CHINA: WAKING UP TO THE NEXT SUPERPOWER

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Beijing has continued to test atomic weapons, transferred nuclear-arms technology to Pakistan and sold missiles to Iran. Clinton is still deciding whether to impose certain economic sanctions on China to punish it for the Pakistan deal, as the law requires, or to waive such penalties as he has in similar circumstances. On the trade front, there is also disappointing news: estimates of the U.S. trade deficit with China range from $20 billion to $35 billion, depending on how Hong Kong transshipments are counted; moreover, Beijing has failed to vigorously enforce agreements with the U.S. that outlaw piracy of videos, CDs and software.

Meanwhile, despite assurances that it seeks a negotiated solution, China has rattled its neighbors by claiming sovereignty over the Spratly Islands in the South China Sea, where six countries have competing territorial claims. It has also repeatedly interfered in the affairs of Hong Kong, the British colony that will return to Chinese sovereignty next year, supposedly with a "high degree of autonomy."

Beijing is also building up its military. In 1979 Deng Xiaoping told the generals and admirals of the People's Liberation Army that they would have to wait 10 years before they could collect their share of the wealth created by modernization. With the military's needs relegated to the lowest rung in his grand reform scheme, the defense budget was effectively frozen, and manpower was pared down from 4 million to 3 million. "Now the bill has come due," says a Washington analyst, "and the post-Deng leadership is paying."

Washington knows China is playing catch-up and is not overly worried about the military expansion: by most estimates it will be at least two decades before Beijing has the capacity--specifically a blue-water navy--to project power at a distance. That could change, of course. Last year an unofficial study, not endorsed by the U.S. Defense Department, concluded that "Chinese military officials believe the present gap in their capabilities is temporary and the long-term goal is to be a global military peer of the U.S." The Clinton Administration is assessing whether to sell China technology to build turbine engines that some experts think could be used to power cruise missiles. Such weapons, according to U.S. Navy officials, played a decisive role in a classified war game, simulated in 1994, in which Chinese forces "defeated" the U.S. Seventh Fleet in 2010. Later this year, the National Defense University in Washington will publish a study that estimates that China could surpass the U.S. as a superpower in 35 years.