China's Gold-Medal Moment

If you were rightfully thrilled by the TV coverage of the Beijing Olympics on NBC, it was nothing compared with the excitement of the Chinese leadership. It views this $40-billion-plus Olympics as the centerpiece of refurbishing China's national prestige. Every detail of the opening was designed to honor and celebrate China's classical heritage and society, as well as its modern engagement with the world—a sophisticated projection of soft power. Flawless was the message China wished to send, and flawless it was. It began with the opening extravaganza and its complicated choreography and coordination among thousands of participants, and for two weeks it maintained its spectacular originality.

We Americans are thrilled by the performance of the whole U.S. delegation—those members who competed with all their hearts as well as those who won golds. Michael Phelps is our Superman, but how inspiring it was to see Henry Cejudo's reaction after winning a single gold in wrestling. The son of Mexican immigrants was so proud he wept as he draped himself in the stars and stripes.

The Chinese athletes performed splendidly, of course, but the gold the country's leaders were striving for was in the political agenda. They saw the Olympic spectacle as an opportunity to demonstrate that China has regained its national stature and power after the legacy of what it experienced as "a hundred years of national humiliation" at the hands of foreigners.

Humiliated. Chinese schoolchildren have long been indoctrinated to believe that until the Communist victory in 1949 their country was the "sick man of Asia." They learned never to forget the 1919 Treaty of Versailles, which gave to Japan Germany's special concessions and extraterritorial status in China. Incidents such as the clash of Chinese and American military aircraft, the Tibetan uprising, the Olympic torch relay, and even the Sichuan earthquake have all featured in a national narrative of a resurgent China defending itself against a hostile world. The humiliation of a hundred years has given way to an ideology of nationalism that nurtures popular resentment of Japan and America. For us the past may be past as we focus on China's awesome capacity to achieve. Not so for the Chinese. For them, the Olympics have been the crowning moment when they could see themselves at last as victor, not as victims. As the former mayor of Beijing put it last year, "We have to have a good Olympics; otherwise, not only will our generation lose face but also our ancestors."

For all of China's re-emergence as a great power and an economic dynamo, it is also fragile. China's great leaps forward cannot disguise that it is a poor country that dares not risk the advance in its standard of living. It's the cornerstone on which the legitimacy of the government depends.

Deng Xiaoping, who succeeded Mao, understood after the uprising at Tiananmen Square that, for the Communist Party to continue its rule, it had to engineer an enduring prosperity. He began a rapid transformation of the Soviet-style economy to one with "Chinese characteristics." Peasants no longer had to work on collective farms but gained permission to have their own plots and decide their own crops. Then Beijing eliminated the institutions that monitored every detail of daily life, as well as the cradle-to-grave social welfare system, the hallmark of Maoist policy. Government today provides far fewer social services than do most western democracies. Operational control of factories shifted from Communist Party secretaries to factory managers who received incentives to make money. The government sold off most state enterprises to private interests and transformed banks into businesses. Ten million rural businesses underwent complete privatization. The government evolved with a modern tax collection system and discipline over expenses. Public education through ninth grade became universal, and now education brings premium pay in virtually all jobs. Millions moved to urban areas, just like in America in the 19th century. The country opened to unprecedented levels of foreign direct investment and joined the World Trade Organization. A mandatory retirement age for government officials became law, the National People's Congress gained new powers, and control of civil society slackened. The result: More than 250 million people have been lifted out of absolute poverty in the past three decades.

China still suffers from many limits that are not a part of its public image. Corruption infects Chinese society. It continues to suffer from unending bureaucratic and political graft. The problem was summed up by one party elder who said, "Not fighting corruption would destroy the country; fighting it would destroy the party."

So productive economic forces continue to be hampered by political ones. For example, factory owners and local officials don't enforce laws designed to ensure clean water, even though 200 million Chinese are sick from contamination and related health threats.

The most famous social dictate, the one-child policy to control population, has produced its own problem. In a generation, China's labor force, with fewer younger people, will be smaller than today's. Senior citizens are living longer, producing an inverted population pyramid. The 65-plus age group will more than double in a generation from around 110 million today to 235 million or more. There is no national pension system to support it. Instead, the support system that has evolved is the Chinese family in which almost every woman gave birth to at least one son, reflecting the Confucian tradition that it was the son upon whom older parents would rely for their first line of support. The sad result has been an explosion in abortions of girls to preserve the possibility of a son. But because of the one-child policy, the future imbalance between boys and girls will create a massive distortion in the marriage market and the challenge of coping with the emergence of tens of millions of essentially unmarriageable young men. The one-child policy has prevented more than 300 million births over the past nearly 30 years. But the growing population of the elderly has raised the concern that China may grow old before it grows rich.

Toxic legacy. China also faces severe ecological and health dangers far more serious than people realize. Air pollution is a huge threat to the quality of life in cities like Beijing and Shanghai, among others: 16 cities rank among the 20 most polluted in the world. In major cities, much of the water is too toxic to drink. Only 1 percent of the surface water available in Shanghai is safe. All told, nearly 700 million Chinese people drink water contaminated with animal and human waste.

Land degradation has turned much of the country into a desert. The Gobi Desert, which covers much of western and northern China, is growing by about 1,900 square miles annually, turning millions of Chinese into environmental refugees in search of homes and jobs. All this—and global warming—will worsen when the country brings hundreds of coal-fired electric plants into service and quadruples car ownership so that within 15 years almost 130 million autos will be on China's roads.

Yes, China is still growing—and dramatically—sustained by a remarkable savings rate of 40 percent, a prodigious work ethic, and $1 trillion of foreign capital. The rapid improvement in the standard of living has helped justify the one-party system in a country that has always perceived chaos as the greatest societal danger.

As China concentrates on internal development and on the education of its people, it is gradually evolving towards a looser, more open society. Having visited China a dozen times from the mid-1979s to the mid-1990s, I found this constructive evolution of China's policies manifest. But the Chinese Communist Party needs its political institutions to keep pace with the forces unleashed by economic change. China is consumed by wireless communications and the Internet, with 150 million-plus "netizens" and approximately 50 million bloggers. They can hold a nationwide conversation for the first time. A text message can reach 100 million citizens within an hour. Its Internet-connected, trend-obsessed young people are changing the country at warp speed.

The result is that the Chinese people have become much more socially active, with thousands of mass protests involving 100 people or more every year. The Chinese leadership has tried to channel the unrest by whipping up extremely nationalistic feelings directed particularly at the Japanese and also at Americans. But as the people emerge from millenniums of autocratic rule, they acknowledge, as their premier put it, "We need peace, we need friends, and we need time." Hence, China's behavior in the international arena is generally cooperative. It has helped to deal with North Korea's nuclear ambitions, and it has settled its numerous border disputes with all of its many neighbors, except perhaps for India. China understands that it is not a resource-rich country and must depend on imported materials, especially oil—one reason that it shares with us an interest in the stability of the Persian Gulf region. Taiwan alone remains the last symbol of its humiliation, such that no Chinese leader can afford to be seen as the one who lost it. Seven U.S. presidents have recognized that Taiwan is a part of China, but the Chinese look to Washington to discourage arms sales to Taiwan that would increase resistance to a Taiwan-China link.

China, with a deep culture that goes back 5,000 years, is not an expansionist country. The people admire the United States, even as they resent us. So we must be patient while China develops a growing educated middle class that someday will have the same political consequences for China that it has had in many other countries. Unlike Russia, China does not have the virulent, violent autocratic and military tradition that is on display in Russia's alarming aggression in Georgia.

The Olympics provided a unique window into China that should help us support our moderate policies toward this remarkable country and its people.