What is becoming ever more clear as this year rattles to an end is that the west has no idea how to handle China. Since the relationship of the People's Republic will be a key factor in the year (and many more years) ahead, that makes this a core question for the Obama administration and Europe – and, closer to the mainland, for India and Japan as well. But there still seems to be an almost childish reluctance in the west to accept China for what it is, whatever one may think of what it is.

It might be nice if China was more like us, but it isn't going to be. Expecting it to fit into the paradigm set by the west is not only futile but positively dangerous. The sooner governments start to work out a meaningful China policy rather than depending on wishful thinking, the better. It would make a good New year's resolution. But I'm not holding my breath.

The sad case of Akmal Shaikh, the London man executed in China on drug smuggling charges provides the latest example of how little the conventional approach to China on decent humanitarian grounds yields, just as concern abroad about the fate of Charter 08 dissident Liu Xiaobo did nothing to prevent him being sentenced to 11 years in jail on Christmas Day. China has reacted indignantly to the protests about Shaikh. The argument that China has made a mockery of justice has been made on Cif by Clive Stafford Smith. Less convincingly, we have had the descant of a reminder of the opium wars, as if Shaikh was a reincarnation of the East India Company, and relativists trotting out the tired old fallacy that human rights abuses in the west and executions in the US disbar us from protesting at the way the trial was conducted.

Behind this froth, what is plain is that China has once again asserted its determination to protect its own sovereignty whatever the issue, and is intent on doing things its way. Given its economic progress in the past three decades and the immediate effect of its huge pump-priming over the past 12 months in restoring growth (even if the second half of next year may prove more problematic), the leadership and the population feel pretty good about themselves. They are in no mood to take lessons, moral or otherwise, from the west.

In this context, the Shaikh case fits into a string of scratchy non-meetings of mind between China and the west over the last couple of months.

First there has been the long-running issue of the under-valuation of the Chinese currency. The case for appreciation of the yuan is undeniable. Equally undeniable is that Beijing is going to do no such thing until its exports rise back to their pre-crisis levels. Even then it has large amount of excess capacity to keep employed, and tens of millions of workers to provide jobs for when the current infrastructure programme starts to come to an end in the second half of 2010. So, however well-founded the arguments put it by the treasury department in Washington or the European Central Bank, the leadership stands firm.

Then we had the spectacle of Obama's visit to China, during which his "town hall" meeting in Shanghai was transmitted only by one local television station, and during which the Chinese arranged a programme for him that was heavy on tourism. Yes, it ended with a lengthy list of general agreements to co-operate and assurances that the basis was being laid for long-term relationship. But the beef was missing, and US briefings that the two sides had reached meaningful agreement on climate change were swiftly blown apart by the fiasco of Copenhagen.

That conference showed just how western leaders are for understanding how China really works. The idea that, by crashing the meeting of major emerging economies, Obama could reach a last-minute deal with the Chinese prime minister to save the planet would have been laughable if it had not been tragic. Did the US president really think Wen Jiabao had any wriggle room to succumb to his charm and reason? Did he imagine that the prime minister would suddenly jettison 60 years of suspicion of the outside world to allow independent monitoring?

Mark Lynas's much-remarked piece in the Guardian puts the blame squarely on Beijing, but takes no account of how the Chinese system actually operates, seemingly imagining it runs on western lines. The Chinese position would have been set out in advance and approved by the standing committee of the politburo. Wen could not deviate from that, even if he had been minded to do so. He may be prime minister but he ranks third in the standing committee and moves carefully. On such a crucial issue, he would be able to do absolutely nothing that might be seen as jeopardising the domestic economy; China accords importance to the environment but a good deal more to growth.

In addition, several key Chinese leaders were out of Beijing at the time and this is a leadership that likes to have everybody in the room when decisions are made and doesn't believe in long-range teleconferences. So it is safe to assume that China was not in negotiating mode, and that, unless Beijing was being set up as the fall guy, Obama, Brown, Miliband et al should have know this, and negotiated accordingly. The same goes for the currency, human rights and, unfortunately for him, for Shaikh. It is also likely to be the case if trade disputes swell next year, as one must anticipate.

That leads to an underlying element which, again, seems insufficiently appreciated by western governments. General Secretary Hu and Wen operate by consensus. They are careful bureaucrats who do not command an automatic majority in the nine-man standing committee. Gone are the days of Mao getting out of bed one afternoon and deciding on a major policy initiative or of Deng Xiaoping imposing himself on those who nominally held positions superior to him. That is, in a way, healthy, but it means inflexibility at the top. Hu and Wen have to deal with factions, lobbies and powerful state companies. For all the liberation of the goods market, the economy is still tightly controlled in key input areas, buttressing the power of entrenched interests. The Communist party knows it needs to reform itself but is terrified of the effect of doing so.

All that is a recipe for caution. Not for the kind of reasoned flexibility and give-and-take which the west likes to make the basis for relationships between nations (however fallible this proves in practice). Repeating mantras about the need to revalue the yuan, respect human rights, join in independent monitoring or accept emission targets which would threaten the growth that provides the regime's prime legitimacy may be necessary for the west's own self-respect and defence of its own values. But the chances of getting results is razor-thin until a new policy context is evolved.