It is time for James Mann to issue a new edition of his classic work “The China Fantasy”.

In 2007 Mann published The China Fantasy, a short book arguing that Western elites misrepresented the benefits of engagement with China and that prosperity and capitalism might not, as they claimed, eventually bring democracy to the PRC.

As I wrote in an April 2010 post:

Mann lays out three general scenarios for China. In the first, the “soothing scenario”, trade and engagement with China brings capitalism, political liberalization and eventually democracy (Western-style democracy, not the intra-party democracy China has introduced). In the second, the “upheaval scenario”, China is headed for chaos, disintegration and collapse (see Gordon Chang and his now two decades of foolishness on this topic).

His third scenario is the most controversial. It also increasingly appears to be the most prescient. For the third scenario Mann asks:

What if China manages to continue on its current economic path, yet its political system does not change in any fundamental way? What if, twenty-five or thirty years from now, a wealthier, more powerful China continues to be run by a one-party regime that still represses organized political dissent much as it does today, while at the same time China is also open to the outside world and, indeed, is deeply intertwined with the rest of the world through trade, investment and other economic ties? Everyone assumes that the Chinese political system is going to open up—but what if it doesn’t? What if, in other words, China becomes fully integrated into the world’s economy, yet it remains also entirely undemocratic?

Fast forward to today. China has been excluded from the “Trans-Pacific Partnership” free trade zone. Tom Holland of the South China Morning Post explains why in “Beijing is riding rough-shod over its WTO pledges”:

On Thursday, Secretary of State Hilary Clinton demanded a level playing field, calling on China to “end unfair discrimination against US and other foreign companies”.

”We want you to play by the rules,” added President Barack Obama on Saturday. “The bottom line is that the United States can’t be expected to stand by if there is not the kind of reciprocity in our trade relations and our economic relationship that we need.”

These comments reflect the growing frustration felt by China’s trade partners, who believe the country’s government has signally failed to live up to the pledges it made on joining the World Trade Organisation in 2001, and that 10 years on Beijing continues to ride rough-shod over both the letter and the spirit of its WTO accession agreement.

Back in 2001, the excitement among foreign business executives over China’s WTO membership was almost as great as in China itself. WTO membership, they believed, would be the lever that finally pried open China’s domestic markets to international corporations by promoting transparency and free and equal competition.

“The WTO provides China with a path to market economics, which will help break local and departmental monopolies that have proven so hard to crack from inside,” wrote the head of the American Chamber of Commerce in China at the time.

“Reforms will be pushed to a new level,” added incoming WTO director general Supachai Panitchpakdi.

Today those hopes have been dashed. Far from accelerating reform and market-opening, WTO membership handed Beijing an export windfall that allowed policy-makers to slow domestic liberalisation to a snail’s pace. Now the state wields even more economic power than a decade ago. Well-connected domestic corporations continue to benefit from a wide range of government subsidies, and foreign companies are openly discriminated against.

The expected political reforms have also not arrived. Ai Weiwei, in a recent interview with Newsweek’s Isaac Stone Fish, pointed the finger at the West for complicity with the Chinese government. Ai didn’t use the term “China Fantasy” but he might as well have:

Ai believes the world shares responsibility for what’s happening in China, and he wants to force the international community to pay attention. “Today, the West feels very shy about human rights and the political situation. They’re in need of money. But every penny they borrowed or made from China has really come as a result of how this nation sacrificed everybody’s rights,” he says. “With globalization and the Internet, we all know it. Don’t pretend you don’t know it. The Western politicians—shame on them if they say they’re not responsible for this. It’s getting worse, and it will keep getting worse.”

Do Western nations have any credible leverage that they are willing to use in this time of economic turmoil? No. So either people continue to fantasize or start to recognize reality.

Follow me on Twitter @niubi or Sina Weibo @billbishop.