China’s recent assertiveness in the East and South China Seas and along the Sino-Indian border has prompted intense debate. Is Beijing finally showing its real irredentist colors? Is this a short-term display of nationalism as party leaders jockey for positions in the Politburo and Central Committee in 2012? Or are these disconnected episodes that represent more continuity than change? One way to frame our own thinking is to imagine how U.S. power looks from Beijing right now.

Following is an imaginary briefing by State Counselor Dai Bingguo to the Leading Small Group on Foreign Affairs sometime in August 2010.

Memo to the CCP Leading Affairs Group on Foreign Affairs

A Foreign Policy based on Peaceful Development and Harmonious Society

I should begin by stressing that the context for our view of external affairs is based on the fundamental pillars of socialism with Chinese characteristics, peaceful development and creation of a harmonious society. Our highest priority even in foreign policy is to strengthen these pillars at home. The greatest threats to stability we face remain internal. I do not need to remind members of this group that over twenty million of our people migrate to the city every year in search of employment; that we face growing economic disparities between the coastal and Western provinces; that our demographic picture will grow serious in the coming decade; that ecological and environmental problems are mounting; that energy and commodity inputs in the out years are still uncertain; and that we must constantly guard against bubbles and over-heating in our economic growth strategy.

The greatest threats to the territorial integrity of China also remain internal, but with dangerous external links. I refer to the dangers of splittism in Xinjiang, Tibet and Taiwan. Two years ago in my report we began with Taiwan, but President Ma Ying-jeou has turned away from the dangerous independence activities of the previous DPP regime and for now our strategy of stressing peaceful development to promote reunification has made some progress. Splittism in Xinjiang and Tibet, however, remain more urgent matters, despite the quieter situation in both regions this past year. Containing and reversing these splittist trends will continue to inform our foreign policy strategies even as our colleagues at the United Front Department and the Taiwan Affairs Office work to secure one China and prevent a reversal of favorable trends over the past five decades.

Our foreign policy strategy flows from the principles of peaceful development and a harmonious society. We will utilize international institutions and forums such as the UN Security Council, the ASEAN Plus Three, the Shanghai Cooperation Organization and the Six Party Talks to constrain unilateralism by the United States or other powers and to protect the principle of non-interference in internal affairs and the maintenance of a harmonious international society and multipolar world. At the same time, we will assert China’s core interests in the South China Sea and other proximate areas consistent with our growing relative strength.

The Most Critical Relationship: America

As President Hu Jintao declared to the gathering of our ambassadors last year, careful management of the China-United States relationship will remain the central pillar for a successful foreign policy strategy. We will continue to seek a “strategic partnership” with Washington in the long-run, though we recognize the Obama administration is no more willing to use this title than was Bush. We will resist calls from outside experts to create a G-2 between the United States and China, since this would entrap us in international responsibilities that would interfere with peaceful development and establishment of a harmonious society. However, we will continue moving in the direction of a bipolar condominium with Washington based on mutual respect for core interests and non-interference in internal affairs and a recognition that China is becoming the most important power center in Asia.

We must also carefully assess the Obama administration. Every American presidential candidate from the opposition since Nixon has used the “China card” –promising a harder line policy on human rights or Taiwan if elected. Candidates McCain and Obama did not resort to this China threat strategy and it appeared that after becoming President, Obama would be able to build on the stable relationship left by Bush. Initial signals from Washington suggested that Obama would engage in self-restraint, recognizing America’s enormous burdens in Iraq and Afghanistan and the downward trends in the American economy. Obama also seemed preoccupied with internal contradictions such as America’s health care system. His promise of strategic reassurance and his postponement of meetings with the splittist Dalai Lama and of arms sales to Taiwan all seemed to indicate that he understood the new relative strength of the United States and China since the financial crisis. The joint statement in November 2009 with agreement to respect for mutual “core interests” was an enormous accomplishment as we sought to codify restraints on the United States left over from the Third Communique.

It is possible, however, that we may have misread the Obama administration. The first indication of a harder line was Secretary of Defense Robert Gates’ speech at the annual Shangri-la dialogue in Singapore June, which reopened the so-called “China threat” theory. The China-U.S. Strategic & Economic Dialogue in May was a success, but the administration’s stance was more hardline than before. Most troubling was Secretary of State Clinton’s participation in the ASEAN Regional Forum where she intruded on behalf of Vietnam and other Southeast Asian states to counter China’s core interest in the South China Sea. We will be able to neutralize the Philippines in this dispute using our usual channels and funds, but Vietnam, Malaysia and even Indonesia appear to be welcoming Clinton’s unwarranted intervention and her Cold War logic about freedom of navigation. The united front approach to stable relations with Washington is also under transformation. In the past, the U.S. business community understood China’s position well and countered protectionism, support for splittist elements or containment policies in the United States. Recently, however, segments of the business community have been joining in the China threat theory, complaining that legitimate economic development policies such as indigenous innovation are a form of protectionism.

Overall, we must judge U.S. power carefully. In the past we have sometimes overestimated American power –for example after the first Gulf War. But at times we have also underestimated American power. We were particularly surprised that only a few years after American withdrawal from Somalia the Clinton administration mobilized a NATO-led force to attack Serbia in the name of self-determination and human rights for Kosovo. It was an unsettling precedent. The lesson for us is that America has been a resilient power historically. American weaknesses deriving from the current fiscal situation and the Iraq and Afghanistan Wars will clearly accelerate multipolarity. We can accelerate that trend, but not at the risk of confrontation with the United States. Nor should we play too much on internal expectations that we can now bend the United States to our will. Our purchase of American Treasury bond notes has created a far more precarious trap for us than for the Treasury Department in Washington. We have allowed some adjustments to the value of the renminbi, but we are not yet ready to move to a market-based exchange rate system or to increase our domestic consumer demand to compensate for higher U.S. savings rates. Our realistic baseline assumption must be that the United States will remain the most powerful center in a multipolar world for at least another decade and that China will remain dependent on the U.S. economy. We must therefore continue to abide by Deng Xiaoping’s strategic guideline to “hide our capabilities and bide our time,” while also seeking opportunities to “get something accomplished.”

The Contradiction between Multipolarity and American External Alignment

A critical measure of American power in the current environment of fiscal and strategic setbacks will be Washington’s ability to counterbalance or contain China through external alignments. We must prevent this through strategic partnerships with third countries, free trade agreements and economic cooperation, utilization of multilateral forums, resolute opposition to interference in internal affairs, vigilance against “democracy-promotion” or peaceful evolution strategies, and pressure on Washington and other capitals to reject the “China threat” theory or Cold War containment strategies (citing the outrage of our netizens will be particularly useful to this end).

Assessing the United States’ external relations, we must focus first on Japan. Japanese power has plateaued and may be in decline. The emergence of the Democratic Party of Japan has also complicated alliance relations with the United States. There are opportunities for us in this development, but we must recognize that Japan’s rightist trend has only been slowed and not necessarily erased. The current prime minister is a leftist, but Japan is a rightist country. We also learned after the so-called “Nye Initiative” that closer integration of U.S. and Japanese military operations can complicate our own planning just as easily as unilateral increases in either Japanese or American assets in the Pacific Ocean. In this regard, we must watch carefully ongoing American and Japanese cooperation on missile defense and the so-called “air-sea battle.” The recent apology by the Japanese government to Korea but not to China indicates that the “China threat” elements exist in both major political parties in Japan. The Japanese business community has not been as helpful to us as we would have hoped, given Japan’s huge dependence on our market and our piece of the supply chain. One stratagem we will try is negotiating on controversial issues such as the East China Sea to dilute the China threat theory, while sticking to our principled position that the area around the Diaoyu [Taiwan calls them Diaoyutai and PRC calls them Diaoyu] islands has always been and will always be Chinese territorial waters.