While pundits pondered whether President Barack Obama, on his first trip to China, had been out maneuvered by President Hu Jintao or whether he had achieved his objectives with quiet diplomacy, a bigger, underreported, story was developing. China's leaders have recognized that for the Communist Party to retain its status as China's ruling party it must elevate its commitment to learning and innovation. Although previous generations of China’s senior leaders have emphasized learning, it now has been made prime Party policy--which will likely present a significant challenge to America's economic competitiveness.

Recently I sat down with Politburo Member and rising star in Chinese politics, Li Yuanchao, a champion of the learning-minded policy. A longtime colleague of China’s President Hu Jintao, Li is currently head of the Party's powerful Organization Department, which appoints and trains senior officials in government and executives in state-owned enterprises, a critical function in government and the economy. Li has pioneered new mechanisms for training and oversight of officials and executives, and has enhanced transparency in the process of governance in order to better serve the public interest.

Li said that China's leaders have determined to build a "learning-minded party." In China, relating current polices to past leaders helps legitimatize current policies, and Li stressed the Party's long-held devotion to learning. "When he was still in Yan'an (Shaanxi province) and living in the caves (1937-1948), Mao Zedong called on the Party to transform our study," said Li. "When reform and opening-up began, Deng Xiaoping stressed that we should learn the world's advanced knowledge. Then Jiang Zemin put forward that if China were to achieve modernization we must build a learning-oriented country and society. Recently, the Party's Central Committee, led by General Secretary Hu Jintao, asserted that a learning-minded party must be built, seeking to revitalize our penchant for learning so as to take up the arduous tasks and challenges ahead of us." These challenges include severe economic imbalances between different sectors of society, particularly urban vs. rural, coastal vs. inland; unemployment; corruption; unsustainable development; resource scarcity; pollution; and more. To China's leaders, social stability is a constant concern.

"To construct a learning-oriented Party," Le continued, "we need to learn both theoretical knowledge, such as Marxist classics and the theory of socialism with Chinese characteristics, and all the advanced human scientific knowledge and advanced experience. In addition to learning, we must also apply leading-edge science and technology. The Internet was invented in America," he added, "but has found its largest number of users in China."

"Surfing the Internet every day has become a habit for many leaders and officials, including myself," Li continued, calling it "compulsory homework." He noted how President Hu Jintao answered questions by netizens and interacted with Internet users online. "We often acquire new information and knowledge from the Internet," Li said. "For example, when we want to develop a certain industry, we first search it online to see how people in China or around the world are developing it."

"During my recent visit to the United States," Li recalled, "I visited Google's ( GOOG - news - people ) headquarters. When executives started to instruct me how to use Google's features, I told them it was unnecessary as I used them every day. I often do searches on the Organization Department to find latest news about the ministry and comments about us by Internet users."

"We ask our officials to cultivate a reading habit and encourage them to read more books, and more importantly, good books," Li said. "The Chinese have a habit of reading. Many families regard books as the most valuable family asset. They can do without cars, but there would be cases of books in the house. Recently we recommended a whole set of books in various genres to officials of the Organization Department. This may sound hard to believe, but we also included A Brief History of Time, a classic by Stephen Hawking. Not only do we want our officials to learn latest knowledge of physics and cosmology but also to develop a way of scientific thinking."

"Every year all ministerial-level officials in the Organization Department will take time out for intensive study and discussions together," said Li. "This year's topic was how to expand democracy in our work. We read books by Marxist classic writers, expositions on democracy by Deng Xiaoping, Jiang Zemin and Hu Jintao, even The Theory of Democracy Revisited by Giovanni Sartori. All of us read together. After we finished, we had comparative discussions, taking into account China's special reality."

"We believe that a ruling party only remains viable and vibrant when it masters state-of-the-art knowledge," Li said.

"Of course, in addition to reading books, we also acquire knowledge through evaluating our experiences," Li continued. "Each year the Party holds a plenum, where an important agenda item is to sum up our own recent experiences. For example, last year we summed up experiences of the 2008 [Sichuan] earthquake and relief efforts. By doing this, we improve how we deal with future situations, for example natural disasters."

Li calls talent "the primary resource of scientific development," and has established "democratic, open, competitive, merit-based" principles in selecting and promoting future leaders. In response to the financial crisis, and in order to achieve the "goal of making China an innovation-oriented nation," Li instituted a "Thousand People Plan" to attract high-level personnel to China from overseas, such as scientists, financial experts, entrepreneurs and senior managers. Li's plan promises high salaries and attractive government funding to elite Chinese professionals, especially top science and technology researchers, who are working abroad and willing to return home. (Many whom China hopes to repatriate have been pursuing careers in the U.S.) Recognizing China's new place in the world, Li stresses training leaders with international knowledge and perspective--the "internationalization of the mind," he says, is a needed new way to "emancipate the mind."

In 1978, Deng Xiaoping initiated China's reform by calling for the Chinese people to "Emancipate the Mind," which meant casting aside Mao's leftist ideological dogmatism. In recent years President Hu Jintao has called for further reform, empowered by a new kind of mental emancipation. Circumstances have changed; the world is more complicated, variegated. This is why Hu stresses creativity and innovation in all areas: science and technology, industry and commerce, global partnerships, political participation, and cultural and spiritual life in all their diverse expressions. Without a further emancipation of the mind, Hu says, China's development will face obstacles and difficulties.

"The change China is undergoing is the greatest China and the Chinese people have experienced in thousands of years," Li said. "It may also be the greatest sustained change in human history."

In a 2009 international computer competition--sponsored by the super-secret U.S. National Security Agency (for obvious reasons)--China fielded the most finalists (20), well ahead of second-place Russia (10) and far ahead of America (2). The worldwide winner of the algorithm-coding contest was an 18-year-old Chinese student.

I need not have to spell out the challenge ahead.