The Self-Absorbed Dragon

China's growing military and economic power has become something of an American obsession. Recent books, like "Red Dragon" or "The China Threat," combined with warnings from Washington—like the Pentagon's designation of China as an emerging "peer competitor"—have contributed to an abiding sense of fear. Analysts such as Robert Kaplan, pointing to Beijing's rising defense spending, now caution that "the American military contest with China in the Pacific will define the 21st century."

Yet inside China, things look very different. Far from being poised on the brink of expansion, the country remains extraordinarily insular—a place where people seem to know and care little about the outside world.

In China, like everywhere, all politics are local—but when your constituency totals nearly a quarter of humanity, the local pressures are particularly acute. Despite 30 years of growth, China today is still just a generation away from poverty, with half its population mired in abject conditions. Beijing's overriding concern thus remains the economy. Foreign policy is an afterthought; imperial ambitions, unthinkable.

Nowhere was the obsessive focus on domestic economics clearer than at the recent 17th Congress of the Chinese Communist Party. Such events always involve political theater. Two thousand-odd delegates sat in a strict hierarchy, some in colorful regional or military costumes, as they listened to speeches and rubber-stamped backroom deals.

But the event involved more than pure propaganda. Consider President Hu Jintao's two-and-a-half-hour opening speech. Standing behind a podium decked with soothing pink lilies and red poinsettias, Hu calmly announced China's current aspirations. At their center: a fourfold increase in China's per capita GDP over the next 12 years, to be achieved by "rebalancing" the economy away from exports toward domestic consumption. Then followed nearly an hour of wonkish proposals: to liberalize banking and capital transactions, float the currency, improve education, provide unemployment insurance, outlaw gender discrimination, expand private property, improve the rule of law, strengthen education and so on. Hu's most passionate rhetoric was reserved for a call to protect China's environment—a task he termed vital "to the survival and development of the Chinese nation."

But for the massive hammer-and-sickle behind him on stage, one could have mistaken the proposals for those of a Scandinavian social democrat (minus the democracy). Of course, Hu had to make clear that his prescriptions were consistent with Marxist ideology. But at the end of the day, his speech was rewarded in classic capitalist fashion: the Hong Kong and Shanghai stock exchanges closed at record highs.