China on the eve of next month's Olympic Games is like a "hot wok" of aiguozhuyi - national pride - according to Liu Xiaobo, the Chinese writer. The question is how far the Chinese government risks overcooking the popular mood. Wherever you go, there is no escaping the official slogan of Beijing 2008: "One World, One Dream". The five cutesy Olympic mascots known as Fuwa are equally ubiquitous, chirruping away on screens large and small, from Beijing's striking new international airport terminal to the humblest local railway carriage.
China's is not the first undemocratic regime to seek to use the Olympics to reinforce its own international prestige and domestic legitimacy. But seldom have sport and propaganda been yoked together on this vast scale. China's communist rulers make no secret of the fact that they see Olympic success as the perfect symbol of their country's "peaceful rise". Even if their athletes do not succeed in beating their American counterparts to the top spot for medals (they came second in Athens four years ago, with 40 fewer than the US) the Chinese government can still win if the entire extravaganza is an acknowledged organisational success.
At first sight, it can hardly fail to be. The feats of construction necessary to host the Olympic Games are precisely what this regime does best. Regular visitors to Beijing have seen the city substantially remodelled over the past year, with the building of around 1.7bn square feet of new floor space, including 110 hotels. Like the revamped airport, the striking new national stadium - where the Olympics will officially begin at 8.08pm on August 8 - exemplifies China's new status as an economic powerhouse. This, after all, is the country that now accounts for three out of the world's six largest companies in the FT Global 500 (PetroChina, China Mobile and Industrial and Commercial Bank of China). This is the economy that, according to the Carnegie Endowment for International Peace, will overtake the US in gross domestic product as early as 2035.
Yet behind the official veneer of self-confidence, China today betrays signs of insecurity - an insecurity that helps explain the somewhat overheated quality of Chinese nationalism. There has been an acute sensitivity to international criticism of the regime for its Darfur-blind support of the government of Sudan, its crackdown on Tibetan separatists and its seeming indifference to the plight of the oppressed peoples of Burma and Zimbabwe. There is also mounting anxiety about the sustainability of China's economic miracle as it approaches its 30th year. The stock market has fallen by 56 per cent over the past nine months. Speculative "hot" money, which is pouring into China in the expectation of further currency appreciation, is adding to already acute inflationary pressures. Capital controls are not impermeable and price controls cannot negate the global surge in food and fuel costs.
These economic stresses are accentuating China's multiple social problems: rapidly growing income inequality, the wretched poverty that persists in the rural hinterland and the gender imbalance that the one-child policy has wrought via selective abortion of female foetuses. Meanwhile, the environmental consequences of China's breakneck industrialisation are literally casting a cloud over the impending Olympics. Unless there is a meteorological miracle, the city's air will be the dirtiest ever inhaled by Olympic athletes. To help that miracle happen, the authorities have resorted to firing rain-inducing particles into the sky from anti-aircraft guns.
Here is another, less positive symbol of modern China: that of a regime in conflict with the environment itself. A week after the Sichuan earthquake of May 12, when the entire country froze to observe three minutes' silence, there was something about the mood in Beijing that seemed familiar; something about the sense of national unity, heightened by 24/7 television coverage of the rescue efforts, that I had encountered before. It was remarkably like New York in the aftermath of 9/11 - except that no terrorist organisation or rogue regime could be held responsible for the Sichuan disaster. The only culpable people were the crooked construction companies and corrupt party hacks guilty of building the ramshackle schools that claimed so many lives when the quake struck. Small wonder the official media hastened to bury that story, which clearly had the potential to weaken the party's popular legitimacy. Small wonder the news reports were soon full of "quake lakes" - another natural target for the People's Liberation Army to train its guns on.
Just as Americans have waged their War on Terror since 9/11, it seems the Chinese are now embroiled in a War on Nature. To grasp what is at stake in this strange war, it pays to travel away from the capital - indeed, away from the entire eastern region of China. The economic front line now lies in western China, in frenetically growing industrial centres such as Chongqing.
Far up the River Yangtze, to the west of the Three Gorges Dam, Chongqing is probably the fastest growing city in the world today. It exemplifies both the strengths and the weaknesses of what might be called China's semi-planned economy. To be sure, much of the economic running is made by private enterprise. Among the foreign companies that have already invested in the region are Ford, BP, Ericsson, Carrefour, Isuzu and Suzuki, all attracted by the combination of generous tax breaks and labour costs about 40 per cent lower than in eastern China. Even more important are home-grown companies such as Lifan Industrial Group, one of a number that have made Chongqing the motor cycle manufacturing capital of Asia.
Yet the explosive growth of Chongqing's industry would not be happening without a very large dose of central planning. Since 1997, Chongqing has been a municipality under the direct control of the government in Beijing. Its transformation from sleepy backwater into the economic hub of western China has been an objective of national policy. That has meant a state-led bonanza of fixed investment, which has grown at an average annual rate of 20 per cent over the past decade. Local officials beam as they reel off the statistics: there will be 30 new bridges over the river, 10 new light railway lines, 2,000km of new highway and millions of square metres of new office space. On the long drive from the airport to the city centre, it is impossible to keep count of the number of new tower blocks under construction or the number of cranes perched on the city's hills.
The trouble with a semi-planned economy, as soon becomes clear to the visitor to Chongqing, is twofold. First, in the absence of rule of law and meaningful private property rights, there are no real limits to the "negative externalities" of economic development. The air in Chongqing is as thick with pollutants as the local food is thick with hot chili peppers, frequently turning the city's natural mists into dense pea-soup fogs. Second, the semi-planned economy allocates resources to infrastructure investment but does nothing to mitigate social inequality. The economic gulf between insiders (officials and entrepreneurs) and outsiders (construction workers and the rest) is now huge. If this is the "harmonious society" of which China's leaders boast, then S