Reprinted by arrangement with the National Geographic Society from the book Dragon Rising: An Inside Look at China Today By Jasper Becker. Copyright 2006 Jasper Becker.

So far it is China’s search to secure supplies of oil that is affecting the rest of the world. China’s biggest domestic oil fields in Daqing in the northeast and the Shengli oil fields in the Yellow River valley have now peaked. China is tapping new oil and gas fields in Xinjiang and off-shore in the Gulf of Bohai and the South China Seas. It is already in dispute with its neighbors like Japan and Vietnam over the rights to exploit underwater fields further offshore. And it is competing with Japan to buy Siberian oil and going head to head with India to stake out oil fields in Angola and Nigeria, and challenging the United States for access from its traditional suppliers like Saudi Arabia and Venezuela.

Washington has become alarmed by China’s willingness to do deals with rogue regimes like Sudan, Burma and Iran that are sitting on untapped reserves . The United States has accused Sudan of genocide in the Darfur region but China is the largest investor in Sudan, where it has built a pipeline. Worried by China’s hunger for energy, Washington blocked an attempt by Beijing to buy Unocal, a major US oil company

China is upsetting the global order with its search for oil and gas but also its hunger for minerals, iron ore, copper, aluminum, uranium and natural resources like timber, fish and soybeans. Its needs are so great that if it is not already the largest buyer and consumer, it could soon be. At the very least its needs are going to shape the environment of its neighbors and economic partners, big and small. The 1998 decision by Premier Zhu Rongji to stop the commercial logging of the remaining domestic forests had immediate repercussions for neighboring Burma where Chinese logging companies arrived to cut down virgin teak forests, and for Indonesia where the last rain forests are being felled to supply the Chinese market. When President Bush decided against joining the Kyoto Treaty to stop global warning, he argued that it would not work if China did not join and control its emissions.

In 2003 China added 1.4 million cars to the seven million on its burgeoning network of roads, one for every hundred people. If, like Americans, every second Chinese had a car, the country would have 600 million—almost equal to the world’s total current car population. Such forecasts naturally beg the question of whether China’s economic growth is sustainable. Or to put it another way, is the world going to run out of finite resources like oil before China gets rich? And will China begin exporting its environmental problems to the rest of the world before it improves its own environmental record?

For example, the dams it plans to build along the Mekong and Salween Rivers in Yunnan province have raised alarm in Southeast Asia and protests by environmental groups who fear that it will endanger the ecology of downstream countries. China has plans for a cascade of 13 dams on the Salween River which after it leaves China runs along the border between Burma and Thailand. Nine of them are in the area of the Three Parallel Rivers National Park which in 2003 UNESCO designated as a World Heritage Site. It is building dozens of dams on the Mekong and on Yangtze tributaries like the Golden Sands River. China plans to double its hydropower generating capacity to over 120 gigawatts by 2010 and to keep building more dams for the further twenty years.

Some of these dams are being built, however, primarily to trap silt and protect existing dams. One of these is the Xiaolangdi Dam built across the Yellow River. Another is the 220-meter-high Xiluodu dam across the Golden Sands River. The latter is designed to trap a third of the silt that would otherwise fill up the Three Gorges Dam reservoir and imperil the value of that gigantic investment.

If one looks at the sad fate of the Yellow River, the Huai River and nearly every other river in China, its neighbors have good reason to be worried. Tens of millions in Burma, Thailand, Laos, Cambodia and Vietnam depend on rivers shared with China for their livelihood.

Efforts to manage the effect of a 50-year long drought in northern China have not been a success. Most of the trees planted in the “green great wall” died from want of attention and the frequency and severity of spring dust storms has increased. The dust is being blown across Korea, Japan and even as far as the United States. North China’s water shortages keep worsening and the solution of shipping water from the Yangtze to supply Beijing can only be a stop-gap measure.

The central government in Beijing has begun calling for more balanced economic development and has even proposed establishing a “green index” by which to measure it. The current premier Wen Jiabao has said he wants to see more “scientific development” and senior officials are now being judged on their ability to achieve environmental targets.

“We are paying more attention to the transformation of the mode of growth, resource conservation, environmental protection and more importantly, the improvement of the lives of the people,” said China’s top leader Hu Jintao in April 2006.

The same month Premier Wen presided over a two-day environment conference in which he admitted that eight of the 20 environmental goals set in the 10th five-year plan have not been met including discharges of SO2, CO2, industrial waste and waste water treatment.

The new mood came on the heels of a major industrial chemical spill on the Songhua River in Heilongjiang Province which borders Russia and which forced the resignation of the head of the State Environmental Protection Agency. After an accident, a plant owned by the Jilin Petrochemical Corporation released a hundred tonnes of benzene and other toxic chemicals into the Songhua River, creating a seventy-mile slick.

At first the Jilin Petrochemical Corporation denied the river had been polluted, saying the explosion had only produced carbon dioxide and water, and that it had treated any dangerous effluent. Next the authorities hid the threat to the drinking supplies of cities along the river. When the water supply in Harbin was shut down, residents were told that the works were temporarily closed for maintenance.

The truth could no longer be disguised when the toxic spill approached the border with Russia. In the face of Russian indignation, the domestic media began to loudly denounce the behavior of Harbin authorities. In the next month the media reported a spate of similar toxic spills into rivers around China.

The story followed a pattern that has become familiar in China. In 1994 the government announced an effort to clean up the Huai River after a tide of pollution killed off the fish and sickened thousands of people.The State Environmental Protection Agency issued new regulations and a plan to build 52 water treatment plants and close down more than 60,000 small industrial enterprises.

By 2001 the People's Daily was claiming victory. It boasted that it had achieved what had taken other countries 20 years to do and credited success to mobilizing the masses. It claimed that the river now met standards set by the State Council, meaning it was at least "grade-three" quality - good enough for industrial use but not for drinking.

It took courage for a whistle-blower like Professor Su Kaisheng of the Huainan Industrial College and a vice-chairman of Anhui's People's Political Consultative Conference to challenge this optimistic verdict. As he told the Worker's Daily, the river quality was actually grade five - so polluted it is judged too dangerous even to be used to water crops.

"To meet the State Council's targets, some provinces gave false figures and made false reports to the central government. As a matter of fact, the pollution has not changed much, although some of the smaller factories have been ordered to halt production." he wrote. Only six of the 52 water treatment plants had ever been built.

China's first environmental law was passed in 1979 and it continues to produce a slew of environmental laws and regulations. The top leaders in Beijing seem sincere when they say that environmental protection is a priority, so what has gone wrong ?

One problem is that inspectors lack teeth. The factories polluting Dianchi Lake are fined but the highest fine ever levied is US$8,500. Many find it cheaper to pay up than to install water treatment equipment. As Xu Kezhu, who teaches law at Beijing’s Politics and Law University, told me, “It’s just not easy to put the laws into practice. Our legal system is far from perfect.”

The economic reforms encouraged explosive growth of factories and mines run by local and village enterprises, and by private entrepreneurs, and they paid taxes which filled the coffers of local governments. The fiscal decentralization after 1979 meant that if these enterprises did not produce profits then local officials, teachers and law officers could not draw their salaries.

Many of the most-polluting industries like tanning, dyeing, paper-making or mining are also the most competitive, where margins are cut to the bone. To generate power needed to grow the economy and to create jobs, many local administrations did not wait for the state to build new dams or power stations but set about building their own small coal-fired power stations, which used the cheapest and dirtiest equipment. In a sense the reforms have simply moved the pollution out of the cities into the countryside.

China’s high growth rates are based on an extraordinary degree of wastefulness. China takes six times more electricity than Japan to make a tonne of steel and three times as much as in most European countries. The country’s 500,000 industrial boilers, which produce most domestic heating, are a third less efficient than those in the rest of the world. If the real environmental costs are deducted, then one ought to cut China’s economic growth rates by between two and five percent.

All this pollution brings local government not only into conflict with the edicts from Beijing but also with local residents. Whereever you go in China, you find communities of farmers or residents caught up in bitter battles with local officials over pollution which is destroying their health or their livelihood. Miss Xu helps run a Center for Legal Assistance to Pollution Victims, staffed by students from the Politics and Law University which in 1999 opened a hotline to help the victims of such conflicts. It was immediately flooded with up to 300 calls a day.

One case involved thousands of peasants in a county a few hours' drive south of Beijing. The local government depended on the profits from a handful of factories which make zinc electro-plated metal coils. The factories used a technology which has been outlawed outside of China and pumped the toxic waste water underground. It seeped into the aquifers from which the villagers drew water to drink and water their crops. Children had begun to die and many villagers had ugly, serious skin diseases. The peasants had gone to the press and were trying to take the local officials to court but the courts were controlled by the local party. When I visited the villagers, they were frightened of going public, and pleaded with me to keep their names out of the press, in case the local police arrested them for forming an illegal organization.

At present it is strictly forbidden to unite workers, peasants, religious believers or students in any organization that challenges the authority of the Communist Party. In theory, the village democracy law passed in the 1980s does allow the peasants to elect their own their representatives on village councils. So far these are the only direct elections regularly permitted in China although there have been experiments in a handful of places where township leaders have been directly elected.

China is also deliberating new legislation to define the activities of non-governmental organizations (NGOs). China already has thousands of NGOs. The membership and influence of environmental groups like the Green Earth Volunteers or the Friends of Nature are closely circumscribed. Many depend indirectly on foreign funding from sources like the Ford Foundation. Others are so closely supervised by the Communist Party that they are dubbed GONGOS, government-organized non-governmental organizations.

One successful NGO in Yunnan, Green Plateau, was started by a couple from Beijing -- Xi Zhinong, a wildlife photographer, and his wife Shi Lihong, a journalist. Xi visited the forests around the 20,000-foot Meili Shan glacier to take the first pictures of a rare species, the Golden Monkey. A few thousand monkeys still roam across these mountains but state logging companies were about to move in and destroy the last natural forests left in the region. The couple helped raised the alarm and the distant government in Beijing gave way to an intensive lobbying effort and put the forests under protection.

In Kunming, I attended the fourth non-governmental organization forum at which Sierra Club visitors, among others, gave lectures advising how best to organize a media campaign. However it is hard to digest the lessons of foreign counterparts because the Communist Party’s tolerance of NGO activities is unpredictable.

The host of the Kunming meeting was Professor Yu Xiaogang, who had founded an NGO, Green Watershed, to protect the Three Rivers' biodiversity. At that moment, the party had become alarmed by the “color revolutions” which had recently toppled post-Soviet leaders in Ukraine, Georgia, and Kyrgyzstan. Yu decided it was wiser not to speak at the meeting when the police advised him to lie low.

It is easy to understand why the party fears that environment groups could become the nucleus of a popular uprising. Environmentalists can easily rally over 100,000 people to oppose big projects like a new dam because in China so many people have to be moved. At the Kunming meeting there was much talk of the movement to oppose the Tiger Leaping Gorge Dam planned for the Golden Sands River. Some eight Chinese NGOs had signed a petition against the dam and were actively helping the 100,000 people who live near the Tiger Leaping Gorge to organize themselves. And they were gearing up to stop other local projects including the first dam on the Salween River.

The movement against the Tiger Leaping Gorge – which is so narrow a tiger supposedly leapt across it - had become a test case for environmental activism so I decided to trek along the ten-mile gorge and interview some of the local activists. At Shi Gu, an ancient trading town on the first bend of the Golden Sands river, I found Yang Xueqing, one of the local leaders. His home was in a cluster of old tiled houses with upturned roofs that will be submerged when or if the dam is built.

A tubby brown bear of man who made a living from farming and trading, Yang believed there was still a good chance to stop the dam or at least to influence the decision-making process. He was busy studying China’s legal system to see how best to do so.

China had just recently adopted a law requiring major projects to pass an environment impact assessment (EIA). To show it had teeth, the State Environmental Protection Agency had just ordered the halt of 30 large projects including 26 that are hydropower plants which had failed to submit proper EIAs.

The law gave environmentalists a new weapon because for the first time it included the requirement to hold public consultations. Local residents would have a voice and could influence other government agencies like the Forestry Commission, the National Minorities Commission and the Land Administration Agency which would also get involved.

“We want people to hear our voice,” he said, taking out a copy of the village election law to see what it permitted. “We also want to speak to the media.”

Yang's opponents can wield great political influence but he thought he could mobilize public opinion on his side. The dam is to be built by China’s biggest independent power producer, the Huaneng Group. It is run by Li Xiaopeng, son of the former prime minister, Li Peng, who oversaw the massacre on Tiananmen Square, and pushed through the Three Gorges Dam project despite a surprising show of public opposition. Big dams are profitable. Power companies can recoup their investment in ten years and local governments in this region can triple tax receipts once the dam is built.

The dams almost without exception impoverish those who lose their land and homes. Mr. Yang had even gone to investigate the fate of the 60,000 moved to make way for the Manwan Dam on the Mekong River in another part of Yunnan, some two hundred miles to the south.

“People were given new land but it is quite inferior to what they had. So they are now worse off,” he said. Yang and his neighbors will be forced to relocate high up the steep pine-clad slopes of rugged 17,000-foot peaks if the Tiger Leaping Dam is built.

“And there was lots of corruption,” he continued. “The local government gave the resettlement money to a businessman who invested in a marketplace, hotels and restaurants. Then his company went bust, so all the money was lost.”

It was a familiar story. With the Three Gorges, the government originally promised each family a lump sum between 20,000 and 30,0000 yuan, a lifetime’s savings in an area where annual cash earnings are not much more than 1,000 yuan.

Then Beijing switched to a new policy called “development resettlement.” Now two-thirds of the money went directly to local officials and households got the rest. The local governments were supposed to invest the funds in new infrastructure and factories. Since no accounts were ever made public, the peasants suspected that most of the money was embezzled. The judiciary prosecuted some cases but the policy led to unrest all over the region.

A group of senior men from Gaoyang township who represented 100,000 peasants whose land was about to be submerged by the Three Gorges reservoir made a collective protest. After a series of riots in which some peasants stormed local party offices, the representatives traveled to Beijing. They brought documents and petitions signed with thumbprints to bolster their claims that they had been cheated. It did them little good. Within six months, the men who came to Beijing had been thrown in jail and were serving three-year jail sentences for sedition.

I told Mr. Yang this story but he was not put off. The Tiger Leaping Gorge is almost as famous as the Three Gorges and Yang treated me to a long exposition on the region’s unique history and culture.

“This is a happy place where all kinds of nationalities live here in harmony. No one wants to leave this beautiful place,” he said. It was home for diverse peoples including the Lisu, Naxi, Han, Tibetan, Yi and Zhang. The Naxi have a matrilineal society led by shamans who developed their own hieroglyphic writing system that dates back to the 14th century.

The neighboring county of Zhongdian had tried to cash in on this by renaming itself Shangri La (Xiang Ge Li La in pinyin), and asserting it was where the 1933 novel Lost Horizons was set.

Joseph Rock’s reports of Yunnan’s diversity of culture and plants may have inspired the English writer James Hinton to write his fantasy about a party ofwesterners lost after a plane crash who discover a hidden valley of happy Tibetans led by a High Lama.

I thought a lot about the book as I followed the trail through the bamboo groves and pine forests high above the waters rushing through the gorge. Above the path, you gaze up at spectacular walls of grey rock topped by white glaciers. Even so it is warm here all the year round as my guide, Xiao Chun, a 17-year old Naxi, told me. It was December, but the bird song, the smell from the profusion of wild and exotic flowers, the colors of the butterflies, was magical.

We spent the night at the Half Way Guest House run by a jolly Naxi matriarch, Mrs. Feng De Wang. In the morning we sat in the kitchen tucking into a breakfast of banana pancakes and steamed bread, and she talked about the racial harmony that reigned here. "Her father is Lisu, and her mother is Zhang," she said, pointing to her staff in turn. “His father is Tibetan and his mother is Naxi. In some households there are seven nationalities.”

In Lost Horizons, the High Lama is a European who had two hundred years earlier stumbled into Shangri La and decided to make it a sanctuary and repository for all the values which he foresaw would be destroyed in the civilized world outside by a coming catastrophe.

Much is being lost and sacrificed as China rushes headlong rush into modernization but even here people wanted to embrace change. Mrs. Feng was promoting her guest house on an internet webpage. My guide, Xiao Chun, walked along the trek flicking opening his mobile phone to chat to friends. The locals appreciated a new road that ran along the side of the gorge where there was even a car park for the buses carrying tourists who had started to arrive. You didn’t get the feeling that even in Tiger Leaping Gorge, the locals wanted to live cut off in a backward Shangri-La, however beautiful and harmonious.

Yet China’s headlong rush to modernization was giving people little choice or opportunity to question, delay, or preserve what was most valuable. Even when UNESCO designated the Three Parallel Rivers National Park into a World Heritage site in 2003, the Yunnan authorities deliberately excluded Tiger Leaping Gorge from the park when its boundaries were negotiated. Those battling to preserve ancient towns, traditional buildings, diverse cultures and customs face an uneven struggle. The promises to create a more evenly balanced development remain just that, a promise. It is a loss that one day everyone will regret.