Frank Talk in Beijing

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DIPLOMACY: Chinese Foreign Minister Li Zhaoxing with Condoleezza Rice

Despite the smiles and words of praise, Secretary of State Condolleeza Rice left no doubt during her brief visit to China last weekend that the Sino-U.S. relationship will be an increasingly important — and perilous — dimension of Washington's foreign policy in years to come. The visit highlighted new tensions over Taiwan, mounting U.S. concern over China's efforts to modernize its military and impatience over its diplomatic efforts to restrain North Korea's nuclear program — and, of course, the Bush administration's promotion of democracy. “China must embrace some form of open representative government if it is to reap the benefits and meet the challenges of a globalizing world,” Rice said bluntly, although Chinese foreign policy types might conclude that they're doing rather nicely in terms of reaping those benefits on the basis of the current system. Rice also made it clear that she believed the Europeans had no business selling arms to China in light of the fact that “defending the Pacific” was a U.S. responsibility.

To put it mildly, her Chinese hosts found Rice far more aggressive than they'd expected from a Secretary of State on a first visit to Beijing. But then, they may not have reckoned with the fact that the U.S. has suddenly found itself playing catch-up in responding to China's “great leap forward” in recent years as a regional strategic power center.

Before September 11, 2001, the Bush administration had identified China as a “strategic rival,” and the complexities — and perils — of the relationship were underscored on April Fool's Day of that year, when a U.S. spy-plane collided with a Chinese interceptor and made a forced landing on Chinese territory in Hainan. The tense ten-day standoff that followed appeared to symbolize the inevitability of a collision between Beijing's rising strategic ambitions and Washington's traditional policing role in the Asia-Pacific region. But the attacks of 9/11 shifted Washington's foreign policy focus for the next three years almost entirely to the Middle East and the al-Qaeda challenge. China was an eager and willing ally against al-Qaeda, facing its own problems from Muslim separatist groups backed by al-Qaeda and the Taliban in its westernmost provinces.

North Korea conundrum

More importantly, China became an invaluable partner in addressing the North Korean nuclear crisis that flared up the following year when the Hermit Kingdom decided to reclaim its place in the headlines from Osama bin Laden by declaring that it had already gone nuclear. Lacking any palatable military options for dealing with Pyongyang but reluctant to accede to its demand for direct talks with Washington, the Bush administration came to rely on six-party talks involving itself, North Korea, China, Russia, Japan and South Korea as the forum to negotiate with Pyongyang. Getting the North Koreans to attend, much less cut a deal, depended heavily on the ability of China — as the regime's economic lifeline — pressuring Pyongyang.

The six-way process has thus far failed to deliver an outcome acceptable to Washington; Pyongyang greeted Secretary Rice's arrival in Asia with an announcement claiming to have expanded its nuclear arsenal. But it established a kind of holding pattern in the U.S. relationship with China, during which the Bush administration focused on its war in Iraq and related matters. For China, the period represented an opportunity to consolidate its astonishing strategic gains assembled in line with what some in its foreign policy establishment call a policy of “concealing strength and waiting for opportunities.” China has no need to exert itself or take risks on the foreign policy front as its power appears to expand exponentially in proportion to its massive economic growth, which has averaged 9 percent per annum over two decades. China's GDP is slated to equal Britain's this year; Germany's in 2009, Japan's in 2017, and America's by 2042 — although some analysts say that by measure of purchasing power parity, it could match the U.S. as early as 2025.

Not only is China's prosperity not financed by debt, it currently holds some $610 billion of foreign exchange reserves in U.S. currency and a substantial portion of the U.S. debt, giving it unprecedented influence over the fate of the dollar and even possibly over the U.S. money supply. It has become the epicenter of trade and investment in the Asian region, and is fast emerging as the dominant foreign partner in a some Latin American countries.

China is now the second-largest trading partner of the European Union and the EU is China's largest trading partner. (That's why Europe is now discussing lifting its arms embargo on China, although pressure from the U.S. to refrain from doing so may have postponed the question, at least until the presidency of the European Union passes from Britain next year.) China's growing strategic role has also seen it move to settle conflicts and stabilize long-troubled relations with key neighbors Russia and India, and assume a natural leadership role in important Asian forums traditionally dominated by the U.S.

Thirst for oil

China's emergence also fundamentally reshapes global energy markets, having accounted for almost half of the rise in demand over the past four years that looks unlikely to allow oil prices to fall significantly for the foreseeable future. China, currently second only to the U.S. in consumption of oil and related products, is expect to more than double its demand over the next 20 years, inevitably putting it into competition with the U.S. for increasingly scarce supplies in the Middle East and elsewhere. Some of the geopolitical consequences are already clear: China has committed itself to a long-term investment of up to $70 billion in Iran's oil and natural gas fields, which makes it highly likely that Beijing would veto any UN Security Council effort to impose sanctions on Iran over its nuclear activities.

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