The deadly attack by Islamist separatists on a police barracks in China's Muslim-majority north west has left the Chinese authorities aghast. Only four days before the start of the Olympics, the daylight bombing of border police, leaving sixteen people dead, seemed to fulfil the warnings given by nervous officials that Uighur separatists would use the Games to attempt a publicity-seeking attack.

For China, the stakes could not be higher. The Olympics in Beijing are planned as the biggest, most lavish, most spectacular ever held. China has poured in huge sums of money, and invested enormous national pride. The Games are seen as a way of showing the world that China is a mighty power and one that has emerged as a global economic powerhouse.

The city of Beijing has been transformed in a way that few other cities have been by the event: daring new architecture dominates the skyline, the infrastructure has been revamped, buildings cleaned, factories relocated or even closed and the city's population given extensive tips, lectures and orders on how to behave.

Patriotism has combined with nervousness to make these Games highly political. It is the first time since the 1980 Olympics in Moscow that they have been staged in a communist country, and the party is determined to show not only that it is in full control but that it runs an effective and popular government. Any challenge, whether political or logistic, therefore assumes unusual importance as it is seen to reflect on the party's boast and on Chinese pride.

Not all has been smooth-running, however. The run-up to the Games has proved increasing vexed for the party as challenges have appeared on all sides. Getting the organisation right has been the least difficult. The environmental problems have proved far harder to resolve, and the cost of a traffic ban and virtual closedown of industry in a desperate attempt to clear the leaden skies will prove enormous.

Western criticism of China's human rights record was probably also expected, and has drawn two contradictory responses. On the one hand, China has attempted to defuse attacks on its foreign policy by taking steps to put pressure on governments in Sudan, Burma and North Korea. On the domestic front, however, it has bristled defiance, cracking down on critics and cutting off websites, only grudgingly restoring some access after Western complaints.

But the bigger challenges have been emotional - the terrible earthquake in May - and political, especially the uprising in Tibet in March. This coincided with the ill-fated Olympic torch relay to cause huge embarrassment and anguish in Beijing, while rallying Han nationalism. Security was stepped up and the authorities realised that the Games had become a target for the demonstrators. For Beijing, the real danger never came from the distant and sparse Tibetan plateau but from a lesser known but far more disaffected region: China's restive Muslim provinces.

The Uighurs of Xinjiang in the far north west are Turkic-speaking Central Asians who have long complained of religious and political oppression under nearly six decades of Chinese Communist rule. Numbering around eight million, they have recently been the target of infiltration and agitation by al-Qaeda and extremist groups such as Hizb ut-Tahrir. Chinese authorities claim to have foiled a series of plots, although a militant group has claimed responsibility for explosions in four cities, including two bus bombings.

The latest attack has put Beijing on full alert. The Olympics will go ahead with panache. But beneath the glitter lurk ingredients all too common nowadays: worry, a security alert and overreaction. The Games come at a high price.