Art can do many useful things. It can decorate, commemorate, remember, describe, envisage. These are important functions, and human history is busy with examples of all of them. But the spellbinding exhibition that has arrived at the British Museum devoted to Ying Zheng, the First Emperor of China, shows art performing one of its rarest duties. What you see here is attempted only when a crackpot achieves supreme power in a great land and decides he doesn’t want to die. It’s a spectacle as rare as it is magnificent.

You have no doubt heard of the so-called terracotta army, the remarkable accumulation of life-sized clay figures of soldiers with which the First Emperor decided to be buried. Their discovery, in 1974, by a farmer digging his well is described here as the greatest archeological find of the 20th century. By being buried in the ground with his army, the First Emperor hoped to continue in the afterlife what he had proved himself to be so good at in this one: conquering. The idea was that his terracotta army would give him the power in the spirit world that he already enjoyed on earth.

The site where the terracotta army was found, around the First Emperor’s tomb in Xi’an, China, is said to contain at least 7,000 of these clay soldiers, arranged in military formation and ready to fight again for their ruler. So far, only 1,000 or so have been excavated. And now 20 of these complete figures – the largest group ever to leave China – have arrived at the British Museum, where they form the centrepiece of a display that turns out to be about much more than them. For me, the clay soldiers aren’t even the stars of the show. The star of the show, the thing I kept noticing, thinking about and reassessing, was the mind of the First Emperor.

Ying became the King of Qin (pronounced “chin”) when he was just 13. Qin was the westernmost of the seven provinces that were to make up the united China, but it wasn’t the strongest of them. In fact, it was one of the weaker ones. But when you become king at 13 and the train set you are playing with is your nation’s shape, size and destiny; when your orders are unquestionable, and you have at your disposal an almost limitless number of bodies to do your bidding; when you are in a position to impose a 13-year-old’s world-view on the nation you command; and when, like all 13-year-old boys, you like playing soldiers, you can do a lot of conquering.

Ying became king in 247BC. By 221BC, he had succeeded in subjugating all the other provinces, creating what we now know as modern China. He ruled as First Emperor until 210BC, when he died, aged 49. These are paltry time spans. Yet this astonishing character somehow achieved in them all that is described at the British Museum. To be as crazy as this, and as fearless, and as brilliant, is a rare combination. The boy-man was as remarkable a figure as any you will ever find out about.

I welcome, too, the decision to mount the First Emperor’s exhibition in the famous Round Reading Room at the centre of the museum, in which Karl Marx wrote Das Kapital, where Gandhi worked, and Oscar Wilde and all the rest. The space is usually off limits to exhibitions, as it has been perversely preserved as an embalmed recreation of the famous library. Had this been Madame Tussauds, that would have been appropriate. But it isn’t: it’s the British Museum. And, while the need to maintain a cryogenically intact library interior is a minor one, the museum desperately requires a large exhibition space at the centre of the Great Court. The sooner this temporary solution becomes a permanent one, the better.

In this instance, building an elevated display area on top of the preserved Reading Room has involved lots of self-evident loft conversion. Since the show has so much storytelling to do, and consists of so many texts, projections and maps, as well as the actual objects, there has obviously been a struggle to achieve the appropriate atmosphere of hush and awe. The lighting is solemn and theatrical. It’s very dark in there. But it all works well enough, and the journey remains lucid, thought-provoking and gripping.

In Xi’an itself, you can see the terracotta army in a barn-like museum that has been built specially for it, where you are prompted to feel its width, as it were, by looking down on the massed ranks of soldiers from high above. The BM show, however, allows you to feel their quality, by bringing you within touching distance of 20 of the life-size figures. In fact, they range in height from 6ft to 6ft 6in, and, given how small everyone was in those days, actually constitute life-size and a half. What you notice this close up is how different they all are: how individualised each portrayal remains. These are actual characters, and almost real people, with different hairdos and mixed facial expressions. I’m not going to get too gooey about this, but, by allowing you to know all these faces in the crowd, to differentiate between them, the show serves as a reminder of the human make-up of any army. I even found myself thinking of our boys in Iraq at one moment.

The First Emperor’s dream of conquering all his neighbours, then doing it all again in the afterlife, was a madman’s dream. But he’s as compelling a figure as he is because he was simultaneously a madman and a practical genius who organised and prepared his society so thoroughly, and with such attention to detail, that the dreams could actually be fulfilled. He gave China a script that is still basically in use today. He standardised weights and measures. He created a working administration whose descendants still run the country.

I learnt so much from this show, and kept having to resist the temptation to make outrageous connections between Ying’s China and the modern one. For instance, the First Emperor pioneered the use of mass production. Various essentials of war were designed to be easily interchangeable – crossbow mechanisms, arrowheads. It was a ruthless sort of manufacture and, although it could result in beauty – as with the lovely bronze bowls seen here, inlaid with gold and silver, or the gorgeous dancing cranes, also made to be buried with the emperor – its chief ambition was to arrive at efficiency and ease of use.

All this the BM reveals in a nicely judged march-past of objects and info that leads you gently but inexorably to the show’s lofty central space, where the terracotta army has decided to camp. The clay soldiers were the most dramatic of all Ying’s efforts at mass production – they came out of the kiln in bits, and had to be assembled by huge teams of overworked slaves, who can be seen here, in models, struggling mightily to put the pieces together in ways that anyone who has brought home a flat-pack from Ikea will recognise. Yet, although this is extraordinarily prescient mass production, it is still mass production of 2,000 years ago, in clay, with imperfect machinery, so more than enough human touches have survived in the characterisation of the soldiers and the fingerprints of their makers.

The emperor was so determined to take everything with him to the afterlife that he also commanded acrobats to be made for him, and administrators, musicians, plate-spinners. His actual tomb has not yet been excavated, but it is said he recreated his entire empire down there, with rivers made of mercury, a false sky filled with stars and ersatz mountains to climb and dream on. There is clearly so much more to find out about Ying and his mad refusal to go. I envy those future generations who are going to get the details.

The First Emperor: China’s Terracotta Army, British Museum, WC1, until April 6, 2008

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