Enterprises are accountable to no one but the Communist party for their actions; there is no network of civil society, plural public institutions and independent media to create pressure for enterprises to become more environmentally efficient. Watchdogs, whistleblowers, independent judges and accountable government are not just good in themselves as custodians of justice; they also keep capitalism honest and efficient and would curb environmental costs that reach an amazing 12 per cent of GDP. As importantly, they are part of the institutional network that constitutes an independent public realm that includes free intellectual inquiry, free trade unions and independent audit. It is this 'enlightenment infrastructure' that I regard in both the West and East as the essential underpinning of a healthy society. The individual detained for years without a fair trial is part of the same malign system that prevents a company from expecting to be able to correct a commercial wrong in a court, or have a judgment in its favour implemented, if it were against the party interest.

The impact is pernicious. The reason why so few Britons can name a great Chinese brand or company, despite China's export success, is that there aren't any. China needs to build them, but doing that in a one-party authoritarian state, where the party second-guesses business strategy for ideological and political ends, is impossible. In any case, nearly three-fifths of its exports and nearly all its hi-tech exports are made by non-Chinese, foreign firms, another expression of China's weakness. The state still owns the lion's share of China's business and what it does not own, it reserves the right to direct politically.

Mark Kitto, a former Welsh Guardsman, has found at first-hand how difficult it is to sustain private ownership in China. He built up three Time Out equivalents in Beijing, Shanghai and Guangzhou but, after seven years of successful magazine publishing, learnt last year that he was about to become a partner of the state. The only terms on which his licence to publish could be retained was if he were to accept a de facto takeover from China Intercontinental Press, controlled by China's State Information Council, the propaganda mouthpiece of the Communist party. It did not matter that he owned the shares, wanted to retain his independence and had been careful to stay within the party's publishing guidelines. The party now wanted control of his magazines and simply took it. It is an example repeated many times over.

China must become a more normal economy, but the party stands in the way. Chinese consumers need to save less and spend more, but consumers with no property rights or welfare system are highly cautious. To give them more confidence means taxing to fund a welfare system and conceding property rights. That will mean creating an empowered middle class who will ask how their tax renminbi are spent. Companies need to be subject to independent accountability if they are to become more efficient, but that means creating independent centres of power. The political implications are obvious.

China's future is shrouded in uncertainty. My belief is that what is unsustainable is not sustained. Change came in the Soviet Union with the fifth generation of leaders after the revolution; the fifth generation of China's leaders succeed today's President Hu Jintao in 2012. No political change will happen until after then, but my guess is that sometime in the mid to late 2010s, the growing Chinese middle class will want to hold Chinese officials and politicians to account for how they spend their taxes and for their political choices. What nobody can predict is whether that will produce another Tiananmen, repression and maybe war if China's communists pick a fight to sustain legitimacy at home or an Eastern European velvet revolution and political freedoms. Either way, China's route to becoming a world economic power is not going to proceed as a simple extrapolation of current trends.

This book has been something of a personal intellectual odyssey. My hypothesis when I began was that China was so different that it could carry on adapting its model, living without democracy or European enlightenment values. I have changed my mind and now see more clearly than ever the kinds of connection I identified in The State We're In between economic performance and so-called 'soft' institutions - how people are educated, how trust relations are established and how accountability is exercised (just to name a few) - are central. They are equally important to a good society and the chance for individual empowerment and self-betterment.

Early in my research, I tried out the still-emergent thesis at a small dinner in Lan Na Thai, one of the restaurants in Shanghai's Ruijin guest house, a complex of refurbished old mansions and traditional pavilions in the French quarter where communist leaders reputedly once ate and slept.

Over stir-fried curried chicken and crispy fried flying sea bass, the Chinese guests repeated politely and persuasively that China was making up new economic and political rules. Afterwards, I chanced to have a few words alone with one of the local rising government stars as we walked out of the complex. He kept his eyes on the ground. 'Don't allow yourself to be dissuaded, despite what you have heard. You are right that China is not different. I want my children to see a China with human rights and democratic institutions. And I am not alone.' He jumped into a taxi and was gone.

I have often thought about that chance exchange. Britain and the West take our enlightenment inheritance too easily for granted, and do not see how central it is to everything we are, whether technological advance, trust or well-being. We neither cherish it sufficiently nor live by its exacting standards. We share too quickly the criticism of non-Western societies that we are hypocrites. What China has taught me, paradoxically, is the value of the West, and how crucial it is that we practise what we preach. If we don't, the writing is on the wall - for us and China.

China's quest for oil

China's foreign policy is increasingly driven by the need to feed its growing appetite for oil. General Xiong Guangkai, deputy chief of the Chinese general staff, has said that China's energy problem needs to be taken 'seriously and dealt with strategically'.

That means less reliance on the Middle East; less transportation of oil via sea-lanes policed by the US navy; more capacity for the Chinese navy to protect Chinese tankers; and more oil brought overland by pipeline from central Asia.

Over the past two years, China has pulled off a string of strategic oil deals. In April 2005, Petro China and Canadian company Enbridge signed a memorandum to build a $2bn 'gateway' pipeline to move oil from Alberta to the Pacific Coast. In Venezuela, President Hugo Chavez is to build a Chinese-financed pipeline to the Pacific coast through Colombia, having given China oil and gas exploration rights in 2005. Saudi Arabia surrendered to Chinese courtship in 2004 and accorded exploration rights.

In Sudan, a major source of oil, China's blind eye to human rights and mass murder if it hinders its interests is demonstrated by Zhou Wenzhong's comment when Deputy Foreign Minister about the situation in Darfur where more than 250,000 have died.'Business is business,' he said. 'We try to separate politics from business and, in any case, the internal position of Sudan is an internal affair, and we are not in a position to influence them.'

Wrong: China has substantial influence on Sudan if it chose to exercise it. It does not, a commentary on China's approach to foreign policy and an awesome warning of the future if an unreconstructed China became yet more powerful.

Tiananmen: the legacy

The image of a single student halting a tank in Tiananmen Square is one of the most arresting in modern history. But the protests spread well beyond Beijing for six weeks in spring 1989 to encompass demonstrations in 181 cities.

The party and army were divided over how to respond; 150 officers openly declared that they would not fire on demonstrators after martial law was declared, and at least a third of the central committee wanted to reach a compromise with the protesters. The party's then general secretary, Zhao Ziyang, proposed a partial meeting of demands for reform. Nobody should be killed.

That was not the view of Deng and the party elders - the eight 'immortals', veterans of the Revolution. A 'counter-revolutionary' riot had to be suppressed. But before Deng could act, he had to leave Beijing to ensure that army groups 28 and 29, personally loyal to him, would provide the core of the force rather than the uncertain army groups based around the capital. Once in place, Zhao was then brutally deposed, remaining under house arrest until his death in 2005. Martial law was imposed on 19 May and a fortnight later the tanks rolled into Tiananmen Square. Official estimates were that 5,000 soldiers and police officers were wounded and 223 killed. Civilian losses - 2,000 wounded and 220 killed - were lower. Many still languish in prison.

Tiananmen is the event that cannot be discussed in China; websites mentioning it are blocked. It was no 'counter-revolutionary riot' but a demand for freedoms that infected all China and very nearly succeeded.

Current leader Hu Jintao and his successors know they are not Deng and cannot command the loyalty of key elements of the army in the same way. Their best strategy is to deliver growth and jobs while trying to keep the lid on China's growing but still disconnected social protests. Whether the policy will carry on working is the open question asked daily in Beijing's inner circles.