Economy, not rights, rules the new China-US world

Now it's Barack Obama's turn to deal with the China challenge, and this time, it's all about the money. As the global financial system teeters, China, with its $1.9 trillion in foreign reserves and slowing but still strong economy, offers a potential lifeline.

The crisis that Obama is inheriting has pushed aside the old points of contention and underscored how profoundly the power equation between Washington and Beijing has changed.

China now owns over half-a-trillion dollars in U.S. government bonds, more than any other country, and Washington needs Beijing to continue buying them to help finance the national debt and the $700 billion financial industry bailout.

And while China's economy is heavily dependent on exports to the U.S., it is also a growing market for U.S. products, making trade retaliation--long a threat wielded solely by Washington--more of a two-way street.

"The power shift in China-U.S. relations is making them more interdependent," said Cheng Xiaohe, an international relations scholar at Beijing's Renmin University. "This next president will need to exercise greater caution."

When Clinton first ran for the White House, he made human rights an issue, accusing then President George Bush of "coddling" the communist dictatorship. But during his presidency, the administration moved to uncouple human rights from trade privileges--a milestone in normalizing ties between the two powers.

During Bush's presidency, as Chinese exports boomed, China's currency regime and trade surplus hit $163.3 billion in 2007, becoming an increasingly fractious political issues, even as the question of human rights was moving to the fringes of the public agenda.

In the Barack Obama-John McCain race, human rights figured early when Tibetan unrest flared and Obama called on Bush to boycott the Beijing Olympics. But the issue soon faded from his talking points, and when relations with China briefly resurfaced, the context was purely economic.

During the campaign, Obama described China as "neither our enemy nor our friend; they're competitors." He called for broad cooperation with Beijing while repeating the accusation that the trade surplus was stoked by a Chinese currency kept artificially cheap.