The Chinese Communist Party is afraid. Last Monday, security agents burst into the homes of more than 70 local Falun Gong leaders after nightfall. They confiscated literature and tapes of the quasi-religious group, collected address lists and smashed statues of Li. When peaceful protests ensued in dozens of cities across the country, police detained more than 10,000 people–the largest crackdown since the military quashed the Tiananmen Square uprising a decade ago. (The vast majority of detainees were briefly held in stadiums and released.) Falun Gong was declared illegal. But police couldn’t touch Li, who has been at odds with Chinese authorities since 1996 and now lives in New York City, where he has permanent-resident status.

A pudgy-faced 47-year-old, Li affects the disarming demeanor of a well-meaning country boy who has suddenly found himself at the center of a political storm. “They can lock people up,” he told NEWSWEEK in a 90-minute interview last week, “but they cannot lock up their hearts.” Sitting comfortably on a couch in a spartan apartment of a follower, Li denied any interest in politics or power, and disclaimed involvement in protests last week or in April. But in doing so, he also issued a veiled warning. “If [the protests] had been organized, there wouldn’t have been thousands of people out there,” he said. “There would have been tens of millions.”

It’s easy to see why the Chinese leadership feels threatened. In recent years, as many of the fundamental tenets of communism have been quietly abandoned, self-proclaimed prophets, spiritual masters and healers have appeared in China peddling new creeds. Some promise quick cures for medical problems, or a glimpse of the future. Others warn of moral pollution and growing spiritual hunger. At a time of social and economic confusion, when joblessness is on the rise and corruption is rife, ordinary Chinese have been quick to embrace new ideologies, as well as ancient dogmas that had long been suppressed. “Communism as a faith is dead, leaving a great void that some shared belief must fill,” explains Sinologist Arthur Waldron.

Nobody has done that more effectively than Master Li. Although estimates on the size of his following range from 2 million (the government figure) to 100 million (the claim of Li’s followers), no one doubts that Falun Gong practitioners make up the fastest-growing spiritual movement in China. It might have more true believers than the Communist Party itself, which claims 60 million card-carrying members. While Li says his teachings are nothing more than a philosophy of physical and spiritual healing–with no formal organization or hierarchy–the devotion of his followers is impressive. To Chinese communist leaders who matured under Mao Zedong–and survived the fanatical Cultural Revolution–it also seems disturbingly familiar.

The faith in Li and his sometimes exotic ideas–followers claim he can channel cosmic forces to cure cancer and heal the blind–has “scared Chinese leaders to death,” says a Western diplomat in Beijing. Li’s most famous book, “Rotating the Law Wheel,” has been likened to Mao’s “little red book,” and the master has a tendency to distill the Truth in capitalized subheadings just like a party propagandist. (The three principles of Falun Gong are Zhen-Shan-Ren, or Truthfulness, Benevolence and Forbearance.) Last week Chinese police had an easy time picking out Falun Gong demonstrators from ordinary passersby because many carried Li’s writings, which are banned in China, in neat plastic bags.

Although Li has hinted at supernatural connections, he told NEWSWEEK that he’s the son of a surgeon and a gynecologist. He was born in Gongzhu Ling (Princess Hill), an industrial town in northeastern Jilin province, in 1951. According to Chinese press accounts, he worked on an Army stud farm during the 1980s, and once played the trumpet for a theatrical troupe. He also found time to study Buddhism and Taoism from masters in the mountains of Manchuria. In 1991 he quit a job as a watchman at a grain company, and the following year he established the first Falun Gong society. He had four deputy directors at the time–all of them Communist Party members.

In those days, Li was an officially recognized master of qigong, the ancient Chinese breathing exercises meant to harness the body’s energy to improve health. But then, according to Chinese media, he began to compare himself to Jesus Christ and Siddhartha Gautama, the founder of Buddhism, and traveled to the United States and elsewhere to spread his teachings. (One of the charges leveled against Li last week was that he changed his birth date to match that of Siddhartha so he could claim to be his reincarnation; Li says the date switch was a bureaucratic mix-up.) The government says it revoked his master’s status, accusing him of spreading superstition. Li moved to the U.S., mildly complaining of harassment, and his movement has been in legal limbo ever since.

Falun Gong devotees tried to break that impasse when 10,000 of them, without warning or fanfare, gathered around the Zhongnanhai leadership compound in Beijing on April 25. (Li admitted to News-week that he was in Beijing just prior to the protest, but denies involvement.) The protesters, many of them middle-aged women who whiled away their time reading Li’s books, waited there into the evening until their representatives won a meeting with Prime Minister Zhu Rongji. Zhu assured the group that it had not been outlawed. Then the demonstrators disappeared as quietly as they had arrived, leaving not a scrap of litter on the streets. (In China, that’s unheard of, and was taken as a sign of unusual discipline.) According to a report in a Hong Kong newspaper, President Jiang Zemin quickly fired off letters to members of the Political Bureau Standing Committee asking them why they didn’t have advance notice of the protest.

Authorities were particularly spooked to learn that many party members had flocked to Li’s movement. The leaders of the April 25 demonstration included retired senior officials from key ministries, as well as a former major general. A Falun Gong leader arrested last week was a former department director of the Public Security Bureau, the outfit that usually cracks down on dissidents. The participation of communists had “tarnished the image of the party,” warned a circular issued last week. Those who broke with the sect would not be investigated, the memo counseled, while communists who refused to “correct their mistakes” risked expulsion from the party.

Li’s American links have also fueled official paranoia, especially in the wake of the U.S. bombing of Beijing’s embassy in Belgrade this spring. The state media last week hinted darkly about “international forces,” and a source close to senior Chinese officials claimed they had compiled “documentary evidence,” including e-mail exchanges, suggesting that Li had plotted social disruption in China at the behest of the CIA. Laughing, Li denies the charges.

The party faithful also know well that homegrown historical forces are at work. Chinese have often embraced the occult or quasi-religious groups during times of great social flux. The apocalyptic tenets of an underground Buddhist cult known as the White Lotus Society helped inspire peasant revolts as early as the Ming dynasty in 1622. In 1850, as Western imperialist powers pressured China’s Ching dynasty court to allow a growing influx of opium, a mystic named Hong Xiuquan led the Taiping Rebellion. (Hong believed he was the brother of Jesus and promised to create paradise on earth.) At the last turn of the century, xenophobic fanatics known as Boxers, who believed that Taoist amulets could protect them from bullets, laid siege to foreign legations in Beijing. Such mystical revolts “usually end badly,” observes China expert Chas Freeman, who was based in Beijing as an American diplomat in the 1980s.

Is Chinese society again coming unhinged? The government seems to think so. For months, the state media have been waging a propaganda campaign to dissuade people from believing in fortunetelling, geomancy (in which “masters” consult Taoist texts to determine the most auspicious location for buildings and furniture) and other superstitions. All the while, it seems, the state has also been preparing its case against Falun Gong. Even as police ransacked houses and set up roadblocks last week, front-page newspaper headlines skewered Li as a liar and a cheat. A special 75-minute television special aired repeatedly last Thursday warned that practicing Falun Gong could trigger disorientation, paranoia, hallucinations, “sickness, handicaps and even death.” The documentary also showcased alleged practitioners who had killed themselves. One vignette recalled a devotee who became convinced he had a “wheel of law” revolving in his abdomen–Li says he personally places such a wheel into each of his followers–and died when he tried to look for it by cutting his stomach open.

The clear aim of the media onslaught is to convince Li’s followers that he’s a charlatan. A lengthy expose by China’s official news agency on Li’s “life and times” went a step further, claiming that he had reaped huge profits from the sale of his books and tapes to buy “luxury houses and limousines.” Li denies such charges–in the NEWSWEEK interview, he claimed that he had difficulty coming up with the air fare to attend a meeting of Falun Gong practitioners in Australia–and he predicts the government campaign will backfire. “Why does the government fear the people?” he asked NEWSWEEK. “Only bad guys are afraid of good people.” The party, in any case, has more to worry about than Falun Gong. Marxism is dead, and with or without Master Li, millions of Chinese are feeling dangerously adrift.