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This is an unusual book. Not only is it written by China's Minister of Education, but he has a Western readership in mind. Zhou Ji is a graduate of Tsinghua University who went on to do doctoral work in the US. Returning to China, he combined research and teaching as a mechanical engineer with political service, which culminated in 2003 with his appointment as Minister of Education.

His book sets out with admirable clarity China's ambitions for its higher education sector. What we have is an authoritative account of the Chinese Government's agreed policies rendered into excellent colloquial English and published by a major Western publishing house with interests in the Asian educational market. I spell out this background in some detail because the book is a far cry from being either a dry-as-bone state paper or a simple public relations brochure. It contains much interesting information, some shrewd analysis and clear evidence of how China is grappling with issues bedevilling higher education across the globe.

The book begins with conventional statements that a strong and buoyant system of higher education in the modern world is economically necessary and socially desirable. No country can develop its potential without an investment in its people, and a good system of higher education underpins modernisation (or, in Chinese terms, "socialist modernisation"). Zhou points to a long tradition of leadership by the educated, the history of which he sketches in a concise opening section. He goes on to argue that through the 20th century steady progress was made towards reforming higher education and making it more accessible; however, much remains to be done.

He does not disparage the efforts of earlier generations, nor does he gloss over the damage caused by the Cultural Revolution ("During that traumatic decade (1966-1976), the education system was scuttled, universities stopped enrolling students for many years and order in teaching and schooling was interrupted. Consequently, a whole generation of people lost their higher education opportunities, and the gap between China and the developed countries was widened once again.") But the book covers in detail developments since the 1980s and within that period the emphasis is placed firmly on the most recent years.

The thrust of the argument is that China has had to rethink its whole educational policy. The country is huge, populous and complex. It is very poor and shot through with inequalities - between town and country, between regions, between ethnicities. Contemporary policymaking is designed to address these problems in a constructive way. This means a drive for general literacy (the aim is that everyone should have had nine years of compulsory schooling by 2020); that graduation to diverse forms of higher and vocational education should sit naturally on top of enhanced basic literacy for all; and that provision should be made for lifelong learning so as to fulfil the potential of every individual and to make China adaptable to change and challenge domestically and internationally.

Several new strategies have come into play since the mid-1990s. The first is that the centralised planning and control of education, a distinctive feature of imperial and early Communist China, has now given way to a more decentralised structure, described by Zhou as a move to "a socialist market economy". This has not meant that central government has abdicated responsibility; rather, it has brought in the provincial governments and created an administrative structure that unifies and simplifies. This has allowed considerable changes to be made in the number and geographical placing of institutions, has cut down on duplication of provision, and, as in similar moves in other parts of the world, has shifted part of the burden of raising resources away from central government. It has also provided for significant differentiation to take place: a small number of elite institutions, directly and well funded by central government, are charged with becoming internationally renowned centres of teaching and research. A second, larger group of elite universities has as its brief high-quality teaching in specific subject areas, drawing students widely from within their provinces; other colleges have a responsibility to meet the specific educational needs of their locality. Unlike the UK, and more like the US, this heterogeneity within higher education is accepted and quite explicit. It makes respectable academic elitism while not devaluing other forms of higher education.

Zhou is unequivocal that it is the state's responsibility to fund higher education, but his policies are creative about how that is done; they leave scope for the development of a variety of funding streams, including from the private sector; and he argues that it is proper that students should pay their share. There are 20 million Chinese students enrolled on courses (about 19 per cent of the relevant age cohort) and their fees account for 25 per cent of higher education income; universities use 10 per cent of this income to provide for scholarships and financial aid for the economically disadvantaged. Admission to universities and colleges is by examination, and standards are demanding. How well students achieve at school and in standardised entrance examinations in effect determines which institution they will go to. "Those who have made it are luckier than their peers who have failed. They are 'God's favourites' in people's eyes, the pillars of their country, and the hope of their nation."

Good teaching is an essential component in China's educational strategy.

Here again there is a combination of incentives to improve standards coupled with regular assessment (with consequences) of quality achieved.

Zhou reminds us that "in China, teachers enjoy a high status in society, and teaching is a respected profession". He produces figures to show the steady increase, since 1998, of more highly qualified teachers in the university system. This has been encouraged by improvements in salaries - which doubled between 1998 and 2002, outstripping by 40 percentage points the rises awarded to staff in other state-owned sectors. "Average university teachers' salaries are among the highest of all professions and trades in China," he notes. It is not surprising there is such a strong desire to become first a student at a leading university and then, on graduation, a university teacher.

China's educational objectives are to be achieved in part by international exchange and especially by study abroad for some of China's top students, and by strategic alliances between universities in China and those in other countries. The past five years have seen an unprecedented number of Chinese students abroad (now over 120,000 a year in more than 100 different countries, with 93 per cent paying for themselves). This represents a huge change from the 1950s and 1960s, when few students were allowed to study abroad and those who were permitted to do so had to hold government scholarships. Peking University now has formal collaborations with 200 universities in 49 countries and receives about 20,000 visiting students and academics a year; Tsinghua University has 150 collaborations with 30 foreign countries. Collaboration extends beyond the university sector: more than 20 international corporations now have agreements with Chinese universities to develop computer technology.

In his conclusions, Zhou does not disguise the continuing challenges facing China, but it is difficult, reading his book, not to be dazzled by China's educational achievement since the mid-1990s, and even more so by its great potential. How then to set all this in a wider perspective, not least because so much attention is now given to the rise of China in the world economy? In Britain, for government, universities and corporations, getting a piece of the action of China's educational expansion is firmly on the agenda. Higher Education in China is clearly designed to foster such enthusiasm, and there will no doubt be some foreign beneficiaries. But will they ever be more than a tiny part of the story? China remains an underdeveloped country; its main interests are domestic, and its main external connections are within Asia rather than, at this stage, with the wider world. At just over 4 per cent of gross domestic product, its educational spending lags behind that of countries in the Organisation for Economic Co-operation and Development by nearly two percentage points.

Moreover, Zhou's book is an analysis of policy and a blueprint for change.

Quite reasonably, he concentrates on setting out the legal, financial and regulatory framework that his ministry is establishing for managing higher education. It is too early yet to determine what the success will be and whether or not a gap will open between policy and reality. The system, even as he envisages it, will inevitably bring and require further change. He is aware of that, but he does not in this book go beyond the most utilitarian philosophy of higher education - that it is desirable because it meets social and economic needs - and this may already be too narrow an approach.

Huge emphasis is placed on applied science and technology (the closure of good departments of chemistry would be unthinkable in this strategy) and, although Zhou argues for increasing recognition of the arts and social sciences in the education of good citizens, the brute fact is that in China's universities the spending on the former is more than 25 times that of spending on the latter. And, no doubt, even within engineering and science, room will have to be found for work that is more speculative, more high risk and of uncertain applicability. This in turn will bring new tensions: competing claims for funding between teaching and research, for example, questions of access as general literacy grows, and of the content of the curricula. More widely, the debate will come to focus on the ability of scholars and institutions to have their head in what they teach and research and how they judge and discharge their social responsibilities.

This is a stimulating book, though, not least because it demonstrates great ambition with limited resources and because it shows that fundamental issues relating to higher education in a range of countries have more in common than might be supposed.

Gordon Johnson is president of Wolfson College, Cambridge.