AT the geographical heart of the Eurasian landmass, Urumqi, the Chinese Muslim capital, is booming as Beijing channels investment westward to douse the fires of Islamic fundamentalism threatening its borders.

As rumours of imminent war swirl in Central Asia, Beijing is claiming business as usual in Xinjiang and across the rest of the country. As a measure of official confidence, state-run newspapers have claimed that work will start on schedule later this year to build a 2,500-mile natural gas pipeline stretching from Urumqi to Shanghai.

But away from the public eye, China has boosted security against terrorist attack. It has increased troop numbers on its borders with Central Asia, including those with Pakistan and Afghanistan.

Fearful of the spread of Islamic fundamentalism, Beijing has put to one side its suspicion of America to give President Bush strong backing in the aftermath of the attacks on New York and Washington.

Mr Bush has cancelled a state visit to Beijing next month. Fears were expressed for his security in a part of the world so close to his sworn enemies in Afghanistan. Visits to Seoul and Tokyo were also put off.

The potential for instability in Central Asia seeping across the Chinese border has prompted experts such as Zhu Xingshan, deputy director of the Economic Centre of Energy Research Institute, to call on Beijing to curtail its growing reliance on Xinjiang to supply its energy needs.

"The impact of the September 11 attacks is not merely on the oil price in China," he said. "China has to reconsider its strategy of ensuring oil security and, to stave off risks, it must adopt a strategy for multiple sourcing of oil."

The pipeline would be a tempting target for Muslim extremists determined to sabotage Chinese rule in a region twice the size of Texas that has historically been much more a part of Central Asia than it has of China.

Since the attack on the US, new questions have emerged about the £12 billion pipeline.

Earlier this month BP, the British oil firm, pulled out of bidding for the project, claiming that it could not add value to its shareholders. Its rivals Shell and Exxon are persisting despite criticism from the investment community.

The pipeline is the centrepiece of a £30 billion project known as the Great Development of the West that is designed to bind provinces with large ethnic minority populations closer to the economically vibrant eastern half of the country.

The wave of state-directed investment has transformed Urumqi into a Chinese-style boomtown where only 15 per cent of the population belongs to the formerly dominant Muslim Uighur minority.

The result is a stark clash of cultures. The Uighurs still crowd ancient bazaars trading sheep or sit cross-legged on dusty carpets on the balconies of turquoise teahouses, while the Chinese sit in restaurants at the base of multi-storey buildings wolfing down pork dishes and swilling clear liquor.

With a fragile peace holding within its territory, Beijing has clamped down on its Western borders to keep out Muslim extremists fleeing east.

China is not expected to participate in strikes against terrorists beyond its frontiers but it has said that it shares America's determination to root out violent extremism.

Chinese support for Washington comes at a price. Prime Minister Zhu Rongji is the latest senior figure to demand that allied action must be co-ordinated through the UN.

"The fight against terrorism should conform to the goals and principles of the UN Charter and the norms of international law and be beneficial to long-term world peace and development," he said.

Beijing is also hinting that it will demand that the US cut back on military support for Taiwan in return for working with America.

"The resolution of the Taiwan issue is China's own internal affair," an official said.