As Beijing weaves its web of multilateral contacts, the United States is quietly moving forward with its own hedging strategy of strengthening ties with key neighbors of China as part of a so-called "soft containment." This strategy is focused on three historic adversaries of Beijing: Japan to China's east, Vietnam to the south, and India to the west. In June 2006, Secretary of Defense Donald Rumsfeld traveled to Hanoi to wrap up a bilateral agreement to broaden nascent defense ties to include English-language training for Vietnamese officers. The development is one small, yet significant, additional step in the development of relations between the United States and its one-time enemy.

Amid this diplomatic slow dance, China's importance in the region steadily grows.

Beijing's stress on cooperation, its talk of integrated development and its aid for some of the region's poorest countries under the fourth generation of leadership headed by President Hu Jintao, mark a dramatic turnaround from decades of chilly, often aggressive, conduct toward the neighborhood. Fuelled by ideological zeal, earlier generations of China's Communist leadership financed small, leftist political parties and fomented unrest to destabilize governments in countries they saw as decadent and reactionary. They dealt with territorial disputes by trying to bully neighbors.

Jin said the change--first outlined in 1996 by Fu Ying, a diplomat who went on to become China's lead negotiator at the Six-Party talks on North Korea and is now Beijing's ambassador to Australia--amounted to China's "escaping from the victim psychology." The leadership realized that as China emerged as a major trading nation, it benefited more than it suffered from the global status quo and should therefore not challenge the existing system but join it, he said.

While China's policy reversal remained anchored in vague, ambiguous language (like "mutual trust" and "mutual benefit") reflecting Beijing's sense of uncertainty, an event shook the region and quickly gave China's leadership the chance to assert its new approach: the 1997 financial crisis.

Traumatic at the time, politicians and specialists today look back at the 1997 crisis as a political watershed for the region. As panic spread across Southeast Asia and speculators fled from an overexposed Thai bhat, Indonesia's financial system wobbled and efforts to defend South Korea's won had virtually depleted that country's foreign exchange reserves, China resisted the chance to devalue its own currency--a move that would have brought in a short-term bonanza for Beijing, but also would have brought several of its neighbors' to their knees. Today, that decision is repeatedly held up in the region as proof that Beijing's approach to its neighbors had changed (in substance as well as in rhetoric) and was driven more by enlightened self-interest than ideology. "I think that was a good reflection of how they have been pursing their policies", Kantathi said. "They've been looking at [the region] as a community and seeing their interdependence with Southeast Asia. That's very encouraging."

By contrast, Asians recall a sense of abandonment by the United States during the scariest days of the crisis. The Clinton Administration's initial reaction was judged both sluggish and cool, as it assessed developments as a regional, not a global, crisis. Later, the administration was viewed as influential in shaping the tough conditions the International Monetary Fund attached to its multi-billion dollar emergency loan packages. People here still remark on a photograph of IMFManaging Director Michael Camdessus standing, seemingly all-powerful, behind a diminished Indonesian president as Suharto signed the loan agreement in Jakarta.

The financial crisis of 1997 was in many ways a psychological turning point for the region--a point where decision-makers recalibrated their views of both the United States and China, and where Beijing saw an opening for a new kind of diplomacy and went for it, helping launch the ASEAN+3 forum just months later. Kevin Rudd, the opposition Labor Party's shadow minister for foreign affairs, trade and security in the Australian parliament, said that APECs failure to address effectively the fallout from the crisis enabled Beijing to launch an alternative forum without either the Australians or Americans. More recently, he said China's success in helping get last December's East Asia Summit of 16 regional countries off the ground resulted in part because "the Bush Administration and the [Australian] government had their eye off the ball."

For many, it's a sign of the times that President Arroyo declared the country's first Filipino-Chinese Friendship Day four years ago and has since ordered the country's universities to offer Mandarin as an alternative foreign language. Although there remains a considerable reservoir of goodwill toward the United States--a long-time ally that ruled the Philippines for the first half of the last century--these moves reflect the arrival of a new power in the region.

Opinion polls conducted in the region consistently find China with a better image than the United States. Even in Anglo-Saxon Australia, arguably America's closest and truest ally anywhere, a survey conducted last year by the respected Lowy Institute found twice as many Australians who considered U.S. policies as a potential threat as those who considered the rise of China a threat. A recent British Broadcasting Corp. survey found that in twenty of thirty countries, a majority of those questioned held a mainly positive image of China, with the highest majorities registered in Asian nations. The same poll found that in only 13 of 31 nations did a majority of participants have a positive image of the United States.

Even the much-heralded American help in the wake of the December 2004 tsunami appears to have done little to revive the U.S. image. A poll released by the Pew Research Center in mid-June on global attitudes found that the number of those holding a favorable opinion of the United States dropped from 38 percent to 30 percent in Indonesia. As recently as 2000, the figure was 75 percent.

In this environment, it's hardly surprising that Beijing has increased its political clout throughout the region. So far, signs of this new influence are hard to spot, mainly because China's leadership isn't asking for much other than political stability and mutually beneficial trading relationships needed to fuel its all-consuming domestic transformation.

Every Southeast Asian country now recognizes China as a "market economy" within the World Trade Organization, a classification Beijing has sought (and the United States has so far refused to grant) in order to help ward off anti-dumping actions. Activities of groups opposed to Beijing's leadership, such as the Falun Gong, have been quietly discouraged in several countries of the region, the Dalai Lama doesn't show up much these days in the region, and there are reports that India and Nepal have started to restrict the activities of Tibetan refugees. In the grand scheme of geopolitics, these are small concessions, mainly tied to Beijing's own domestic agenda. They are made with little political cost for countries of the region, but they are important for Beijing's current number one priority: maintaining domestic stability as it drives ahead with its disruptive internal transformation.

For area specialists both in China and in the surrounding region, the impossible question is what Beijing may want once its internal reforms are complete, its confidence is buoyed and its strength unquestioned. While there are no clear answers to that question today, what remains clear is the shifting power in the region.

"This century of American domination [of Asia]--it's not coming to an end, but it's fading", noted Hal Hill, a Southeast Asia economist at the Australian National University in Canberra. "That's inevitable with China's growth." The ADB's Ali echoed Hill's assessment: "Given the size of the United States, it will remain a dominant trading partner", Ali said, "but the dominance of the U.S. will gradually recede."

1 Senior officials in Canberra confirmed in interviews that Australia declined to participate in the initial sessions of a small, informal group of countries (that included Britain, the United States and New Zealand), convened in the wake of Hong Kong's return to China to discuss changes in the East Asia-Pacific region, in part because the forum gave the impression of "ganging up" against China. It has since joined the group, which Australian officials said has never met above the level of political directors.