Marius Kloppers made a family gamble on China seven years ago, well before its industrial machine began to shake the world. "I took a view that China was going to be a world power," said the BHP Billiton chief executive. "My kids started learning Mandarin when they were four years old."
Kloppers owes China for transforming BHP into one of the world's most profitable companies. He earned his place at last night's breathtaking opening to the Beijing Olympics by handing over a $100 million tribute of gold, silver and bronze medallions.
The Prime Minister, Kevin Rudd, was also at the Bird's Nest stadium last night, having also made an early call on China. He gambled on Chinese language and political studies in 1978, the moment the country began to open to the world. Now he's returning to pay his respects to a place that has enriched his life and is making Australia wealthy.
Another was the Perth tycoon Andrew Forrest, whose place as Australia's richest man is founded on Chinese backing for his new Pilbara iron ore mine. "When I went to Taiwan 20 years ago and opened offices there, I was impressed with the entrepreneurial spirit of the Chinese people when they weren't shackled," he said yesterday.
"Then in 2001 I travelled again over their major mainland industrial areas and noted that the Taiwanese free spirit of business was spreading all through China."
Elsewhere around the stadium were 85 other world leaders and hundreds of corporate chiefs, most of whom knew little about Beijing other than they could not afford to miss it. They are here because of China's economic might, because of its geopolitical power and to witness the world's most populous nation coming of age after 200 years of poverty and turmoil.
For four months these leaders have been reading about China's draconian security measures and myriad human rights problems. Some threatened to boycott, such as France's Nicolas Sarkozy, and others, such as Rudd, toyed with the idea of quietly not turning up. But in the end more leaders were in Beijing last night than in the three previous Olympic Games combined
If they could break from their minders to walk the streets, they would see the Games are broadly popular and so too is the Chinese Government. In a new survey by the respected American polling group, the Pew Research Centre, an astonishing 86 per cent of Chinese respondents said their country was heading in the right direction - up from 48 per cent in 2002 and much higher than any other country.
Western bookstores have been littered with titles such as The Coming Collapse Of China and The Writing On The Wall. These best-selling tomes are premised on the idea that the authoritarian Chinese state will either embrace democracy or be swept aside by a newly confident middle class and the waves of globalisation.
There has been intense speculation for years that the Olympic Games would hold the Chinese Communist Party to ransom, and force open the system to competitive viewpoints and help entrench human rights. But that's not what's happening.
This year China has faced a litany of natural and diplomatic disasters - ice storms, the Tibet riots, the torch relay, the Sichuan earthquake, floods, domestic terrorism, draconian security - and the state has systematically turned each of them to its advantage. The biggest challenge of all, these Olympic Games, could turn out to be a crowning public relations achievement.
Instead of pointing to an unsustainable dichotomy between a rigid Leninist political system and a supposedly freewheeling market economy, analysts are now coining new definitions for the Chinese state model: "popular authoritarianism", "hybrid" or simultaneously "repressive and responsive".
Chinese leaders prefer to stick to Deng Xiaoping's old formula of "capitalism with Chinese characteristics". It's essentially pragmatism. The state is learning, adapting and rebuilding on its own terms. Whatever it is, the governing Chinese Communist Party is now stronger than it has been at any time in 30 years.
"I don't see a revolution coming in China any more than in the United States," says Anne-Marie Brady, an expert on Chinese politics at the University of Canterbury, New Zealand. "Chinese people want change but not the radical change that Western commentators imagine."
The template for the survival of the modern Chinese Communist Party state was laid out by the then paramount leader Deng 19 years ago, in the midst of its greatest crisis. Soldiers were still cleaning blood from the streets after the Tiananmen massacres when Deng called in his generals to say the Communist Party would not abandon its economic reforms.
But he instructed the post-Tiananmen leaders to also make one crucial departure from the previous years of reform. From that moment they would place as much importance on propaganda as they did on the economy.
The party elevated its propaganda chief to the inner cabinet and extended his reach to each tier of government and every realm of public communication. Officials began regular study sessions at the party school and were subjected to new ideological vetting.
The propaganda department regained power to appoint and remove editors and top officials in almost all media publications, the arts and education institutions. By the end of 1989, the communist states of the Soviet bloc began to tumble and the Chinese Communist Party obsessively studied what had gone so wrong.
From these lessons the Chinese communists reaffirmed a commitment to keep the economy on track, opening up to the world and allowing its people to haul themselves out of poverty. At the same time, the party tightly controlled "strategic heights" - the high cash-flow sectors such as banking, communications, transport and resources - and tilted the market playing field steeply in favour of state-owned companies and private entrepreneurs who had official connections and played by party rules.
Today, private entrepreneurs account for most of China's dynamic export sector and three-quarters of its jobs. But all 20 largest companies are state-owned.
"The economic elite has either come out of the party elite or it's been absorbed into it," says David Goodman, a professor of contemporary China studies at the University of Technology, Sydney. The same goes for the urban middle class: they are insiders enjoying the benefits of the system, not outsiders challenging an established elite.
Gradually, Chinese leaders began to implement another Soviet bloc lesson: they moved to pre-empt demands for democracy by becoming more responsive, if not accountable. The President, Hu Jintao, and the Premier, Wen Jiabao, now monitor and react to public opinion in a manner not dissimilar to modern democratic leaders.
It is no coincidence that the list of Chinese public grievances identified by last week's Pew Survey - inflation, inequality, corruption, air pollution - mirror the stated policy priorities of the Hu-Wen Government.
Most importantly, and least understood in or outside China, Communist Party leaders learnt there was no point in a vast propaganda apparatus that served up only Marxist-Leninist dogma and scared people into submission. So they reprogrammed China's propaganda apparatus into the world's most successful public relations machine.
Rather than fearing new communication technologies, the state co-opted them. These days propaganda and security organs monitor text messages and send messages of their own. Tens of thousands of internet police block sensitive sites and seed "favourable" discussions on chat rooms and blog sites. They allow Chinese citizens to access many foreign media sites, while emphasising some reports and filtering out others.
Four weeks after May's Sichuan earthquake, Australian psychiatrists conducting workshops for Chinese mental health workers saw their Chinese colleagues and students tearfully sing a song called Sheng Si, Bu Li (Alive or Dead, Never Apart). The song, hastily composed by an official disaster committee in Beijing and sung by the martial arts movie star Jackie Chan, was broadcast nationwide. It was a sentiment that drowned out the anger from the bereaved parents of children killed in shoddy school buildings.
The tools of propaganda evolved and so did the message, as the Communist Party moved beyond the ideals of revolution to the imperatives of staying in power. After the Soviet Bloc collapse, the public was educated on the perils of premature democracy. The news media were guided to incessantly show the chaos that followed the collapse of Soviet communism and ethnic bloodshed after the break-up of Yugoslavia.
And the message turned to nationalism. Chinese schoolkids were inculcated on how their country had been the "weak man of Asia" during "the century of national humiliation" that stretched from the Opium War of 1840 to Communist victory in 1949. Museums opened and books were written to show how China had stood up after decades of Western and Japanese degradations.
This new historiography is so deeply accepted that many Chinese people believe it has always been the way they have looked at the world. Incidents such as the clash of Chinese and American military aircraft, the Tibetan riots, the Olympic torch relay and even the Sichuan earthquake were immediately framed in the nationalist narrative of a resurgent China defending itself against a hostile world.
Many saw China's prompt and relatively open response to the earthquake as evidence of new policy. In fact, it was a stock response taken from its modernised propaganda handbooks: don't cover up disasters and make every effort to extol the heroic rescue work of the People's Liberation Army.
While the Tibet riots and subsequent news blackout caused many outside China to reassess their optimistic views of the country, their criticisms of China prompted millions of young Chinese to spontaneously post "I China" on their internet instant messenger tags and tens of thousands of overseas Chinese to rally to "defend" the Olympic torch relay.
China's tense determination to host a "successful" Olympics and its clinical campaign to top the gold medal tally are part of the new narrative about redressing past humiliation. "We have to have a good Olympics," said the Vice-Premier, Wang Qishan, when he was mayor of Beijing last year. "Otherwise not only will our generation lose face but also our ancestors."
China has rebuilt its propaganda apparatus with tools and methods based as much on Western public relations theory as Marxist-Leninist dogma, censorship and coercion. "In the 1960s people weren't necessarily convinced, they were just terrorised into submission," says Brady, who this year published a forensic account of China's propaganda system, Marketing Dictatorship. "Now they stress management rather than control because they understand that persuasion is more effective than force."
Meanwhile, information and international sources of media are available for those who can be bothered skirting the Great Firewall. A plethora of new consumer-oriented magazines and new media gave an impression of unfettered debate. The scope for discussion, personal liberty and policy debate has greatly expanded.
The party-state also draws on the 1400-year-old tradition of bureaucratic mandarins, selected by rigorous examinations. "It does help explain the resilience of Communist Party rule despite the fissures in society and the corruption of much of officialdom," says Arthur Kroeber, the principal at the Dragonomics consultancy in Beijing. "In the Chinese cultural context, a regime's legitimacy is conferred largely by its ability to mobilise this bureaucratic tradition.
So where is China headed? Chinese officials don't like talking about how big their country's going to be - the world is wary enough already about "China Rising" - but the Chinese economy looks set to power on much as it has for three decades, at a time when the West appears set for a few tough years. Geo-political power will shift accordingly.
The West has no direct lever to force China to change domestic policies. It could close its wallets today and China would hardly notice. China, on the other hand, has become the single biggest lender to the US Government, as Beijing works out what to do with the $US2 billion ($2.2 billion) in foreign exchange reserves it accumulates each day.
If China pulled those investments, American and world interest rates would soar and the financial crisis would become a global catastrophe.
Thankfully, that's not going to happen. To analysts such as Richard Rigby - the director of the Australian National University's China Institute, a former senior China analyst at the Office of National Assessments and a former consul-general in Shanghai - it's a financial version of the Mutually Assured Destruction doctrine that kept the nuclear superpowers, the US and the Soviet Union, at arms' length for so long.
China's emergence in the world, closely followed by India and smaller nations such as Brazil and Indonesia, is enmeshing it within a complex network of trade, investment and diplomatic engagement and negotiation. If there's a "tipping point" to worry about, it's when China's military feels it can control the seas around Taiwan for the five days or so before the US can send massive reinforcements. At this point the Chinese leaders - aware American public opinion cares little for Taiwan's fate - might expect Washington to rethink, and US allies such as Japan and Australia to waver. A report to the US Congress in April said this "anti-access" capability could be reached as early as 2010.
"That is one of those real tipping points, because that is something which they themselves - whatever the rest of us think - see as a fundamental, core national interest," Rigby says. "Which doesn't mean necessarily that they will go to using that approach to their overall global engagements. They're going to need the rest of us for such a long time. There's still so much that they can't do."
Fortunately, the return of the reformed Chinese Nationalist Party, the Kuomintang, to power in Taiwan under the President, Ma Ying-jeou, replacing the independence-leaning Chen Shui-bian, has wound back concerns that Beijing would feel more free to bear down on Taiwan once the Olympics are over. A recent US scholars mission to Taipei and Beijing led by the former defence secretary William Perry pointed to the best opportunity in decades for diplomacy to reduce the risk of a US-China war.
Rigby sees a Chinese leadership educating itself about the world and more willing to join multilateral efforts than simply "picking off" foreign countries one by one. Nor does Rigby think the Olympic security crackdown is more than temporary "housekeeping".
"There's no doubt that China saw the Games as a sign of their international acceptance, and it's a good thing that they want it," he says. For the overwhelming majority of Chinese, he adds, "it's a return to the world stage".
We can be fairly confident that when the country's leader, Hu, talks about democracy, he means accountability and representation within the existing system rather than competitive elections. In 2012, he will hand over to a new leader, probably Xi Jinping. By the next scheduled transition, due in 2022, two-thirds of a much older population is likely to be living in cities, compared with less than half today.
Kroeber expects the pace and nature of political change will reflect the new challenges of urbanisation and economic problems caused by shutting down avenues for creative expression and debate.
Justin Lin, a Peking University professor and the chief economist at the World Bank, thinks the Government is sympathetic to his call for it to retreat to create room for a more efficient, equitable and sustainable economy. If he's right, a bigger, more confident entrepreneurial class may bring with it new political demands.
Yesterday one of China's boldest journalists, Caijing magazine editor Hu Shuli, wrote that security had become all consuming "in some circles" and had overshadowed bigger objectives.
"In short, to use an English expression, they should take it easy," she wrote. Another editor, Yanhuang Chunqiu magazine's Wu Si, said the Olympics had helped to expose China to international norms: Chinese journalists watching the freedom afforded to foreign journalists will be asking "Shouldn't it be the same for us?"
The Olympics have intensified all of China's contradictions. Last night's opening ceremony was an elegant and understated celebration of its classical heritage and its modern engagement with the world. The sophisticated projection of soft power was set against an inward-looking, heavy-handed and sometimes absurd security blitz leading up to it.
John Garnaut is the Herald's Beijing-based Asian economics correspondent. Hamish McDonald is the newspaper's Asia Pacific editor and a former Beijing correspondent.