Leading article: Turbulent times as China chooses its future

When David Cameron signed a £1.4bn trade deal with China yesterday, he might have been forgiven for wondering which China he was dealing with. Until recently, a new revolution appeared to be taking place in the country. Meteoric economic growth seemed to be bringing a greater openness to the world, greater freedoms for China's emerging middle-classes, a fairer legal system and a new awareness of individual rights. But since Mr Cameron went to Beijing last November and gave a tentative thumbs-up, things have been moving in the opposite direction. There is a new nervousness and uncertainty inside China. Its peculiar brand of authoritarian capitalism seems to be reverting to a greater authoritarianism all round. In the struggle between conservative and liberal factions within the leadership, hardliners are firmly in the ascendancy.

Things began to go wrong with the uprising in Tibet in 2008 which provoked a military clampdown. Even more violent was the reaction to unrest in China's other great western frontier province, Xinjiang, where the population is overwhelmingly Muslim. China set its face against any criticism from the West, and when the Nobel Peace Prize was last year awarded to the jailed dissident Liu Xiaobo, the line became even more uncompromising.

Attitudes hardened towards peaceful political reform; even Aids activists and campaigners on China's babymilk scandal were arrested. The regime began to imprison people just for expressing opinions in blogs. Human-rights lawyers, whose number had blossomed in a decade of tolerance, were detained merely for doing their job. The Arab Spring has only unnerved Beijing further. Spending is vastly up on rebuilding the domestic spy-networks which pay one citizen to inform upon another.

The rise of the hardliners has had another major consequence. China is greatly increasing its military spending. Officially up 12.7 per cent, the real rise is thought to be much higher. It is developing stealth fighters, modernising its missile systems, submarines, radar, cyber-warfare and anti-satellite weapons. It is building its first aircraft carrier to threaten US dominance of Far East trading lanes.

Its near neighbours are worried. Relations have been strained between China and Japan over the East China Sea, with its large potential reserves of oil and gas. It is in a land dispute with India. Its live-fire exercises are seen as threats by Vietnam whose oil exploration vessels have had their cables cut twice by Chinese naval boats in recent weeks. Last week the United States promised better military equipment to the Philippines navy to defend waters China covets.

It is to be hoped that all these hardline stances soften next year when the transition of power is over and the country's president and party general-secretary Hu Jintao has handed over the country's reins to his anointed successor Xi Jinping. The power struggles at the top of the Communist Party have slowed the economic reforms necessary to keep China growing at the rate the global economy requires. They have also put a brake on necessary political reforms – and yet have done so through a draconian clampdown which might yet provoke the very unrest and instability the hardliners so fear.

The Chinese prime minister, Wen Jiabao, often speaks of the need for political reform, but he is either weak and isolated or not the reformer he purports to be. There has been a distinct lack of progress on many critical issues facing China and its economy during his 10 years in office. Only when we discover the name of his successor next year will we know how China will conduct itself at home and on the world stage in the decade to come.