By Michael A. Ledeen

As President Bush, now in Beijing, gets up close to the rulers of China, he must have conflicting feelings.

We are told that the Chinese have helped us fight terror, which is cause for satisfaction. On the other hand, the CIA has recently revised sharply upwards its estimate of Chinese military power in the near future, which is cause for concern. As he ponders what China is and may be, Mr. Bush might reflect that the People's Republic is something quite unique, and therefore very difficult to understand.

China is not, as is invariably said, in transition from communism to a freer and more democratic state. It is, instead, something we have never seen before: a maturing fascist regime. This new phenomenon is hard to recognize, both because Chinese leaders continue to call themselves communists, and also because the fascist states of the first half of the 20th century were young, governed by charismatic and revolutionary leaders, and destroyed in World War II. China is anything but young, and it is governed by a third or fourth generation of leaders who are anything but charismatic.

The current and past generations of Chinese leaders, from Deng Xiaoping to Jiang Zemin, may have scrapped the communist economic system, but they have not embraced capitalism. To be sure, the state no longer owns "the means of production." There is now private property, and, early last June, businessmen were formally admitted to the Communist Party. Profit is no longer taboo; it is actively encouraged at all levels of Chinese society, in public and private sectors. And the state is fully engaged in business enterprise, from the vast corporations owned wholly or in part by the armed forces, to others with top management and large shareholders simultaneously holding government jobs.

This is neither socialism nor capitalism; it is the infamous "third way" of the corporate state, first institutionalized in the 1920s by the founder of fascism, Benito Mussolini, then copied by other fascists in Europe.

Like the earlier fascist regimes, China ruthlessly maintains a single-party dictatorship; and although there is greater diversity of opinion in public discourse and in the media than there was a generation ago, there is very little wiggle room for critics of the system, and no toleration of advocates of Western-style freedom and democracy. Like the early fascist regimes, China uses nationalism -- not the standard communist slogans of "proletarian internationalism" -- to rally the masses. And, like the early fascisms, the rulers of the People's Republic insist that virtue consists in sublimating individual interests to the greater good of the nation. Indeed, as we have seen recently in the intimidation and incarceration of overseas Chinese, the regime asserts its right to dominate all Chinese, everywhere. China's leaders believe they command a people, not merely a geographic entity.

Unlike communist leaders, who extirpated traditional culture and replaced it with a sterile Marxist-Leninism, the Chinese enthusiastically mine the millennia of Chinese thought to provide legitimacy for their own actions. No socialist realism here! Indeed, this open embrace of ancient Chinese culture is one of the things that has most entranced Western observers. Many believe that a country with such ancient roots will inevitably demonstrate its profound humanity in social and political practice. Yet the fascist leaders of the 1920s and '30s did the same. Mussolini rebuilt Rome to provide a dramatic visual reminder of ancient glory, and Hitler's favorite architect built neoclassical buildings throughout the Third Reich.

Like their European predecessors, the Chinese claim a major role in the world because of their history and culture, not because of their current power, or scientific or cultural accomplishments. Just like Germany and Italy in the inter-war period, China feels betrayed and humiliated, and seeks to avenge historic wounds. China even toys with some of the more bizarre notions of the earlier fascisms, like the program to make the country self-sufficient in wheat production -- the same quest for "autarky" that obsessed both Hitler and Mussolini.

It is therefore wrong to think of contemporary China as an intensely unstable system, riven by the democratic impulses of capitalism on the one hand, and the repressive instincts of communism on the other. Fascism may well have been a potentially stable system, despite the frenzied energies of Hitler's Germany and Mussolini's Italy. After all, fascism did not fall as the result of internal crisis; it was destroyed by superior force of arms. Fascism was alarmingly popular; Hitler and Mussolini swept to power atop genuine mass movements, and neither Italians nor Germans produced more than token resistance until the war began to be lost.

Since classical fascism had such a brief lifespan, it is hard to know whether or not a stable, durable fascist state is possible. Economically, the corporate state may prove more flexible and adaptable than the rigid central planning that doomed communism in the Soviet empire and elsewhere (although the travails of Japan, which also tried to combine capitalist enterprise with government guidance, show the kinds of problems China will likely face). And our brief experience with fascism also makes it difficult to evaluate the possibilities of political evolution.

Although Hitler liked to speak of himself as primus inter pares, the first among racial equals, he would not have contemplated the democratization of the Third Reich, nor would Mussolini have yielded power to the freely-expressed will of the Italian people. It seems unlikely that the leaders of the People's Republic will be willing to make such a change either. If they were, they would not be so palpably concerned that the Chinese people might seek to emulate the democratic transformation of Taiwan.

To be sure, the past is not a reliable guide to the future. China has already amazed the world with its ability to transform itself in record time. Many scholars believe that China's entry into the World Trade Organization will bring further dramatic change, as the Chinese have to cope with freer competition and a greatly enhanced foreign presence. They may be right, but I have doubts. For the most part, politics trumps economics when the survival of a powerful regime is at stake, and the Chinese leaders have often said they have no intention of following Mikhail Gorbachev's example.

Meanwhile, Mr. Bush has to contend with the present state of affairs, and must evaluate the risks and challenges of contemporary China. Classical fascism was the product of war, and its leaders praised military virtues and embarked upon military expansion. Chinese leaders often proclaim a peaceful intent, yet they are clearly preparing for war, and have been for many years. Optimists insist that China is not expansionist, but optimists pooh-poohed Hitler's imperialist speeches too, and there is a lot of Chinese rhetoric that stresses Beijing's historic role, as if there were an historic entitlement to superpower status.

Thus, classical fascism should be the starting-point for our efforts to understand the People's Republic. Imagine Italy 50 years after the Fascist revolution, Mussolini dead and buried, the corporate state intact, the party still firmly in control, the nation governed by professional politicians and a corrupt elite rather than the true believers. No longer a system based on charisma, but on political repression, cynical not idealistic, and formulaic appeals to the grandeur of the "great Italian people," endlessly summoned to emulate the greatness of its ancestors.

That is China today. It may be with us quite a while.

Mr. Ledeen, a resident scholar at the American Enterprise Institute and a member of the U.S.-China Security Review Commission, is author of "The War Against the Terror Masters," forthcoming from St. Martin's Press.