The repercussions of the NATO bombing of the Chinese embassy in Belgrade on Friday could reverberate in China for decades. It may come to be seen as a seminal moment in a very big debate on foreign policy being pushed by those at the top who want a strong, nationalistic China able to project its power beyond its borders.

Many people in Beijing say that if a Chinese missile blew up a US embassy, there would be military retaliation by Washington, and ask: "What are we going to do about it?" Some demonstrators against NATO commented: "If Mao had been around, America would never have dared to do this!"

No Chinese person I talked to accepts that the NATO strike on the Chinese embassy resulted from a map-reading error. The Chinese leadership itself cannot (and most likely does not) accept NATO's explanation in the absence of a full inquiry and the punishment of the war crime. To do so would be seen as kow-towing by the masses.

It is regarded as a deliberate act of aggression by America, the country which helped to inflict two centuries of unbearable humiliations on China, and which in recent history has backed the Kuomintang and then armed South Korea, Taiwan and Japan, with the ultimate goal of destroying Chinese communism.

People in China have not been told about ethnic cleansing in Kosovo so they naturally conclude that US-led NATO is an aggressor bent on hegemony and determined - as a Beijing businessman, Mr Mou Jianmin, put it - to test China's reaction, and to see how the West should deal with China in the future.

A Western-educated Chinese graduate explained to me with utmost conviction: "Russia has been bought off with American money, which leaves only China as a threat to the United States. That's why they did it."

NATO helped to overheat the boiling pot by the way it handled the aftermath of the embassy blast, showing an abysmal lack of understanding of Chinese sensitivities. China lost face by the attack, and it needed, and deserved, an immediate, strong and unequivocal apology from NATO. They got instead what a Chinese analyst called "Japanese war apologies" from NATO leaders (with the exception of Germany), i.e., grudging and inadequate, a view fully shared by most resident Western correspondents in Beijing.

The failure of the Chinese leadership to pass on to the people what apologies were made for a number of days exacerbated the hurt. The liberation of China by Chairman Mao in 1949 was supposed to end the historic humiliations, and the bombing may have damaged President Jiang Zemin and the Prime Minister, Mr Zhu Rongji, the two leaders most closely associated with the policy of befriending America.

"The nostalgia for Mao reflects a strong perception that the current leadership is too pliant and conciliatory towards the United States," said an Asian diplomat.

Some observers believe that Mr Zhu, the West's favourite reformer, has been put in an invidious position, having shown "unnecessarily warm" feelings towards the Americans on his trip to the US last month which, his critics say, sent the wrong message about China's readiness to deal with the West on its terms.

When he came back, Mr Zhu reportedly ran into a "firestorm" of criticism for the concessions he was prepared to make on the World Trade Organisation. The room for Mr Zhu to manoeuvre is getting much smaller. People have also complained that the top Chinese leadership did not show its face for days after the bombing, and that the government reaction, broadcast nationwide on Monday, came from the fourth-ranking Chinese Communist Party member, Vice-President Hu Jintao, rather that from President Jiang himself. Mr Hu's star, some say, is in the ascendant.

The short-term political fallout of the NATO strike is also manifesting itself. While the blast genuinely outraged China, it is proving a godsend to the leaders of the party concerning the 10th anniversary of the June 4th crackdown in Tiananmen Square; the deep anger against NATO will make people more inclined, as this very sensitive date approaches, to vent their frustrations against foreigners rather than the government.

The government in fact handled the aftermath of the bombing well, ensuring that only students were allowed to unleash the nation's anger, as workers' frustrations at the loss of their secure "iron rice bowl" in economic reforms could have boiled over into something more ugly.

Another benefit of the NATO blunder is that criticisms of the ideological bankruptcy of the party will be swept aside in an upsurge of patriotic fervour on the celebration on October 1st of the 50th anniversary of the founding of the People's Republic of China.

The bombing has further had the effect of strengthening China's hand in several ways. Beijing occupies newly-acquired high moral ground, and will expect significant US concessions as the price of restoring normal relations; among them an end to allegations that Beijing stole nuclear secrets from America; the exclusion of Taiwan from the proposed US anti-missile umbrella in the Pacific, and the dropping of demands for further opening of Chinese markets as the price of Beijing's entry into the WTO.

The catastrophe in Belgrade has moreover made China an important player in efforts to find a settlement in the Balkans, with the threat of a Chinese veto strengthening Russia's hand in the international negotiations, and Chinese troops possibly taking part in an eventual UN peacekeeping force in Kosovo.

But perhaps the most significant thing Mr Hu said in his broadcast was that the policy of reform and opening up continues. This was a strong signal that the all-powerful seven-member standing committee of the party supports the "mainstream faction" and has decided that it should maintain its efforts to integrate into the world order as the only way forward that makes economic sense.

China needs Western investment. Ties broken off by Beijing with the US - such as human rights dialogue and co-operation on weapons proliferation - can be quickly restored. Therefore relations with the US should be quickly mended, a former student leader said, provided Washington makes a genuine effort on its side to undo the damage. But, he added, China will be a tougher partner in the future.