Universities could be key to finding a common direction for diverging nationalist and internationalist agendas in China, claims Rana Mitter

Give China a chance." You could hear this slogan frequently in China in the 1990s, after the country failed in its bid to hold the 2000 Olympics. The memory of Tiananmen Square was still too fresh to make Beijing a convincing contender at that time, but the story spread among many Chinese that the West was determined to prevent China from making any moves back into the international community, fearful that the new Asian dragon would dominate and overtake the influence of the West.

That all seems a very long time ago. The outside world now seems to be unable to get enough of China, with huge amounts of foreign direct investment going into the country and thousands of students, business executives and tourists coming out. Yet it is clear that China is taking a stronger and more nationalistic position, both at home and abroad. This has led to a great deal of speculation in the West about where China is going. Is it developing a strong and active nationalism? Or is it genuine about its desire to engage with the rest of the world?

The answer is: both. The choice is not between the kind of xenophobic hostility to foreigners that was seen during the Cultural Revolution, and a simple, wide-open door to the outside world. China feels that it has good reason to be wary about the West's language concerning free trade; when similar language was heard 150 years ago, it led to the Opium Wars and to China's being, in the pithy language of the time, "carved up like a melon".

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At the same time, Chinese leaders look back with concern at the Cultural Revolution, a time when China turned completely inward and damaged its economy for a generation, in particular in the fields of science and technology. Now China wants to develop a strong economy and sense of nationhood, and becoming integrated into international norms is a large part of that quest.

Higher education is one of the arenas where this engagement between nationalism and internationalism is on display. This is nothing new. During the liberal New Culture period of the 1910s and 1920s, many of the figures who would shape China travelled abroad to study: Hu Shi, an architect of language reform; Zhou Enlai, future Prime Minister; and Yan Baohang, a leading ideologist under both the Nationalists and Communists. Their aim was not to settle abroad, but to bring back ideas from overseas that could be used, in the phrase of the time, for "national salvation" from the twin perils of imperialism and warlordism. The motivations of many of today's educators and those educated in China are similar. Classic imperialism has been replaced by a wariness about a new world order in which the West dominates; warlordism has gone, but internal tensions within Chinese society still threaten its stability. For this reason, studying science, technology, economics and management abroad are again seen as a means of bringing back knowledge to save China and make it strong. One of the bestsellers of the past few years was Harvard Girl Liu Yiting ( Hafo Nushi Liu Yiting ), the autobiography of a young girl from a poor family in the Chinese hinterland who, through hard work and sacrifices by her family, managed to gain a place at America's top university. The book did so well that, in the words of Harvard University's dean of arts and sciences: "She's not on financial aid any more."

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Huge numbers of Chinese students are studying in the US, the UK and Australia. Some institutions in the West have decided that the next step is to build campuses in China. For more than two decades, Johns Hopkins University has had a joint venture with Nanjing University, where American and Chinese professors and students mix freely. In Britain, the boldest step has been taken by Nottingham University, which has built a reproduction of its entire campus, clock tower and all, in the city of Ningbo. As a result, a Chinese student can pay much lower fees to get a degree from a top British institution that just happens to be located in China (and indeed, British students could choose the same option, although they can opt out of the course in Marxism-Leninism that Chinese students are required to take).

However, this may be a transitional phase. Chinese universities have no intention of remaining in the second tier, particularly within their own country. In fields such as science and technology, they are beginning to reach the upper end of league tables. In 20 years, science and technology based in China may well be truly world class, and young Chinese may no longer see any conflict between quality of education and patriotic sentiment in choosing to go to a top Chinese university to study science or management. But the "internationalist nationalism" that is fuelling the Chinese Government's support for its own "key" universities also means that it may be much longer before China can become globally competitive in fields such as history and social science, which are less lucrative.

In 1916, Peking University appointed its greatest president, Cai Yuanpei. Cai had studied in Germany and brought back ideas to shape the "education for a world-view" that he wanted to bring back to China: a curriculum that was modernised, diverse and celebrated differing points of view. Some 90 years on, China is much freer than it was under Mao Zedong, and some of the best work in the world on Chinese history and politics comes out of institutions such as Peking and the Chinese Academy of Social Sciences. But that does not include the best work in political science on the true causes of Taiwan separatism, and it does not include the best historical work on the origins of the catastrophic Cultural Revolution. Political restrictions mean that, for the moment, Cai's priorities are on the back burner as Chinese universities are still under state orders to prioritise national salvation over critical inquiry. In hard science, this does not necessarily cause a conflict. In other areas, the West will continue to have comparative advantage for a long time.

The lesson may be that it is worth wrapping up partnerships with major Chinese institutions now, so that the links are made for the time, some decades hence, when students from around the world weigh up a genuine choice whether to go to the Massachusetts Institute of Technology, Cambridge University, a branch of the Indian Institute of Technology or Qinghua University.

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The store China sets by ÖйúAƬ can be seen in another bestseller, Wang Wenliang's Graduating from Peking University Counts for Nothing ( Beida Biye Deng yu Ling ), which came out last year. Wang is one of China's most flamboyant business gurus, and his book tells the story of how he got his degree from Peking, China's most prestigious university, but failed to find a good job and found satisfaction only by jumping into the world of business. The book follows a path well trodden by Western business gurus. Yet the desperation with which it stresses how overrated top universities are only goes to show how powerful their cultural mystique remains in China.

Entry into top Chinese universities is for a ferociously hardworking (and well-connected) few, and the esprit de corps among students and staff at China's top universities is second to none. These places are eagerly learning from abroad, welcoming back graduates of top Western institutions. But they are waiting for the day when top Harvard professors will boast about their masters from Peking, or their PhD from Fudan University: the ultimate fulfilment of "internationalist nationalism". The day may be closer than we realise, and institutions making smart alliances today may reap the benefits in a decade or two - so long as they do not sacrifice their core values of critical inquiry to do so.

Rana Mitter is lecturer in the history and politics of modern China at Oxford University and author of A Bitter Revolution: China's Struggle with the Modern World , published by Oxford University Press, ?18.99.