It was breathtaking even if inevitable. China has abandoned its constraints on one-party rule. In 1980 Deng Xiaoping, the author of the Chinese miracle, wrote into China’s constitution 10-year term limits for its presidents and committed the country to the rule of law. Certainly China would continue as a one-party state, but it would be one that operated within constitutional bounds. Never again would the country suffer the depredations of a despot like Mao. Deng even held out the possibility that by 2030 China might become a democracy with a properly independent judiciary.

No more. Last Sunday the People’s Daily announced that President Xi would be carrying on in office indefinitely. Equally ominously, the constitutional commitment to the rule of law – in any case more observed in the breach – was to be transformed into a commitment to “wielding the law to rule”. No prizes for guessing who would wield that law. A newly drafted first clause in the constitution, in line with the “thoughts of Xi Jinping”, declares that the “leadership of the Chinese Communist party is the most essential feature of socialism with Chinese characteristics”.

So, alongside his indefinite general secretaryship of the Communist party and indefinite term as leader of China’s armed forces, Xi is now president of China for life, with no requirement to uphold an impartial system of justice, however qualified in reality. It is a move from autocracy to despotism. Xi is to become the contemporary emperor of China, but unlike previous emperors he will define and use the law to support his regime rather than attempt to offer an impartial system of justice. You cannot run a continent of 1.3 billion people on the basis of structural injustice.

Thus China’s future is foretold. Yes, the immediate prospect is not great, but dictatorships do not last for ever. Like imperial dynasties before it, imperial communism will suffer a succession of revolts from below that will be met by increasing repression until finally the system blows up. Censorship, already intense in China, was ratcheted up another notch with last week’s temporary ban on the letter N: bloggers could no longer refer to Xi serving n terms.

Yet Xi will age, like Robert Mugabe and other “strong men”, and will be terrified of giving up power because of what his enemies will do once he no longer holds the reins. Within China the moves are portrayed as a sign of strength. The truth is the opposite – and reveals with savage starkness the impossible dilemmas facing the Chinese leadership.

Xi, on taking power five years ago, had no option but to launch a series of highly public anticorruption drives. The party’s legitimacy was falling to new lows as its leaders shamelessly accumulated vast wealth through back-handers and bribes. But necessarily Xi’s anticorruption drives could not attack his own power base: they could only be political in character – arriving at the point today where he and his circle cannot countenance an orderly transfer of power in 2022 for fear they will be rounded on in turn. The party can only go on, hoping that economic growth, growing international power and ruthless nationalism will be sufficient to hold off its growing internal critics.

Yet how is that growth to be achieved? It will not be through benevolent trade deals with a second-order economy like Britain. The “Made in China 2025” strategy sets out to establish world leadership in key advanced industrial sectors, backed by protection of its own markets. So much for the World Trade Organization and its rules.

Facebook Twitter Pinterest Pro-democracy protesters near the venue of the ‘One Belt, One Road’ summit in Hong Kong. Photograph: Alex Hofford/EPA

With their backs against the wall China’s leaders will double down, so that China’s economy will become even more dominated by the party, strengthening its apparatus of control. One little-noticed dimension of the Belt and Road initiative, investing $1 trillion overseas, is that China is insisting that all trade disputes be arbitrated by Chinese courts. Jacob Rees-Mogg and Boris Johnson complain of being vassals to the European court, constructed on impeccable principles of independent jurisprudence which Britain shares. Try winning a dispute in China’s courts under despot Xi without the power of the EU behind you.

China’s economic rise has captivated the world – it is now the No 1 global exporter. But it was driven by an astute if unstable mix of qualified one-party rule, state guidance and fierce competitive capitalism. Deng and the Shanghai “liberals” wanted to engineer a rule-of-law society around market principles in which the Communist party had a primary but not overwhelming rule. After a fashion it worked.

But now it is time for the west to reappraise its relationship with China. For another aspect of Xi’s thought is that China offers a “new option” as an economic and social model based on Chinese “wisdom”. Thus China sees itself becoming not only the dominant power in Asia, to which everyone pays tribute, but one that offers wisdom to which everyone must genuflect. Xi is a canny reader of power: only the EU and the US have the hard and soft power to challenge China’s ambitions and act as an exemplar of why justice matters.

The reason representative democracy trumps referendums as a form of democratic governance is that, as events change, representatives can change course instead of being held to a decision made in very different circumstances. 2018 is a different world to 2016, which the front benches of both our major parties have yet to acknowledge. Instead of kowtowing to China in the quest for non-existent trade deals, Britain should be strengthening its commitment to the EU as China throws everything behind despotism. It is an argument Britain deserves to hear – and act on.

• Will Hutton is an Observer columnist