Any day now Barack Obama will be handed the transition dossier on the most important relationship in the world, that between America and China. He will find there the wisdom of a generation of elite policy makers, still dominated by the statecraft of Henry Kissinger. He should tear it up.

For the first time since I watched a million demonstrators take control of the streets of Shanghai in June 1989, China is entering a period of dynamic political change driven from below – and Washing-ton needs to raise its game.

Last week three Nobel laureates – Seamus Heaney, Nadine Gordimer and Wole Soyinka – spoke in support of 300 Chinese signatories to the bravest document to emerge from the people’s republic since that bloodstained summer. Charter 08 is a manifesto for democracy, justice, a free market and a federal republic of China.

“The era of emperors and warlords is on the way out,” it proclaims, “the time is arriving everywhere for citizens to be masters of states.”

The minions of state security have already started arresting the charter’s supporters. Yet it is spreading online, defeating an army of website censors.

This is China, almost 20 years after Tiananmen Square. Viral politics is infecting the system. A staggering 253m people get their news from the internet. Chat rooms have become a Chinese agora, seething with profanity and rage against the powerful. A civic movement known as weiquan, taking its name from a Chinese character that can mean “rights” as well as “power”, is growing among victims of the system – the evicted; the cheated; the bereaved parents of babies who drank poisoned milk, and of schoolchildren killed in the collapsing classrooms during the Sichuan earthquake last spring.

The world crisis means that the Communist party’s economic miracle – if it ever deserved the term – is fading. Founded on cheap exports to credit-junkie American consumers, it is in deep trouble. Party officials are trying to reverse a stock market crash, a property slump and thousands of factory closures. The security forces are trying to suppress myriad worker protests against layoffs and unpaid wages.

Sporadic, incoherent yet unmistakable, a new China is coming to life online and on the street, liberating itself by stealth from the “new China” falsely proclaimed by Mao Tse-tung in 1949. That regime is now old China. How will Obama deal with this transformation? Will his China policy be one of continuity or of change?

The presence among his advisers of Jeffrey Bader and Susan Shirk is not encouraging. Bader is a former US diplomat in China who also serves as senior vice-presi-dent of Stonebridge, a firm that helps corporate clients to do business with Beijing. Guess what? He advocates private persuasion, not “negative soundbites”, as the best way to convince the Chinese regime to improve its conduct. Shirk served in the Clinton administration on east Asia and is also an advocate of the conventional wisdom that pragmatism usually equals silence.

Then there is the business lobby, dutifully lining up to caricature anyone promising change as a China basher or worse a protectionist. I doubt that Obama’s voters elected him to keep the world safe for out-sourcing by the Fortune 500. He can do better than this.

The fact is, whatever foreigners do, change is coming in China through the Chinese people. The risk for America is that if it relies on traditional emissaries cocooned in protocol and five-star hotels, it will miss a huge opportunity.

Instead of business as usual, Obama should exploit the Obama factor. How will ordinary Chinese feel when the charismatic young American president stands alongside their own leaders, so well described by the Prince of Wales as ghastly old waxworks? The waxworks will struggle to explain recent American events to their people, who have always been told that America is (a) racist (b) ruled by dynasties named Clinton or Bush and (c) run by a cabal of white men on Wall Street.

Don’t forget: millions of people in China genuinely see America as in its Chinese name – mei guo, the “beautiful country” – a haven for their ancestors or relatives and an inspiration to China’s republican revolutionaries of 1911.

To reach them, the new president must discard two myths perpetuated by Kissinger and his disciples. The first is that China is so powerful that its imperious leaders must always be placated on democracy and human rights. The second is that only privileged interlocutors – like Bader, employed by consulting firms when not in government – can deal with the Chinese elite.

These self-serving fables have given a club of cynical pragmatists a paralysing grip on China policy in the endless turf wars between America’s bureaucrats, spies and soldiers.

Obama is promising change. Where better to start than here where there is a mind-set that has not changed since Kissinger prepared the way for Richard Nixon to go to China in 1972. Thanks to recent scholarship, we now know that Mao courted Nixon only out of fear that the Soviet Union planned to strike against his economically ruined agrarian nation.

Mao and his silkworm, Zhou Enlai, spun a web of diplomacy that lured Kissinger and Nixon to come as tribute-bearers in the mistaken hope that the Chinese would help them win “peace with honour” in Viet-nam. “The relationship was established on the basis of the US being the supplicant,” says Roderick MacFarquhar of Harvard University. The Chinese have cleverly kept it that way for 36 years.

Yet the reality is that China is a poor agricultural country. It may have the world’s fourth biggest economy but its population of 1.3 billion means that in terms of wealth per capita it does not even rank in the top 100 nations. China’s rivers and lakes are ruined. Its air is poisonous. The one-child policy means that by mid-century it will face a crisis as fewer workers support more than 300m old people. The leadership is stale, the party split by factions and the armed forces are untested except by repression. This is not the next superpower. It isa paper tiger.

The American mandarins like to claim that China is too inscrutable and dangerous to offend. It isn’t. All the democracies have to do is to speak out consistently and in public for Chinese democrats, to support political prisoners and to refuse to break ranks when the regime tries to single out this or that country for punishment. The Chinese people will be watching.

Like Nixon, the next American president has a chance to “seize the hour”. Obama should take his cue from Charter 08 – not the memoirs of Kissinger.

Andrew Sullivan is away