BY arresting, mistreating, and expelling human-rights advocate Harry Wu, China's leadership has given him all that he sought when he entered China - and more. Through its ironhanded welcome of Mr. Wu, Beijing ensured that he again succeeded in dramatizing the sorry state of human rights in China. More important, the leadership also inadvertently revealed the emptiness of its claim of being open to the outside world. Wu's triumph shows that Beijing is correct in considering him a more formidable menace than the United States news media portray him to be. Reports cast Wu, a US citizen, as the victim of coincidental crises: a downturn in American relations with China and the leadership succession in Beijing. According to the reports, ambitious Chinese leaders, tussling over the power slipping away from ailing patriarch Deng Xiaoping, are determined to prove their hard-line credentials by crushing any internal or external political challenge. The leadership cracked down hard on Wu - he was sentenced to a 15-year prison term for spying - because it believes he is an agent for a US-led conspiracy against China. This popular portrayal is accurate enough, but incomplete. It overlooks the cosmopolitan traits that Wu shares with millions of Chinese and that so alarm hidebound leaders seeking to control change. Wu and other cosmopolitan Chinese embody in the extreme the post-Deng party leadership's two betes noires - the bourgeoisie and anything foreign. So rather than just reveal a systematic abuse of human rights, Wu also showed through his mission that Beijing has not lived up to its claim of opening China to the world. His expulsion highlights the ancient penchant of China's leadership to choose insularity over outwardness and what is traditional over what is modern. Like China's rulers for centuries, the Communists have repressed an independent mercantile class out of fear that a free and thriving stratum of entrepreneurs will weaken their tight hold over the economy and society. Moreover, the leaders have restricted foreign ideas and ways that would undermine their ideologically regimented rule. Wu epitomizes the qualities that China's leadership abhors. He was born in the 1930s to a wealthy Shanghai financier and, during his upbringing, was steeped in Chinese and Western cultural traditions. Raised in privilege, he was insulated from the poverty, injustice, and social ills of China during its revolution and war with Japan. He attended the Jesuit-run St. Francis Xavier's school and went to Beijing for undergraduate study. Although he believed patriotically in the Communist government, he ran afoul of the thought police by naively heeding Mao Zedong's 1958 call to criticize the political order - ''Let 100 flowers bloom.'' Wu was cast from the intellectual elite into the desolate obscurity of China's gulag. During 19 years as a political prisoner he endured hard labor, starvation, and torture. Wu's courage in venturing back to China to document abuses in his old labor camps is unusual. But his background and suffering are not. During more than five years reporting from China, I met many cosmopolitans like Wu. These outward-looking Chinese have suffered more than any other group for their openness to ideas from abroad. After taking power, the party rounded up many of them, banishing them to destitute villages, sentencing them to hard labor in remote prison camps, or executing them by the truckload. Today, as in decades past, cosmopolites like Wu pose a fundamental threat to China's regime. They are challenging party autocrats to ease their grip on how citizens think and act. By aggressively pursuing dreams of prosperity, encouraged by the Deng-era maxim, ''to get rich is glorious,'' they are part of a vast, grass-roots force propelling China's reform far beyond the party's original intent. They have discarded Mao's dogma of socialist cooperation and seized on Deng's creed of market competition, thereby making Chinese society increasingly vibrant and unruly. Cosmopolites and millions of other newly assertive Chinese have launched myriad interest groups to protect their hard-won wealth, celebrate their identity and beliefs, and limit state intrusions into their lives. Day by day, society splits further along the lines of class, region, and economic interest. Private entrepreneurs are setting up business and trade associations. Intellectuals are forming unofficial think tanks. And liberal students and workers are running underground unions. Confident of their identity and open to foreign influence, cosmopolitan Chinese like Wu form one of the leading social forces pushing for a free, outward-looking society. The mistreatment and expulsion of Wu must not be seen narrowly as a conflict between Washington and Beijing over human rights. Rather, Wu is the latest victim in China's ancient conflict between Great Wall isolationism and modern, cosmopolitan openness. Cosmopolitan Chinese like Wu are a leading social force pushing for a free, outward-looking society.