power in the eyes of ASEAN, China changed its attitude toward East Asian regionalism.' Although China, Japan and South Korea together account for 90 per cent of East Asia's economic strength, they have allowed the ten SouthEast Asian dwarves - that together account for the remaining 10 per cent - to set the pace for regional integration. Qin Yaqing argues that the dwarves have successfully tamed China, using the first East Asia summit in 2005 as an illustration. China abandoned its opposition to Indian and Australian participation in the summit even though it feared that the two countries would gang up with Japan to organize an anti-Chinese caucus within the East Asian Community. 'However,' as Qin Yaqing argued, 'if China had opposed ASEAN's decision it would not only have offended ASEAN, but also aroused mistrust and harmed the co-operative momentum of the region. In order to keep the ball rolling, China had to compromise.' Qin Yaqing is overstating the extent to which regional integration has changed China's attitude to its interests, but China's conversion to Asian unity has certainly enhanced its influence in the region, and reassured its neighbors.

Although Rear Admiral Yang Yi has emerged as a powerful advocate for increasing China's soft power, his real goal is to earn the legitimacy for a serious build-up in his country's hard power. 'China is a great power,' he says. 'We need to build a powerful military commensurate with our international status.' In an article in Global Times, Yang Yi complained of a growing gap between China's economic profile and interests and its capacity to defend them. He fears that the speed at which China's economic interests are expanding - with factories, investments in energy and raw materials, and new markets mushrooming around the world - is outstripping his country's military means to defend them. How, Yang Yi asks, is China going to be able to protect its citizens and assets overseas? How can it take part in disaster relief, anti-terrorist activities, humanitarian assistance or UN peacekeeping missions with its decrepit military machine? And, to return to the perpetual question in Chinese foreign policy circles, how will China be able to defend itself from the USA in the event of a war over Taiwan?

While Yang Yi rarely misses an opportunity to argue for increasing Chinese military spending, he does not want Beijing to get into an arms race with the USA. It has become a truism in Chinese circles that the former Soviet Union spent itself into oblivion by being lured into a competition for military primacy. So rather than trying to match the USA's military machine plane for plane and bomb for bomb, the Chinese approach is to go for an 'asymmetrical' strategy of finding and exploiting the enemy's soft spots. 'Asymmetric warfare' has been voguish in Western military circles for a long time. It has traditionally been used to describe how terrorists can take on and defeat standing armies, in the same way that David took on Goliath. However, the Chinese have taken this debate far beyond the techniques of terrorism. Chinese intellectuals and military planners have created a cottage industry of devising strategies for defeating a 'technologically superior opponent' (their preferred euphemism for the USA).

Every year, Chinese military spending goes up by over 10 per cent (American intelligence estimates that the real figure is two to three times higher) to fulfil the country's great power aspirations. However, its military modernization - which has seen it building ships and submarines, buying fourth-generation combat aircraft and aiming 900 ballistic missiles at Taiwan - has not been about trying to copy or match the US military. The goal is, instead, to find cheaper ways of neutralizing the USA's military advantage. Instead of rivaling the USA on its own ground, Beijing wants to play the Americans at a different game that Beijing can win.

For example, on Taiwan, rather than vainly seeking military supremacy of the Taiwan Strait, Beijing has sought to increase the price the USA would have to pay to defend the island in a war. Twenty years ago the USA could have adopted a purely defensive strategy by creating a shield around the island. As a result of China's military modernization, this defensive strategy is now unsustainable. Now the USA would be put in the unenviable position of needing to attack mainland China to defend Taiwan. China's activities in space have followed a similar pattern. Beijing's goal is not to launch a series of 'Star Wars' against the USA. Instead, it has sought to undermine the US military doctrine by developing weapons which could destroy the satellites which provide so much of the USA's military intelligence. Like Odysseus, who overcame the Cyclops by blinding him with a burning stake, Beijing's audacious plan is to blind American troops by taking away their satellite intelligence. Beijing hopes, thereby, to make it impossible for the USA to get involved in a conflict over Taiwan or Japan.

The most interesting aspects of China's attempt to become an 'asymmetric superpower' are outside the realm of conventional military power. The most detailed explanation of this approach came in a book called Unrestricted Warfare which shot into the Chinese best-sellers' lists in 2001. This book, written by two People's Liberation Army colonels, attracted attention only among specialists when it was first published in 1999. However, after Osama bin Laden's attack on the World Trade Center, its thesis seemed visionary. It argues that the American obsession with military hardware is the country's greatest weakness, blinding its policy-makers to the wider picture of military strategy, which must include the use of economic, legal and political weapons as well. The book sets out a series of strategies for 'non-military warfare' arguing that 'soldiers do not have the monopoly of war'.

Top of their list is 'economic warfare'. Referring to the Asian financial crisis of 1997, the authors speak with awe about the power of international financiers like George Soros to undermine the economies of the so-called 'Asian Tigers': 'Economic prosperity that once excited the constant admiration of the Western world changed to a depression, like the leaves of a tree that are blown away in a single night by the autumn wind: If a lone individual like Soros could unleash so much destruction simply for profit, how much damage could a proud nation like China inflict on the USA with its trillion dollars of foreign reserves?

Another possibility is 'super-terrorism'. In a prescient passage, the authors predicted attacks like Osama bin Laden's on the World Trade Center two years before they took place. They correctly foresaw that the response of the USA to the attacks would be more damaging to the country's security than the attacks themselves: 'it often makes an adversary which uses conventional forces and conventional measures as its main combat strength look like a big elephant charging into a china shop. It is at a loss as to what to do, and unable to make use of the power it has:.

The most interesting thesis is the idea that China could use international law as a weapon, or 'Lawfare' for short. The authors argue that citizens of democracies increasingly demand that their countries uphold international rules, particularly ones that govern human rights and the conduct of war. Governments are, therefore, constrained by regional or worldwide organizations, such as the European Union, ASEAN, the International Monetary Fund, the World Bank, the WTO and the United Nations. The authors argue that China should copy the European model of using international law to pin down the USA: 'there are far-sighted big powers which have clearly already begun to borrow the power of supra-national, multinational, and non-state players to redouble and expand their own influence'. They think that China could turn the United Nations and regional organizations into an amplifier of the Chinese world-view - discouraging the USA from using its might in campaigns like the Iraq War.

Many of these asymmetric strategies are already taking shape. As the liberal internationalist Shi Yinhong argues, 'the US is winning the military game in the Pacific by strengthening their bases in Guam, Okinawa, Hawaii. China doesn't like it, but it isn't playing that game. China is playing a different game based on economic investment, trade, immigration and smile diplomacy. The USA can't stop this. And it is losing China's game. It can't stop China's rise.' What Shi Yinhong means is that China is trying to change the rules of the competition for primacy in East Asia, and working around the USA rather than confronting it head on. It is as if the USA had an unbeatable team at tennis, so rather than trying to take the Americans on at their game, Beijing is trying to persuade East Asia that table tennis - which China can hope to win at - is the most important game. China's charm offensive is pushing back American influence in countries such as South Korea, but because it is couched in the language of multilateralism and peace it has not alarmed China's neighbours.

Where is China heading?

China is like a giant time machine - straddling centuries of thinking about power. Like Europe it has many twenty-first-century qualities. Its leaders preach a doctrine of stability and social harmony. Its military talk more about soft than hard power. Its diplomats call for multilateralism rather than unilateralism. And its strategists rely more on trade than war to forge alliances and conquer new parts of the world. But China is equally at home in the twentieth-century world of power that the USA has made its own; investing in military modernization, protecting its sovereignty, and talking with a nationalistic fervor about reunification with Taiwan.

It is this twentieth-century China that has undermined claims of peaceful intent and forced the most populous nation in the world into the incongruous position of fearing enemies that include a tiny island with a population of 20 million, the world's most peaceful man (the so-called 'Dalai Lama threat') and a sect that is mainly known for practicing t' ai chi and eating vegetables (Falun Gong). The obsessive quest to oppose Taiwanese independence is given as a rationale for double-digit spending increases in defense and the deployment of 700 missiles. It was in part the concern that Taiwan could be goaded into declaring independence by China's perceived softness that led to the dropping of the rhetoric about 'Peaceful Rise'. And Taiwan is just one of the 'five poisons' that the Chinese fear will lead to the break-up of their nation - the others are separatists in the Muslim enclave of Xinjiang, Tibet, Mongolia and the provinces around Korea. Many of the issues that currently cause tension between China and the West - the competition for energy sources, China's role in Africa, stopping nuclear proliferation in Iran and North Korea can be soothed with tactical shifts by both parties. But for all the talk of multilateralism, soft power and interdependence, the obsession with Taiwan has stopped China from truly adapting its outlook to an era of globalization. Whenever I hear Chinese strategists discussing the small island, I am reminded of the words of Michael Corleone in The Godfather: 'Just when I thought I was out, they pull me back in again.'

For a nation that has virtually trademarked a concern for the longue-duree, Chinese intellectuals are surprisingly coy about their future. When you ask them what a Chinese hyper-power will be like, they tend to duck the question, trotting out a list of pressing domestic problems which they claim will be all consuming. However, in their more candid moments, China's foreign policy thinkers map out two possible paths.

Liberal internationalists like Zheng Bijian or Qin Yaqing like to talk about how China has rejoined the world; how it is gradually adapting to global norms and learning to make a positive contribution to global order. 'Do you know how many times Mao went abroad when he was president?' one of my liberal internationalist friends asked me on a recent trip to Beijing. 'Just twice, to Moscow in 1950, and then again in 1957. And do you know how many foreign trips Hu Jintao has made this year alone?' The question was rhetorical because even my friend had lost track of Hu Jintao's dizzying travel schedule. That week alone had seen the shiny-quiffed president hold meetings with leaders from over ten countries, including Algeria, Brazil, Canada, France, India, Japan, Malaysia, Switzerland and the USA. From Darfur to Tehran, Caracas to Havana, Pyongyang to Delhi, Harare to Luanda, China's voice is being heard. The country's voracious appetite for energy, natural resources and markets has propelled its president to the four corners of the earth, forcing this unlikely jet-setter to amass almost as many air-miles as foreign reserves.

And as China becomes more exposed to the world, they argue, so too it is becoming more engaged in solving global problems. In recent years, Beijing has been working through the six-party talks to solve the North Korean nuclear problem; working with the European Union, Russia and the USA on Iran; adopting a conciliatory position on climate change at the Vancouver conference; and sending 4,000 peacekeepers to take part in UN missions. Even on issues where China is at odds with the Test - such as on humanitarian intervention - the Chinese position is becoming more nuanced. Then the West wanted to intervene in Kosovo, China opposed it on the grounds that it contravened the 'principle of non-intervention', On Iraq, it abstained. And on Darfur, after blocking measures at the United Nations for many months, China actually voted for a UN mandate for peacekeepers when it was chairing the Security Council. Many Chinese say that Beijing is gradually shifting its position on sovereignty to edge towards humanitarian intervention.

On the other hand, neo-comms like Yan Xuetong openly admit that they are using modern thinking to help China realize ancient dreams. His long-term goal is to see China return to great power status, building an order in its own image. Like many Chinese scholars he has been compulsively studying ancient thought: 'recently I read all these books by ancient Chinese scholars and discovered that these guys are really smart - their ideas are much more relevant than modern International Relations theory'.

The thing that interested him the most was the distinction that ancient Chinese scholars made between two kinds of order: the 'Wang' and the 'Ea'. The 'Wang' system was centred around a dominant superpower, but its primacy was based on benign government rather than coercion or territorial expansion. The 'Ea' system, on the other hand, was a classic 'hegemonic' system, where the most powerful nation imposed order on its periphery through force. Yan explains how in ancient times the Chinese operated both systems: 'Within Chinese Asia we had a "Wang" system. Outside, when dealing with "barbarians", we had a hegemonic system. That is just like the USA today, which adopts a "Wang" system in its relationship with the Western club where it doesn't use military force or employ double standards. On a global scale, however, the USA is hegemonic using military power and employing double standards.'

Yan Xuetong's goal is to recreate an Asian 'Wang' system based on fairness and the rule of law in Asia. The problem for China is getting from here to there without provoking a war with Japan or India. Yan Xuetong's answer goes to the heart of the problem. 'The reason that other countries will accept it is that we would build it through domestic policy by becoming a model society that people would want to be part of. We don't have that yet. At the moment all of China's attractiveness comes from its economic power, but that cannot last. Money worship is not attractive enough. You need moral power.' The unspoken assumption is that China will need to change its political system to be able to become a hyper-power. Yan Xuetong seems to accept that it will be hard for China to have global legitimacy without liberalizing its political system. But surely, even then, Japan would not accept a Chinese-led 'Wang' system? Yan Xuetong's belief in the mechanics of power is absolute: 'Japan will not invite this relationship but over time the Chinese club will be so powerful that Japan will want to join it. It will be like the UK and the EU: a reluctant partner.' According to Yan Xuetong, China will have two options as it becomes more powerful. 'It could become part of the Western "Wang" system. But this will mean changing its political system. The West is talking about this but I do not think they really believe it is possible. The other option is for China to build its own system.'

The tension between the liberal internationalists and the neo-comms is a modern variant of the Mao-era split between bourgeois and revolutionary foreign policy. For the next few years, China will be decidedly bourgeois. It has decided - with some ambivalence - to join the global economy and its institutions. Its goal is to strengthen them in order to pin down the USA and secure a peaceful environment for China's development. But in the long term some Chinese hope to build a global order in China's image. Their approach is to avoid confrontation, while changing the facts on the ground. Just as they are doing in domestic policy, they hope to build pockets of an alternative reality where it is Chinese values and norms that determine the course of events rather than Western ones. Seen from this perspective, the Shanghai Co-operation Organization and East Asia Community are like 'painted zebras' in reverse. Superficially they look like Western models of multilateral integration - like the European Union. But, in reality, they could be seen as the kernels of a Chinese world order where state sovereignty is meaningful and the rights of states to operate without external intervention trump the rights of the citizens that inhabit them.

The Western world is abuzz with talk of managing China's rise. How can China be 'moulded', 'socialized' or 'coerced' into becoming like us? How can we make it safe for a world of multilateral institutions, democracy and the rule of law? These questions which diplomats and statesmen compulsively debate are designed to reassure; to make us all believe that China's development is ours to shape. By framing the problem in this way, we can talk ourselves into thinking that with skill and consideration, a new China can be built in our own image. But few Westerners realize that their anguish about China's rise has its mirror image in Beijing. A debate is stirring among Chinese scholars and officials about how to manage the West's decline; how, they are asking, can they best shape the behaviour of Western powers to advance Chinese interests and values?

This controversy burst into the open in 2006 with a provocative newspaper article by Wang Yiwei, a young scholar at Fudan University, who asked 'How can we prevent the USA from declining too quickly?' Wang Yiwei's question generated heated responses from neo-comms and liberal internationalists alike. One of Wang Yiwei's colleagues at Fudan University, Shen Dingli, has framed the challenge even more sharply: 'have people asked themselves what would happen to the world if America declined?' he asked. 'Could China, Russia, the EU, Germany or Japan deliver public goods as America can, or build international political or economic institutions?' For Shen Dingli, who believes that Beijing is not yet ready for prime-time, the goal should be to 'shape an America that is more constrained and more willing to co-operate with the world'. China should use a mix of engagement and containment to shape the USA so that it becomes a responsible power: which, of course, is the exact mirror image of the US approach to China.

What these debates show is that China's rise will not be a mechanical process that can be delicately 'managed' by Western policy-makers. China will actively try to 'manage' the West even as it attempts to manipulate Chinese behaviour. Moreover, the dam-burst of economic growth that has projected the People's Republic into the world is happening at a pace that defies careful 'management', bringing a tsunami of unintended consequences in its wake. In 2005, my friends in Beijing were thrilled to see The Economist run a cover story called 'How China Runs the World Economy'. It argued that 'over the coming years, developed countries' inflation and interest rates, wages, profits, oil and even house prices could increasingly be "made in China'''. But two years on, China's economic impact is old news. Soon, the covers of Western magazines will declare that 'China Runs the World's Politics'. I can already imagine editorials arguing that from climate change and nuclear proliferation to human rights and global poverty, the world's policies are being set in Beijing. 'China's ideas on world order,' they will say, 'will have as dramatic an effect on our foreign policies as its cheap exports have had on our economic ones.'

The most immediate consequence of China's rise is that the much predicted 'universalization of Western liberal democracy' has stalled. The Chinese state, with one in five of the world's population, has got off the conveyor belt that seemed to be leading it towards a Western political and economic settlement. Even if the rest of the world carried on developing regardless, this change on its own would overturn Francis Fukuyama's predictions of 'the end of history'.

The next phase of China's development could be even more dramatic. The first thirty years of the People's Republic reform programme have been mainly about China joining the world; absorbing and assimilating know-how from the West on economics, politics and foreign policy. The story of the next thirty years will be about how a more self-confident China reaches out and shapes the world. For governments in Africa, Central Asia, Latin America, and even the Middle East, China's rise means that there is no longer a binary choice between assimilation to the West and isolation. Of course, China will not define the new order on its own, but it will provide an alternative pole and a philosophy that will find their place alongside US attempts to create a balance of power that favors democracy, the European penchant for multilateralism and Islamists' hopes of theocratic rule. The golden thread that links China's emerging ideas about globalization is a quest for control. Chinese thinkers want to create a world where national governments can be masters of their own destiny rather than subject to the whims of global capital and American foreign policy. They want investment, technology and market access from the rest of the world, but they do not want to absorb Western values. Their goal is not to cut China off but rather to allow China to engage with the world on its own terms. In short, they want to stop China being 'flattened' by globalization. Yellow River Capitalism, deliberative dictatorship and Comprehensive National Power are the basic building blocks of this new Chinese philosophy of globalization which seeks to re-establish a place for nation states in controlling the economy, managing politics and shaping the foreign policy agenda. Chinese leaders are already using these ideas - brick by brick - to build an alternative world order: China's 'Walled World'.

In the spring of 2007, Hu Jintao proudly announced the creation of a new 'Special Economic Zone'. At a packed press conference, business journalists and corporate leaders beamed as he announced that the winning combination of export subsidies, tax-breaks and investments in roads, railways and shipping would be extended to a whole new industrial zone. However, this was a Special Economic Zone with a difference. It was neither on the east coasts of China nor on the western plains. This outpost of Chinese capitalism would be built in the heart of Africa, in the copper-mining belt of Zambia. Standing alongside President Hu Jintao, the Zambian leader Levy Mwanawasa announced that 'the establishment of a "Special Economic Zone" in Chambishi will see China injecting $800 million into our economy. This will go a long way in boosting economic development in our country.' The Zambian Special Economic Zone is just the first of five that Beijing has pledged to build in Africa as it exports the secrets of Yellow River Capitalism far beyond its borders.

China will literally transplant its growth model into the African continent by building a series of industrial hubs with tax incentives that will be linked by rail, road and shipping lanes to the rest of the world. Zambia will be home to China's 'metals hub', providing the People's Republic with copper, cobalt, diamonds, tin and uranium. The second zone will be in Mauritius, providing China with a 'trading hub' that will give forty Chinese businesses preferential access to the twenty-member state Common Market of East and South Africa that stretches from Libya to Zimbabwe, as well as easy access to the Indian Ocean and South Asian markets. The third zone - a 'shipping hub' - will probably be in the Tanzanian capital, Dar es Salaam. Nigeria, Liberia and the Cape Verde Islands are busy competing for the other two slots.

As it creates these zones, Beijing is embarking on a building spree, criss-crossing the African continent with new roads and railways. The 'Tanzam' railway which China built to link Zambia with Tanzania in the 1970s is being revamped, as is the Benguela line which links Zambia with oil-rich Angola. As one South African puts it, 'even Africa's numerous former colonial powers did not have the commitment to invest so substantially in the continent's infrastructure and probably were unable to afford it anyway'. Many of Africa's former colonial powers have been taken aback by the scale of China's interest in Africa. In November 2006, forty-eight leaders of African nations turned up in Beijing for an elaborate summit hosted by Hu Jintao. At the summit, the Chinese president self-consciously tried to outbid the West by announcing that Chinese aid to Africa would be doubled by 2009 (a full year earlier than the targets which Bob Geldof and Bono demanded of Western governments during the G8); creating a $5 billion investment fund for Africa; a further $5 billion of preferential land and investment credits; debt cancellation for thirty-two countries; thousands of scholarships, as well as a plan to build schools and hospitals across the continent.

More significant than its appeal to African hearts and minds, is the way that China's presence is changing the rules of economic development. The International Monetary Fund and the World Bank used to drive the fear of God into government officials and elected leaders. The development expert Jeffrey Sachs famously compared the IMF to a surrogate government whose seconded officials sat in the inner sanctums of seventy-five developing countries: 'These governments rarely move without consulting the IMF staff, and when they do, they risk their lifelines to capital markets, foreign aid, and international respectability. But today, IMF officials struggle to be listened to even by the poorest countries of Africa. The IMF spent years negotiating a transparency agreement with the Angolan government only to be told hours before the deal was due to be signed that the authorities in Luanda were no longer interested in the money: they had secured a $2 billion soft loan from China. This tale has been repeated across the continent - from Algeria to Chad, Ethiopia to Nigeria, Sudan to Uganda, and Zambia to Zimbabwe.

As the balance of economic power in the world shifts - with Chinese assets of $1.3 trillion dwarfing the IMP's shrinking loans portfolio of $35 billion - the world's most powerful development agencies are struggling to enforce their priorities in the face of Chinese competition. In place of the strict 'conditionality' of the so-called Washington Consensus, many African countries are embracing the lessons of Yellow River Capitalism. Whereas the Washington Consensus is against state intervention in the economy and in favor of privatization, strong property rights and economic 'shock therapy', Yellow River Capitalism encourages the use of public money to drive innovation, a push to protect public property, and the gradualist reforms of Special Economic Zones.

The allure of the Chinese model extends beyond Africa. In their quest to mimic Chinese success, countries as diverse as Brazil, Russia and Vietnam are copying Beijing's activist industrial policy that uses public money and foreign investment to build capital-intensive industries. These countries have also rowed back from another principle of the Washington Consensus and slowed down - sometimes even reversed - the privatization programmes they embarked upon in the 1990s. Just like China, they are maintaining control over sectors of the economy said to be vital to the national interest (and their definitions of the national interest are widening to include public utilities, energy and even agricultural production). Like China, they believe that efficiently managed State Owned Enterprises can raise massive profits for the government, which can be reinvested to achieve political and social goals (and by hanging on to these State Owned Enterprises, the governments can also prevent politically independent entrepreneurs from challenging their powerbase). There are complex reasons for the backlash against the Washington Consensus - the legacy of financial turbulence in Russia, Latin America and Asia, the economic freedom accorded to resource-rich nations by the rise in commodities prices, and the election of populist leaders in many parts of the world - but the stunning success of China's economy is clearly part of the picture.

What is striking is that the spread of Yellow River Capitalism seems to be going far beyond the regions that have been targeted by Chinese investors. The success of China's model of gradualist change has led to the creation of a rash of Special Economic Zones all over the world. According to World Bank estimates, by 2007 there were more than 3,000 projects taking place in Special Economic Zones in 120 countries worldwide. Most are explicitly modeled on the Chinese example. The Chinese model has attracted admirers across the developing world. Government research teams from Iran to Egypt, Angola to Zambia, Kazakhstan to Russia, India to Vietnam and Brazil to Venezuela have been crawling around the Chinese cities and countryside in search of lessons from Beijing's experience.

Just as attractive as Chinese growth is the way that Beijing has been able to maintain control over its own economic policies. Unlike the Asian Tigers of the 1980s which relied on economic assistance from the West, China has freed itself from the interference of Western development agencies and financial institutions. China has happily resisted vocal pressure from the USA to revalue its currency, making it clear that it would deal with this issue on its own terms. For developing countries that exchanged colonial rule for the diktats of the IMF and World Bank, the promise of setting their own agenda is the stuff that dreams are made of. As one Nigerian journalist puts it:

The Chinese government knows what is good for its people and therefore shapes its economic strategy accordingly. Its strategy is not informed by the Washington Consensus. China had not allowed any [IMF] or World Bank official to impose on it some neo-liberal package of reforms ... their strategy has not been a neo-liberal overdose of deregulation, cutting social expenditure, privatizing everything under the sun and jettisoning the public good. They have not branded subsidy a dirty word.

For many years, developing countries were uncomfortable with the 'flat world' philosophy of the Washington Consensus. However, it was not until recently that they had a proven alternative of combining gradualist economic reforms with the state control and social priorities of Yellow River Capitalism. Globalization was supposed to bring about the worldwide triumph of the market economy, but China is showing that state capitalism is one of its biggest beneficiaries.

As free market ideas have spread across the world, liberal democracy has often travelled in its wake. In the last thirty years alone more than sixty countries have embraced democracy. The American scholar Samuel Huntington has christened this the 'Third Wave of Democratization' (the first wave was in the early 1800s, the second took place immediately after the Second World War). Even in the last three years, we have seen popular protests demanding democracy on the streets of Georgia, Ukraine, Lebanon and Kyrgyzstan - the so-called 'color revolutions'.

But for the authorities in Beijing there is nothing inexorable about the progress of liberal democracy. I was in China at the time of Ukraine's 'Orange' revolution and Kyrgyzstan's so-called 'tulip' revolution. My Chinese hosts looked on in disbelief as Moscow failed to stem the popular protests and shore up its preferred candidates. In their determination not to repeat what they regarded as Russian mistakes, the Chinese authorities set up a unit to review the work of foreign NGOs in China, while one of the leading government-sponsored think-tanks sent researchers to Uzbekistan, Kyrgyzstan, Ukraine, Georgia and Belarus to assess the role of pro-democracy NGOs and to propose countermeasures.

The Chinese government decided that they did not want any 'colour revolutions' happening on their watch, and have therefore cracked down on foreign-funded NGOs and sent teams of people to train other governments in Central Asia on effective crowd dispersal.

Today, the talk among Western democracy activists is of a backlash against democracy promotion. The American NGO Freedom House has coined the term 'freedom stagnation' to explain the fact that the number of free countries in the world has not increased. The National Endowment for Democracy talks about 'a "chilling effect" on democracy assistance, intimidating some groups and activists, and making it more difficult for them to receive and utilize international assistance and solidarity'. Leading writers about democracy, such as Tom Carothers, describe a 'pushback' against democracy, as autocratic governments clamp down on free media, civil society and human rights groups.

Of course, this is not all down to China. The Bush administration's 'forward agenda for freedom' which linked democracy promotion to regime change in Iraq has sapped the legitimacy of democracy promotion, and provided a pretext for governments to crack down on human rights and democracy activists. President Putin in Russia has led a crackdown on the media and political freedom in his own country and supported regimes in the former Soviet Union that have adopted the same tactics. And many recent democratic set-backs such as the military coups in Thailand and Congo- Brazzaville had little to do with China. However, China must take some responsibility for this trend.

Even if the People's Republic had done nothing in the world, the power of the Chinese example would have presented a major challenge to promoters of democracy. The contrast between its performance and that of the Soviet Union has given rise to a widespread belief that economic reform must precede political reform.

This 'sequencing myth' has become a major barrier for promoters of democracy, taking the pressure off many countries to liberalize their political systems. Even more worrying, China's economic success has broken the perceived link between democracy and growth. Even aid agencies in democratic countries, such as the UK's Department for International Development, freely admit that there is no evidence that democracy contributes to economic development. And if China's recent experiments with deliberative dictatorship and public consultation work, dictatorships around the world will take heart from a model that allows one-party states to survive in an era of globalization and mass communications.

Many people argue over whether China is actively promoting autocracy around the world, or whether it simply has a morally neutral approach that puts its national interest first. Either way, through its political and economic links with problematic regimes, China has emerged as the biggest champion of autocracy around the world. The pressure group Human Rights Watch complains that 'China's growing foreign aid program creates new options for dictators who were previously dependent on those who insisted on human rights progress'. China's support goes beyond its increasingly generous economic aid. It offers friendly regimes political support at the United Nations Security Council, training in counter-insurgency, and even access to bugging and surveillance equipment.

In Zimbabwe, the Chinese government has given President Mugabe political, military and technical support. The Chinese have frustrated attempts in the United Nations to explore his 'Operation Clean the Filth' that resulted in the mass eviction of 700,000 urban poor. Beijing has also provided Mugabe with technology for autocracy, supplying him with equipment to jam radio signals, monitor e-mails and disperse demonstrations. After Uzbekistan's government massacred hundreds of protesters at be expected always and everywhere to do what needs to be done.' That is how the former British prime minister Tony Blair addressed the American people in 1999, when genocide was raging through Kosovo. He was delivering his call to action in the only nation that could stop the killing. 'Acts of genocide can never be a purely internal matter,' he declared, outlining his 'new doctrine of international community' that authorized powerful states to protect the citizens of other countries from massive abuses of human rights. But, with the USA bogged down in Iraq and Afghanistan, today's campaigners on global issues are focusing more and more of their attention on Beijing. It is not entirely surprising that China has been called upon to deal with problems in neighboring countries such as North Korea or Burma, but who would have thought that China would be in the front line of global discussions on climate change, nuclear proliferation in Iran or land reform in Zimbabwe? The most dramatic development is possibly the fact that Beijing is in the eye of the gathering storm in Darfur.

In July 2007, the American speed-skater and Olympic gold medalist Joey Cheek led a delegation to the Chinese embassy in Washington DC. He argued that Beijing's relationship with Khartoum 'gives China the opportunity to do something that no one else in the world is able to do. It gives them a chance to show that they truly are the power in the world that they are aspiring to be, and that they could pull off something that the West couldn't.' Beijing is under pressure to use its leverage on the Sudanese government: as well as selling the government weapons, it buys two-thirds of Sudan's oil and has invested $6 billion in its industry. More importantly, it is China that has set the pace for international diplomacy both in Darfur itself and in the United Nations in New York, watering down various attempts to introduce sanctions and mandate UN peacekeepers (the United Nations Security Council has only banned travel and frozen the assets of four junior individuals in a conflict that has seen the death of 400,000 people and the displacement of 2 million).

China has been treading a fine line on Darfur. Smarting from accusations of 'bank-rolling genocide', it has tried not to appear destructive: appointing an envoy to Darfur in 2007, supporting the idea of a UN peacekeeping mission, pressurizing the Sudanese government to negotiate with rebel forces. But, at the same time, Beijing has stuck to a line of 'influence, not intervention', refusing to accept sanctions against the regime, and insisting that forces should only be deployed with the Sudanese government's consent. In its approach to the crisis, Beijing has sought to use multilateralism to increase its own power and that of its Sudanese ally sticking to the idea that everything needs to be passed through the United Nations Security Council (where China has a veto), and promoting the idea of multilateral talks. This echoes the Chinese approach to North Korea and Burma where Beijing has promoted talks which allow it to set the pace of diplomacy, delivering just enough progress to satisfy the West but not so much as to endanger the autocratic regimes which look to China for support.

China's approach to Darfur shows that its emerging 'Walled World' philosophy has revolutionary implications for geopolitics. At the beginning of the twenty-first century, Western governments and their citizens, influenced by genocide in Rwanda, terrorist camps in Afghanistan and nuclear proliferation in Iran, began to feel a responsibility to intervene in countries that threaten human rights and international security. However, Beijing is determined to defend an older idea of sovereignty, based around the sovereign rights of states. Its rules include not invading other countries, not trying to overthrow regimes, and above all not interfering in the internal affairs of other states. In the place of Tony Blair's 'international community' they are pushing 'Comprehensive National Power'.

China is promoting this agenda internationally through its new-found interest in multilateralism. By supporting the United Nations and creating new regional organizations, Beijing is not only changing the balance of power in many parts of the world, but also ensuring the importance of respect for national sovereignty. The Western creations of the European Union and NATO - defined by an approach that includes the pooling rather than the protecting of sovereignty - have found their matches in the Chinese-inspired East Asian Community and Shanghai Cooperation Organization. Through these organizations, China is reassuring its neighbors of its peaceful intent and creating a new community of interest that excludes the USA. The former US official Susan Shirk draws a parallel between China's multilateral diplomacy and her own country's after the Second World War: 'the United States was ... able to convince other countries that it would not threaten them by creating multilateral global institutions and submitting itself to the authority of these institutions. By binding itself to international rules and regimes, the United States successfully established a hegemonic order. Could China's participation in global and regional multilateral institutions have the same result, enabling China to rise to power without provoking a concerted effort to contain it?'

The United Nations is becoming a powerful amplifier of the Chinese world-view. Unlike Russia which comports itself with a swagger - enjoying its ability to overtly frustrate US and EU plans - China tends to opt for a conciliatory posture. It is prepared to veto things when it has to, but it prefers to hide behind others, and block things without getting the blame. In the run-up to the Iraq War, although China opposed military action it allowed France, Germany and Russia to lead the international opposition to it. In 2005 when there was a debate about enlarging the United Nations Security Council, China encouraged African countries to demand their own seat with a veto which effectively killed off Japan's bid for a permanent Security Council seat. Equally, Beijing has been willing to allow the Organization of Islamic States to take the lead in weakening the new Human Rights Council. This subtle diplomacy has been devastatingly effective - contributing to a massive fall in US influence: in 1995 the USA won 50.6 per cent of the votes in the United Nations general assembly; by 2006, the figure had fallen to just 23.6 per cent. On human rights, the results are even more dramatic: China's win-rate has rocketed from 43 per cent to 82 per cent, while the US~s has tumbled from 57 per cent to 22 per cent. The New York Times' UN correspondent James Traub has detected a paradigm shift in the United Nations' operations: 'it's a truism that the Security Council can function only insofar as the United States lets it. The adage may soon be applied to China as well.' James Traub may be right. China's capacity to influence the United Nations is increasing, and soon we may be complaining about Chinese behavior on big policy issues, rather than saying 'if only the USA would act differently'.

In the 1990s, the satirical writer Wang Shuo upset the Chinese authorities by penning a best-selling novel, Please Don't Call Me Human, in which he imagined a Beijing Olympics where nations competed to prove their citizens' capacity for humiliation, rather than their athletic prowess. In this fantasy competition - which China was determined to win at any cost - the novel's protagonist, a delinquent pedicab driver called Yuanbao, who leads the Chinese team, scored the maximum points by performing a number of degrading rituals ranging from drinking another contestant's urine to being frozen alive in a fish tank. Wang Shuo's remorseless mocking of his country's greatest obsession - saving face - ends with the distressing scene of Yuanbao ripping off his own face to win the gold medal. The image of the faceless anti-hero standing in a pool of blood - holding his facial skin above his head in triumph - was such a shocking rebuke to the country's dreams of national greatness that Wang Shuo's writings were eventually banned in a government campaign against 'spiritual pollution'. The country that Wang Shuo depicts had become so used to seeing the world order as a given to which it must adapt that it assumed that the only way to overturn the humiliation inflicted on China by foreigners was to embrace that humiliation itself.

On the surface, the Beijing that is preparing to host the real Olympics in 2008 could not be more different from that depicted in Wang Shuo's novel. At home, the regime sees the games as China's coming-out party as a global superpower. The generation that lived with the weight of national humiliation is giving way to a new elite whose working lives have only known Chinese success and prestige. And abroad, China hype has become ubiquitous: almost half the leaders of the world's 192 countries visited China in 2006 to pay tribute to the rising giant. However, for all this show of confidence, China's mindset remains defensive. Like Wang Shuo's Olympic Committee, China's contemporary philosophers are trying to change the rules of global competition to reflect China's strengths, rather than having the confidence to compete with the West on existing terms. This defensiveness has a history.

Almost all visitors to Beijing make the pilgrimage to the Temple of Heaven, whose lantern-like profile rises like a specter over the Chinese capital, offering its citizens an iconic glimpse of the afterlife. The intricately structured building - whose form was designed according to cosmological principles to mimic the exact shape of heaven - rises through a series of white marble clouds before reaching a plateau at the 'Altar of Heaven'. It was here that the emperor - the so-called 'Son of Heaven' - would offer sacrifices and prayers to 'the Supreme Ruler of the Universe'. His annual re-enactment of this ritual was designed to symbolize the principle of world order in ancient China, the concept of 'all under-heaven' or 'Tian-xia'. The emperor was literally at the centre of the world order, and his rule would recognize no boundaries or limits. But even as they were flaunting their universalist ambitions at their favorite temple, the Ming emperors were building an even more famous national symbol: the Great Wall of China. The very act of opening up and looking at the world, seemed to carry with it a need to establish boundaries which could shield China from the influence of barbarians and foreigners. The Ming dynasty, like every regime in Chinese history, was obsessed with the need to hold China together and shield it from its neighbors. The Chinese have labeled this obsession with boundaries the 'Great Wall mentality'. It is a concern that runs so deep that it has infiltrated the country's identity, its lifestyle and even its alphabet: all Chinese cities are surrounded by walls, the traditional Chinese courtyard house literally takes the form of a wall surrounding an atrium, while the pictograph for 'country' is made up of a four-walled pattern.

Although China's concern with national sovereignty and the power of the state arose at a time when China feared incursions from foreign powers, these ideas are now being projected on to the world outside. Today's 'Great Wall mentality' is not about protecting the country from foreign incursions; it is about promoting a Chinese view of sovereignty. This is not happening according to a pre-calculated master plan. China is so big, so pragmatic and so desperate to succeed that its political leadership is constantly experimenting with new ways of doing things. It used its Special Economic Zones to test out a different kind of market philosophy.

Now it is testing a thousand other ideas - from public consultations to regional alliances. But from this laboratory of social experiments, a new world-view is emerging that will in time crystallize into a recognizable Chinese model. And China's own emancipation from the West has created an alternative, nonWestern path for the rest of the world to follow. The ideal of a 'Walled World' where nation states can trade with each other on global markets but maintain their control over their economic future, their political system and their foreign policy is emerging as an ideological challenge both to the US philosophy of a 'flat world' and the European preference for liberal multilateralism. In this new competitive environment Western policy-makers will need to adapt their own ideas if they want to promote and protect their liberal values.

The twenty-first century will not be a Chinese century where McDonald's is replaced by mantou (steamed buns) as the world's favorite fast food, CNN is subordinated by CCTV, or Hollywood by the Chinese New Wave. But China will join the USA and the European Union as a shaper of world order, challenging Western influence in Africa, Asia, the Middle East, Latin America and the former Soviet Union with a different model of globalization. If China continues to grow, it is possible to imagine that in the future, demonstrators outside the World Trade Organization will complain about the Beijing Consensus as well as the Washington Consensus. They may tune into the Chinese president's address to the National People's Congress as well as the American 'State of the Union'. The political struggle between Xi and Li could be as over reported as the contests between Segolene Royal and Nicolas Sarkozy, or Rudi Giuliani and Hillary Clinton. The world's media may become as obsessed with China's neo-comms' plans for Central Asia, as they were with the American Neo-Cons' designs for the Middle East. And when Bono and Bob Geldof next attempt to save Africa, they may hold their largest concert in Beijing's Olympic Stadium rather than London's Hyde Park. China's path to superpower status will not be smooth. It is possible that Beijing's formula of state capitalism, open markets and a closed political system will not last the course. However, it is worth noting that it took three generations for a Soviet economic model that did not work in theory to actually fail in practice. And until the very moment that it collapsed, the Soviet Union embodied an alternative model that challenged Western liberal democracy. Beijing's ascent has already changed the balance of economic and military power, and it is now changing the world's ideas about politics, economics and order. Those who argued that the People's Republic would become more Western with its growing wealth have been proven wrong. For the first time since the end of the Cold War, Europe and America face a formidable alternative: the Chinese model.






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