The biggest impact felt in this region during 2002 came not from bombs exploding but rather from the Chinese 'dragon' stretching; its twitching tail touching even the most remote Pacific island.

But this was a process rather than a drama.

The drama came from violence. The effects of the 11 September attacks on the US in 2001 echoed round East Asia, and then rebounded more than a year later with the bombing on 12 October of a Bali night club, killing almost 200 people - mostly Western tourists.

Leaders throughout the region showed both dexterity and opportunism after 11 September and again after 12 October by using the transformed global-security environment to consolidate their own positions. The leader of every major regional country except Vietnam visited Washington in late 2001 or during 2002 pledging moral support and more. In return, they obtained imprimaturs for their own efforts to rein in groups against their national interests by designating them as extremists.

Beijing, for instance, gained Western recognition that the long-standing struggle for independence by Uyghurs - mostly Muslims of Turkic descent in resources-rich East Turkistan province - comprised part of the global fight against extreme Islamic terrorism. Malaysia's Prime Minister Mahathir Mohamad - previously lambasted by Clinton for having his former deputy, Anwar Ibrahim, tried and jailed - received praise from US President George Bush for his use of tough anti-extremist rhetoric and legislation.

Both 11 September and the Bali bombing enabled the 10 members of the Association of South East Asian Nations (ASEAN) - flailing about since the end of the Cold War to recast itself as an economic union - to reposition the organization in the more familiar terrain of security. Meeting with US Secretary of State Colin Powell in Brunei in August, ASEAN signed a powerful counter-terrorism pact, while Indonesia, Malaysia and Thailand also entered bilateral anti-terror arrangements with Australia. Indonesia, the world's most populous Muslim country, was criticized by its ASEAN neighbours for taking inadequate action to help them fight terrorism through the first nine months of 2002. Following the Bali bombings President Megawati Sukarnoputri signed decrees increasing Indonesia's security powers and Parliament - with some misgivings - later made them permanent.

The Bush administration indicated it would re-establish financial and training support to the military while boosting its aid to the police. At the same time, both the Indonesian army and police stepped up their activities in Aceh and West Papua: the two resources-rich provinces at either end of the republic that have most strongly maintained a struggle for independence.

Surprisingly, in the rest of the Indonesian republic the army was largely kept in its unaccustomed new place: under civilian control, sidelined from a central role in domestic law enforcement. The Parliament abolished the 38 seats reserved for the army in August at the same time as it introduced direct presidential elections.

However, opposition and civil-rights groups throughout the region remain uneasy about the likelihood of human rights becoming a major casualty of the 'war on terror' diminishing good democratic governance - which had been steadily increasing its hold - and replacing it with elected, authoritarian oligopolies.

But it is China, where democra-tic governance has failed to gain traction, which has forged furthest ahead since the 'war on terror' began. With the US strengthening its position in Central Asia, Afghanistan and Pakistan, and with Japan becoming more strategically engaged, hardliners within the party's leadership stressed the 'objective deterioration' of China's surroundings. This reinforced the country's nationalist thrust, and the rapid modernization of the military.

China's economy - still growing at more than seven per cent per year - is now being used as the country's prime diplomatic tool for projecting its influence to every corner of the region. At the ASEAN summit in Cambodia in November, China - represented by its 'market Leninist' Premier, Zhu Rongji - took centre stage. A decade earlier, ASEAN countries - whose combined GDP remains slightly above China's - were receiving 80 per cent of the investment coming in to the region. Today the situation is reversed, with investors relocating their factories from Southeast Asia to China. The meeting launched plans for the world's biggest free-trade zone - to be developed over the next decade - bringing together ASEAN's 500 million people with China's 1.3 billion. The energetic Zhu then turned to his Japanese and South Korean counterparts, also attending the summit, and proposed that these three North Asian economic giants should start negotiating a trade bloc too.

This hunger for new, special economic deals followed immediately after China's accession to the World Trade Organization (WTO) in December 2001. It underlined the crucial significance for China's leaders of finding ways to keep the economy growing rapidly. For this is central to their legitimacy. After the Cultural Revolution had effectively destroyed ideological commitment to communism, the late Deng Xiaoping cut a new unwritten and unspoken contract with the Chinese people: we deliver ever-growing living standards, you let us rule undisturbed.

As the army of displaced and jobless workers grows - reinforced by farmers as WTO entry starts to bite - the pressure also keeps growing to attract new investment and to dominate new markets overseas. China has already strained its own environment beyond breaking point. Desertification now blights 28 per cent of the country and bans have been imposed on cutting further forests.

So Beijing's answer is to abandon former notions of self-sufficiency, and to use the nation's new-found economic muscle to import the raw resources it needs to fuel its growth. This, in addition to its determination to keep tabs on Taiwan, has driven it to boost substantially its presence in the Pacific. It has become a major player in Papua New Guinea's controversial logging industry, and is building its fishing capacity in the region too. It has a satellite tracking station in Kiribati.

China is also doubtless aware that the Melanesian nations are facing their gravest problems since becoming independent a quarter of a century ago. The Solomon Islands, now widely dubbed a 'failed state,' is worst placed: its government is unable to pay its health workers or teachers, and its militias still control parts of the country. Its bigger neighbour Papua New Guinea (PNG) removed 70 per cent of its MPs at its mid-year election but saw its economy slump even faster, with agricultural and resources outputs diving, its currency also plunging and the Government running out of both funds and options other than to borrow heavily. In the southern highlands - PNG's oil- and gas-rich 'Texas' - elections were abandoned and warlords rule: a troubling version of the region's possible future.

The dislocation of the Pacific islands region from its Asian neighbours - other than China - and from the rest of the global economy continued. Although the 14 island members of the Pacific Islands Forum agreed to join a free trade zone over an eight- to ten-year period, inter-island trade is only two per cent. Attempts to switch to new crops have not lived up to early hopes. Kava, for instance, soared in Europe and North America as a cure-all herbal medicine for the 21st century, with $100 million new plantings. Then claims the herb was linked to liver disease resulted in bans.

Back in the 1930s and 1940s Japan failed in its attempt to build an Asia-Pacific empire or 'co-prosperity sphere'. It is now China's turn to try. In late 2002, as it constantly worked to build allies, it forgave Cambodia and Afghanistan their aid debts. In the Pacific, too, its aid is becoming significant. On its way to building an empire of its own, it will ultimately drag the Pacific island nations closer culturally and economically to Asia.