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Now the myths have died, the centre may not hold

The death watch is familiar territory in Chinese politics. Many profitless hours have been devoted to guessing what would happen when the moribund leader of the day finally ceased to breathe. But Deng Xiaoping's may be the last of that sort of event. The idea that in 20 years' time, the world will be gazing at the blank crimson walls of the Forbidden City wondering what will happen to China when the 90-year-old Jiang Zemin dies is more than a touch implausible. Somehow Jiang Zemin does not feel like an entirely permanent fixture.

The era of domination by aged revolutionaries is over. But as China puts an ever greater distance between its capitalist present and its revolutionary past, the large questions about her political future remain elusive. Will her extraordinary economic development give birth to a more enlightened political era? Will diplomatic bullying evolve into co-operation, or degenerate into military adventure?

Deng Xiaoping's legacy, it has been universally chorused this week, is one of economic liberalism and political repression. The formula is correct as far as it goes. There are no political rights to speak of in the China Deng built, and the rule of law remains subordinate to the party's interests - and, often enough, to the interests of individual party members.

But still, Deng has left a liberty of sorts: with the market economy comes the freedom to make decisions and exercise choice; the freedom to earn and spend, to move around and communicate; to go abroad, to listen to music and read books that were once forbidden. It's far from perfect, but it's much more than there was in the Seventies, when Deng climbed to power for the third and last time to embark on his great adventure of dismantling the China that his old enemy Mao had made.

At an individual level, a generation of Chinese is growing up more sophisticated, better educated, more independent of mind and better informed about the outside world than any before it in Chinese history. Some will become millionaires, others will always go hungry, so un-socialist has China become. However their material fate plays out, all will in theory remain subject to the political will of a Communist Party in whose ideology even the party itself no longer believes. Clearly this situation will have to evolve.

At the very least, successful economic activity demands a legal system that functions, if not perfectly, at least adequately. Once the law of contract can be relied on, other aspects of the legal system have a better chance. Entrepreneurship, too, fosters a certain independence of mind and an open economy demands that statistics bear some resemblance to reality. If China's economy continues to grow as it has in the past five years, all of these factors will contribute to political evolution. Deng may go down, at last, as the man who resisted political reform, yet created the conditions in which it had to happen.

That is the optimist's view. The pessimist points to the disparity in wealth between the rich and poor and sees the gulf growing unbridgeable. The evident affliction of the beggars on the streets of China's cities and the awful, visible poverty of the migrant unemployed hint at social problems on a breathtaking scale that nobody seems interested in addressing. Inflation splutters on, fuelled by the loss-making state enterprises that nobody dares to close. Agriculture is squeezed by corrupt and inept local officials while in the cities giant shopping plazas spring up like mushrooms after rain. And sitting on top of it all, a party that reeks of corruption.

The pessimist sees peasants who rise up against corrupt local officials and rebellious individuals, frustrated at the party's monopoly of and misuse of power, turning to unofficial and more dangerous experiments in leadership. Even parts of the army, now corrupted in the manner of the Latin American armed forces in the Seventies by its slow decay into a business conglomerate, might begin to pursue interests quite separate from those of the state it is meant to defend: the centre weakens, the periphery slips from political control.

Neither of these visions is as likely as a combination of the two: that the poorer and more remote regions slip back into local despotism, ill- rewarded by the prosperity that is transforming eastern China into a modern economic power. There, a formula might be found for balancing competing interests without bloodshed. There it will grow steadily less plausible for the party to impose any ideological position and to try will only expose its ideological weakness to ridicule.

But a key problem remains: if nobody believes in the Communist myths anymore, which myths will be employed to hold this strained and disparate country together? It's a question about China's self-definition, but one that fundamentally affects her relations with the rest of the world. If, as many believe, the only plausible answer to it is nationalism then a number of groups are in for a nervous time as Chinese muscle grows. Firstly, of course, the non-Han (ethnic Chinese) peoples of the Chinese empire who have a claim to, or a memory of, a nationhood of their own - the Muslims of what used to be called Chinese Turkestan, the Mongolians of Inner Mongolia and the Tibetans.

They are already suffering the effects of the hardening of Beijing's political arteries as weaker men than Deng postured round his sickbed in the past two years. The Muslims have the tantalising example of the newly independent Muslim republics of the former Soviet empire across the border and the devotion that Islam gives to their cause. The Tibetans have a history of resistance that goes back to 1950 and the Mongols are not immune to resentment or to envy of the freedoms, if not the poverty, of their Outer Mongolian cousins. Chinese nationalism is a euphemism for Han supremacy in this multinational state and the rights and claims of none of these peoples will be allowed to prosper if it becomes the dominant ideology.

The second group who must worry are the Taiwanese: the return of Hong Kong is a prize for a regime that has harped ad tedium on the theme of historical injustice; there is face involved here, as well as finance. Taiwan is a prize of a different order. If Hong Kong represents the humiliation of the 19th century, Taiwan speaks of a 20th-century quarrel, one that many still remember. It's an ideological as well as a political problem. It's hard to think of anything that the Chinese Communist Party now subscribes to that would not have sat quite comfortably with the KMT, the nationalists of the 1930s and 1940s. Like today's Communist Party, the KMT was territorially ambitious, inclined to capitalism, nationalistic but West-oriented, despotic in conduct but democratic in rhetoric.

In the high days of Chairman Mao's utopian socialism, an ideological case could be made for the quarrel. Now it's hard to see how the Communist Party could demonstrate its moral superiority to anyone's satisfaction. To a jaundiced mainland eye, Taiwan must look like a nation that had the good sense to embark on economic development decades ago and has now embraced the political development to match. A democratic Taiwan is a provocative example to the one-party state across the straits and a democratic Taiwan that rejected unification would have a strong claim on international sympathy.

Taiwan is the only plausible territorial ambition that China's armed forces have: it is the PLA's unfinished business and the party's open sore. Taiwan can take little comfort from Beijing's pattern of arms purchases over the past five years: long-range fighters and sea-skimming missiles from Russia and Kilo-class submarines that render her, for the first time in history, a naval power to be reckoned with. Nor can any of the other parties to the dispute over the oil-rich waters around the Spratly Islands find this naval build-up reassuring. China may not plan to resolve these issues by force, but her rhetoric suggests she might and she has equipped herself with the physical means to do so.

Deng's political strength was an asset for the West. As he sank into impotence, the tone in Beijing grew steadily more strident. Will there be anybody now at the centre with strength enough to conduct China's external relations in as reasonable a tone? The West, ambitious to embed China in multilateral institutions and to avoid a dangerous adventure across the straits, must hope so.