China Breaks Out

Scheduled for just 20 minutes, the meeting went on for two hours. U.S. Commerce Secretary Don Evans had traveled to China to meet with Chinese Prime Minister Wen Jiabao and press a stern message: Beijing's "unfair" trade practices and refusal to revalue its currency were "undercutting American workers." Wen heard him out during the November sit-down but, according to a Chinese diplomat familiar with the meeting, had a retort at the ready. Surely his American visitor realized that most of China's foreign-exchange reserves were in U.S. Treasury bonds. If China acted precipitously in revaluing its currency, it might be compelled to sell those bonds, which could create instant problems for U.S. financial markets. Wen reportedly told Evans: "China's a very big economy moving ahead very, very fast. If it stumbles and falls, it could make others fall, too."

Not long ago few Chinese leaders would have been comfortable riffing on trade surpluses and T-bonds. But as Wen kicks off an official visit to the United States this week, he represents a new government team, a new sophistication in Beijing--and, in some ways, a new China. Almost as soon as Wen and his boss, President Hu Jintao, took over China's top government jobs in March, they launched an international charm offensive. Globe-trotting from Bali to St. Petersburg, the relatively young duo--each is 61--have promoted a diplomatic style that is eliciting adjectives like "nimble," "subtle" and "nuanced"--words virtually never before used to describe China on the world stage. At a moment when the United States is perceived to have become more unilateralist, China has ironically shown a new appreciation for multilateral agenda-setting--brokering the six-party talks on North Korea, proposing a free-trade agreement with ASEAN and becoming a more active member of the U.N. Security Council. "They feel less vulnerable internationally than did their predecessors," says Boston College China scholar Robert Ross. "After 20 years of hearing people talk about the rise of China, they're witnessing it happening. It gives them a degree of confidence their predecessors didn't have."

In the old days, Beijing was hot on rhetoric but cool toward everything else. Chinese diplomacy was marked more by its passivity and ideological rigor than any true inventiveness. While occasionally lambasting the United States for its "hegemonic" strategy to "contain" China, Beijing over the past 20 years focused on domestic economic concerns. To the degree China took a leadership role, it was usually as a rallying point for some of the weakest countries in the developing world. That came naturally for a diplomatic corps that practiced chip-on-your-shoulder diplomacy more in touch with the humiliations of a century ago than the challenges of the day. "For decades China's power largely resulted from the fact that they could be obstructionist across a whole range of issues," says Evan Medeiros, a Sinologist at the Rand Corp. in Washington, D.C.

No longer. With the turn of the millennium, especially after 9/11, Beijing has been on a roll, joining the World Trade Organization, winning its bid to host the 2008 Olympic Games, even catapulting an astronaut into space. On the diplomatic front this year alone, Chinese officials have organized dozens of high-level international trips, issued a flurry of white papers and proposed deeper cooperation among Asian militaries. After the failure of the trade talks in Cancun, WTO chief Supachai Panitchpakdi suggested that China could be the key player in saving the current round of negotiations. And although it remains a work in progress, Beijing's willingness to strong-arm Pyongyang to the negotiating table has already been roundly praised and is seen by one leading Chinese scholar as an "unprecedented breakthrough for Chinese diplomacy."

How will the Comrade of the East get along with the Cowboy of the West? Wen Jiabao's 100-watt smile will go down well with some Americans. But his trip won't exactly be a cakewalk. "This visit will test the extent to which both sides can compartmentalize concerns over trade or Taiwan without having it upset the whole relationship," says Medeiros. Tensions have risen on both issues in the weeks leading up to Wen's visit. On the trade front, conservative Republicans have begun blaming China for the loss of American jobs ahead of next year's election season. And, also with an eye on elections next year, Taiwanese President Chen Shuibian has been pushing the envelope with Beijing, calling for a public referendum that Chinese authorities see as an alarming move toward Taiwanese independence. But Chinese officials remain optimistic about the summit's prospects. "Both leaders are no-nonsense problem-solvers who know the relationship benefits both sides," said a senior Chinese diplomat on the eve of Wen's departure.

It will be up to Wen to keep smiling--despite the barbs--and convince his American hosts that China is no threat. His message: American and Chinese fortunes are interconnected like never before. Not that the Bush administration needs to be reminded that China is the biggest market for U.S. firms like Procter & Gamble, Kodak and Motorola--and rising fast for American automakers. To help quiet critics, Wen's trip was preceded by Chinese purchases of Boeing jets and GE aircraft engines. And what about the China-bashing that almost inevitably erupts during campaign time? Wen's team takes a clear-eyed view of the tough talk. "There are some political risks to this trip," says the Chinese diplomat, shrugging. "But we understand that they're a result of the political season."

The new leadership's mix of markets and moxie has proved to be a winning formula just about everywhere else. Beijing has creatively used its economic heft to solve a slew of issues with its neighbors. So, for example, tensions with New Delhi have eased dramatically--due in no small part to the fact that India's exports to the Middle Kingdom have risen by 85 percent this year, reaching $2.95 billion. Beijing's relations with Japan--while still hampered by historical grievances--are on a more solid footing in part because of booming trade flows. (According to the Japan External Trade Organization, Sino-Japanese trade grew almost 34 percent in the first half of 2003 compared with the same period the year before.) And this year--only 11 years since Beijing and Seoul normalized diplomatic relations--China overtook the United States as South Korea's biggest single market. Some 40 percent of the foreign students now studying in China are South Korean.

China's laserlike focus on economic diplomacy has stood in sharp contrast to Washington's preoccupation with the war on terror. "While the United States has been engaged in Iraq, China has been engaged in a diplomatic tour de force across the region," says Asian specialist James Przystup. Reaching another milestone this year, Wen signed an amity pact in Bali with the leaders of ASEAN, moving closer to establishing a free-trade zone with Southeast Asia. By 2005, Wen said, China's trade with ASEAN would more than double to reach or surpass $120 billion--the level of U.S.-ASEAN trade last year. "The Americans are only thinking of Southeast Asia in terms of security. This is --the same mistake Washington made in the 1950s when it thought of the region as only another domino to fall to communism," says Karim Raslan, a Malaysian lawyer and columnist. "China is simply being much smarter in its approach to the region."

Some doubt this renaissance in Chinese diplomacy will last. "Everything hinges on the sustainability of China's economic growth, which is itself in great doubt," says Minxin Pei, a China expert at the Carnegie Endowment for International Peace. Indeed, Beijing's smiles have been marred by its recent outbursts over Taiwan. Infuriated by Chen's provocative statements, Chinese generals were quoted last week warning that Taipei was on the "abyss of war." Sounds more like harm than charm. Whether China's New Age diplomats can smooth over age-old problems like Taiwan will remain their toughest test.

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