(IPS) feature While much of the world struggles to escape recession and the reverberations of the anti-terror war are sweeping the globe, China is basking in the glow of its nearly unique economic performance and the fulfillment of important national goals.

The year that is nearing its end has been a truly remarkable one for the Middle Kingdom, which appears to be regaining its central position on the world stage as it enters a new year.

Winning the right to host the 2008 Olympic Games and pushing past the last negotiating barriers to join the World Trade Organisation (WTO) are major symbolic landmarks in China's history.

By hosting the annual summit of the Asia-Pacific Economic Cooperation forum in October at a time when the US economy was losing steam and Japan's economic engine has been stalled for a decade, China has emerged as the rising economic leader of the region.

Beijing has also given strong backing to the US-led 'war on terrorism', thus siding for the first time with the global power players and sweeping aside the last remnants of its isolationist foreign policy.

Global test

While 2001 would be remembered as a milestone in China's turbulent transition from a self-reliant and totalitarian state of 20 years ago into a more integrated member of the world community, next year is set to become a test for China's ability to cope with the challenges of its global integration.

WTO accession means China will have to open new areas to competition - and there will be social costs. WTO membership means many jobs will disappear in a range of sectors, from farming to banking, all in the name of rising economic efficiency. Inefficient state-owned industries are expected to bear the brunt of the changes ahead.

In social terms, the agreement will tend also to widen the gap between rich and poor and between the wealthy east and impoverished west of the country.

Although the transition period when China has to free up its markets seems long enough, many analysts warn Beijing has little time left to tackle the reforms of the most unmanageable industries.

Some of the most fundamental reforms such as the task of transforming the bulk of China's mostly unproductive state-owned enterprises into modern companies that compete in the international markets, and the establishment of a national social-welfare network to support the newly unemployed, have been left to the last.

Slower growth

Although China's economic growth is poised to top seven percent this year, the World Bank's latest assessment warns that annual growth would slow down to 6.8 percent in 2002. This represents a significant slowdown from the eight percent growth in 2000.

As the slowdown hits the earnings of China's state companies and reduces the number of jobs created by the private sector, Beijing is likely to soft-pedal some of the hardest reforms to allay the risk of social unrest.

The prospect of angry urban workers joining forces with the discontented peasantry has always troubled Chinese leaders. There are 120 million people living below the poverty line and around another 150 million migrant workers who can only find seasonal employment.

Protests by disgruntled laid-off or unpaid workers have become commonplace all over the country, and especially in China's industrial belt of the north-east.

While the urban economy in the coastal areas is robust and growing, huge parts of the countryside where 900 million people live have been stagnated. Rural incomes have not increased, and in many cases have declined, over the last five years.

In the context of big disparities between the booming coastal east and impoverished west, China's integration into the global trade community becomes a concern.

Unlike the 19th century when imperial China was forced to throw its doors open to the west by their powerful gunboats, with WTO membership Chinese rulers are voluntarily opening the country's domestic markets.

Power transfer

Just what the popular reaction will be and how the government will handle any discontent remains to be seen. The social climate would be even more significant because next year will see the start of a slow transfer of power from the generation of Communist Party chief Jiang Zemin, reformist premier Zhu Rongji and a host of other senior officials.

Diplomats and observers here believe Jiang will remain in control of the powerful Central Military Commission for the years to come, much as his predecessor, late Deng Xiaoping did. This would mean that Jiang's successor and his team would have to act in the shadow of their seniors as long as they dominate the party hierarchy.

The new leadership, the so-called ''fourth generation'' of leaders to be elected at the Communist party Congress in the autumn of 2002, is likely to comprise technocrats such as current Vice President Hu Jintao and Vice Premier Wen Jiabao.

Although few observers believe the new leadership would challenge directly their elder Party patrons, they argue that in the realm of politics as everywhere else, WTO will bring in change.

''China's accession to WTO will deepen and help to lock in market reforms - and empower those in China's leadership who want their country to move further and faster towards economic freedom,'' then US President Bill Clinton argued last March. ''China's accession to WTO will help strengthen the rule of law in China and increase the likelihood that it will play by global rules.''

Liberals in the Communist party even hope that global integration and entry into the WTO would help China pursue political reforms that have been left in the backburner since the Tiananmen Square crackdown on pro-democracy demonstrators in 1989.