A Rampaging Market, but a Long Way from Global Power

Mao Zedong's favourite Chinese dynasty was the Qin. The first emperor, Qin Shihuangdi, had unified the country, and had himself buried surrounded by a life-sized terracotta army. To the son of a rich farmer from Hunan, who had never been abroad and never wished to go, it was an appealing model: an inward looking fortress, militaristic and with a population in fear of its emperor.

Qin Shihuangdi and his terracotta warriors are still popular with tourists, but the images chosen for the giant mural at international arrivals in Beijing's newest airport all derive from paintings of the T'ang dynasty, an outward looking imperial house that encouraged cultural and political interchange along with the Silk Road trade.

Only two big ideas now survive from Mao's copious outpourings: one is a truculent nationalism that seeks to restore China's former pre-eminence, and the second the proposition that political power belongs exclusively to the Communist party. His successors, by moving towards the market economy, have set in train the social and economic revolution that Guardian journalists have been reporting in this week's special editions of G2. China's leaders aim to make China the 21st century's superpower. Whether they will succeed, nobody really knows.

Progress so far has often been oversold. In 1993, after 15 years of rapid growth, China's exports had barely crept back to where they had been in 1928. And by 2000 the dollar economy, hailed as the future engine of global growth, was barely bigger than those of Spain and Holland combined. Even now, China's GDP is less than a quarter of Japan's.

The frenzied development of the cities is less a sign of a thriving market economy than of the monopoly of power by a state free to spend its citizens' savings on often unwise and ill-planned urbanisation. As Milton Friedman put it when he visited Pudong, Shanghai's showcase development: "This is a statist monument for a dead Pharaoh." Of the billions of dollars of foreign investment poured into China in the last two decades, almost none has brought a return in the domestic market. China, 25 years into its market reforms, remains an enigma: is this the next superpower, or are the problems that China visibly faces too much for a sclerotic Communist party to solve?

The dash for growth, as the government now admits, has been an unsustainable environmental disaster. China has 16 of the world's 20 most polluted cities, a rapidly falling water table, appalling river pollution, extensive desertification and a steady loss of scarce agricultural land. China can no longer feed herself; she can barely keep the lights on. But to sustain the growth required to make continued one-party rule sustainable, she plans a further burst of urbanisation that would constitute the largest ever movement of population - of a further 500 million peasants to the cities. To provide jobs for them the economy must keep expanding, regardless of the costs.

But the prosperity that visitors see in China's cities has been bought at the expense of the majority of the population - the 900 million people who languish in the Chinese countryside and who have, over the past four decades, been steadily robbed of their accumulated surpluses by a state that spent their savings on industrialisation and then on urbanisation.

Peasant migrant workers have been the bedrock of the China boom: the men have built the cities, the cheap labour of the women has driven exports. They have been poorly rewarded: the government recently admitted that migrant construction labourers were owed $61bn in unpaid wages. As fast as the Chinese economy has grown, the gap between rich and poor has grown faster. Today China is one of the most unequal societies in the world. Millions of former workers in state enterprises have lost jobs, healthcare and pensions. In the countryside, school and medical services have either collapsed or are so expensive that many can afford neither to see a doctor or send a child to school.

The unchecked power of corrupt rural officials has given them license to tax the peasants beyond endurable limits and to pack the public payroll with relatives and cronies. A county administration that in the 80s typically employed 400 officials now employs 2,000, all paid for by the peasants.

In the cities, life for the lucky few has changed beyond recognition. Young Chinese can travel, earn and spend their money and fall in love without state interference. Even the one-child policy can be circumvented with money. There is a real liberty of opinion, reflected in a tentative emboldening of the Chinese press and thousands of internet chat rooms that, despite government efforts at censorship, offer public space in which to debate. But to most young Chinese - peasants who have grown poorer and less well educated - these opportunities are out of reach. Many will not find jobs, however fast China grows. Their discontent - and the lack of outlet for it, must be added to the balance.

The limits of freedom are easily measured. A Chinese citizen may not found or join an independent trade union, practise Falungong, found a political party, display a photograph of the Dalai Lama or join a church or any other religious organisation that does not acknowledge Communist party leadership.

The penalties for transgression can be up to 15 years in prison. Worse, an ordinary citizen has no defence against the petty tyranny and official corruption. So far, China has confounded those who argue that the market automatically brings political liberalisation.

Even if the party wanted to open up, how well could it manage the change? The persecution of harmless Tibetan Buddhists is a sign of weakness rather than strength. This is the heart of the Chinese conundrum: is the Communist party's control strong enough for the party to confront its problems, or is it so weak that it must continue to pay off its supporters and persecute its dissenters?

Should we fear China in the 21st century? She is a nuclear power with a population hungry for material wellbeing. She has explicit claims on Taiwan, which has become the only real democracy in the Chinese speaking world. But China has not fought an active war since losing to Vietnam in 1979 and, despite the effort that goes into the diplomatic isolation of Taiwan, it remains unclear that the People's Liberation Army could successfully invade. Besides, Taiwanese businessmen have invested an estimated $150bn in China. The more China depends on international trade, the less likelihood there is of such a reckless adventure.

China's other territorial ambitions have been satisfied by the absorption of her immediate neighbours - Inner Mongolia, Xinjiang and Tibet, whose cultures are being extinguished by Chinese colonisation.

China's fiercest ambitions are economic. She needs to continue to export and to attract inward investment. She needs to secure oil supplies and maintain access to markets. Still, her future as the world's next superpower is not guaranteed. China's last two decades of growth have been no more impressive than that enjoyed by Taiwan, South Korea or Japan in the 50s and 60s. China is likely to remain the world's manufacturing base for the foreseeable future, but continued growth will depend on further and difficult reform. To become a global superpower, China needs to share the internal wealth and build a more equal, well-educated society. On present trends, India or Brazil are equally plausible analogies.