Holding the Olympic Games in Beijing was always going to be controversial. China's leaders are not usually ignorant of history. They know what happened when the Games were held in South Korea and Mexico: running, jumping, diving and swimming were accompanied by protesting.

There are bound to be protests on victors' rostrums and on the streets in Beijing in August. After all, is no athlete in the world a member of Falun Gong or a subscriber to the literary output of Human Rights Watch and Amnesty International? All those of us who wish China well hope that any protests are handled with dignity and restraint. That will be one way to show how China is changing. There will be 20-30,000 foreign journalists in Beijing to report whatever happens.

But for China the risk of embarrassment is greatly outweighed by the chance to celebrate the country's re-emergence as a great global power. China's history in most of the past two centuries is best passed over in sympathy. Ravaged by Western powers, including Britain, invaded by Japan and tormented by warlords and the worst excesses of Maoism, the Chinese missed out on both stability and prosperity for more than 150 years. But since the Deng-ist reforms of the 1980s, the Chinese economy has taken wing. Only 40 or so years since the Great Famine and the Cultural Revolution, China has turned itself into the world's workshop - big importer and exporter, lender of first resort to the American Treasury and banks. It is no surprise that China thinks that economic success is worth celebrating with more than a few fireworks.

When the first visitor from China, Shen Fuzong, came to Oxford in 1687 to catalogue the Chinese holdings in the Bodleian Library, his country was the greatest economy in the world. So it has been for 18 out of the past 20 centuries. Barring a calamity, it will be again before the middle of this century, certainly in overall size though not in wealth per head.

This has been a momentous transition. China is not a superpower. There is only one of those, America, with mastery of the global commons and with a political, security, commercial and cultural reach that matters everywhere. Yet China has become a hugely significant world player: its economic might has political consequences. There is hardly a world problem that can be solved unless China is involved.

I find it difficult to understand why some people regard the rise of China as a threat. China's success is good for the world. One of the main contributors to the rapid economic growth from 2001-2007 - despite terrorism, wars and the rise in the price of oil - was that China and India had joined the more open world economy. Would the rest of us be better off if China was still dirt poor? Would we be well served by a collapse of the Chinese economy? It is lousy economics to argue that when China gets richer, the rest of us automatically get poorer.

Not do I share the view that the century ahead will inevitably see a hegemonic struggle between the US and China. That is not inevitable, and it is certainly not desirable. What we may well see for a while is a half-hearted attempt to challenge the model of liberal and democratic capitalism that America and Europe have pioneered. I do not myself believe that freedom will lose in that peaceful encounter.

What is clear is that we should seek to work with, not against, China. That does not mean giving up our own views on human rights and the rule of law. Chinese officials are often contemptuous of those who give the impression that they are prepared to sacrifice what they really believe for some usually illusory gain. But China deserves the respect of trying to understand and know it better. This is an area where all world-class universities have an important role to play.

At Oxford University today there are more than 750 students from China, including Hong Kong. That number has grown from 89 in 1996-97. Only America has a larger number of international students at the university. More than 40 per cent are undergraduates and 60 per cent are studying for degrees in mathematics and physical and life sciences. They make a significant contribution to the life of the university. A great university should want to attract the best students and researchers from around the world. I would like to see the number of our Chinese students continue to grow.

To attract more interest from China, we have to show more interest in China. That is what we are doing this week with the launching of a world-leading centre for scholarship on China that will bring together the work of our outstanding academics on literature, the arts, history as well as public health, migration and public sector management.

This work has attracted to Oxford senior Chinese officials from the cities, the provinces and the central governments for training courses and studies in comparative government. This year we will launch a one-year MSc course in Modern Chinese Studies. We have opened a new office in Hong Kong to keep in touch with our 1,600 alumni there and on the mainland, and the Oxford University Press, with a headquarters also in Hong Kong, will publish 500 new titles this year.

When the last firework explodes at the end of the Games, China will be left not only with the bills and the cleaning up, but with a formidable agenda of domestic problems: from social equity to the management of urbanisation, from the environment to efforts at political change. I hope that, at Oxford, we will teach many more young Chinese to find out more about our own value systems, and continue to collaborate with Chinese universities and think- tanks in finding the best solutions.

Lord Patten of Barnes is Chancellor of the University of Oxford and a former Governor of Hong Kong