Audio: Standing before a panel of US and Chinese flags, President Obama talked about the United States and China in equal partnership to build the 21st Century.

President Obama: Some in America think that there is something to fear in a rising China. I take a different view.

Audio: Today a Wall Street Journal editorial by Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner calls for a new dialogue with China, nearly conferring superpower status on China, arguing that simply put, few global problems can be solved by the US or China alone.

MK: This week the United States and China sat down for the strategic and economic dialogue, with China still calling for the end of the US dollar dominated international system with two trillion forex reserves and counting, a large amount of that in US Treasury bills and America’s still in the financial doghouse.

What has emerged from these talks?

Of course we’ll look at the unrest in Central Asia, the Stern Hu case and Hillary Clinton claiming that the US is ready to re-engage with Asia.

Hillary Clinton: The United States is back in South East Asia. President Obama and I believe that this region is vital to global progress, peace and prosperity.

And we are fully engaged with our ASEAN partners on the wide range of challenges confronting us.

MK: Welcome back.

This week, no interviews as I am still in China and unable to sweet talk the powers that be, like a few other people around the place at the moment. But as there is so much going on I thought it important to give you a brief run down before I am back up and running a bit later.

Let’s start with Hillary Clinton first, because it was with some interest I read that the US Secretary of State had proclaimed the US was ready to ‘re-engage’ with Asia. She was speaking in Thailand at the ASEAN Regional forum.

I am not sure what everyone else’s reading has been but I am pretty sure the US has been ‘engaging’ with Asia now for at least eight years.

We can discuss what ‘engagement’ means, but if this means ensuring that diplomatically... you have hub and spokes allies across Asia, a military policy with Asia at the forefront, and a security policy that seems pretty interested in North Korea and China’s military build up, then I would have thought ‘engaging’ is precisely what has been taking place since 2001.

However, the US has said it is now ‘officially’ re-engaging so let’s watch for what that means precisely in the next few months.

America said ‘We’re Back’.

America, we are sure you’re back, but please, could we have something a little more original to play with here in the Asia Pacific? It sort of sounds like you’re announcing a Rolling Stones Reunion Tour.

Now, the US-China Strategic and Economic Dialogue, as opposed to the former ‘Strategic Economic Dialogue’ has just taken place in Washington.

For those of you that don’t know, it was a two day event designed to get the US and China talking, and it would seem they do need to talk.

As I said earlier, the Chinese have invested up to 700 billion in US treasury bonds, so they have a vested interest in the US economy.

The U.S. pledged to curb the budget deficit and boost household savings, and China committed to rely less on overseas demand for its goods. Or so says the news reports say.

The Chinese Central Bank governor said China will wait for the U.S. to begin to pull back on its stimulus measures before deciding whether it will do the same.

“If we see that the U.S. starts to exit its expansionary fiscal and monetary policies, then China will see what it will do at that time,” Zhou said at a press briefing today.

The People’s Bank of China governor also said that “I believe that the Federal Reserve of the U.S. will make appropriate arrangements to prevent high inflation.”

Hmmmm. So is that an agreement? It doesn’t quite sound like it, does it?

More importantly was the resumption of US-China military dialogue. US head of Pacific Command Admiral Timothy Keating said there was clear agreement on the need and desire to resume talks.

Yes, that is true Admiral Keating. I think it is called North Korea.

He also added that the US welcomed the news that the Chinese Ministry of Defense plans to launch an official website on Aug 1st, the Chinese Army's 82nd birthday, saying such information "could be very beneficial".

"This goes to our desire for more transparency and better understanding of Chinese military intentions," he said. "Developing trust and mutual understanding is critical."

Let’s see how far that goes in the current climate.

And the economic talks concluded by saying that both would work to oppose protectionism; that there would be more representation from developing countries in international financial institutions and the US would work to reduce restrictions on hi-tech exports to China.

For those of you that don’t know, there have been US restrictions on hi-tech exports to China, the concern being that they may be used for military purposes.

As for climate change, there was a memorandum of understanding signed, but not really much detail revealed except there are going to be more talks, and more summits.

To the riots in China’s Western provinces, Xinjiang to be precise.

I wrote a small piece about this for New Matilda http://newmatilda.com/contributor/7012 but if you have followed my stuff on China, the violence in the Western provinces wasn’t exactly unexpected.

The history of this is fascinating and great powers have had a field day causing trouble for China in this region for centuries, and by that I mean Russia and the Western powers.

The Chinese are saying the ringleader, Rebiya Kadeer of the World Uyghur Congress is US based, and has links to the National Endowment for Democracy and organised attacks on embassies around the globe at the time of the violence.

What was interesting were the claims in the Chinese press that this had to do with energy and geo-political interests in Central Asia. A China Daily article clearly laid out the interests of China in maintaining stability in Xinjiang, and the interests of Washington in increasing instability in this area.

It said: ‘Eurasian cohesion from Russia to China across Central Asian countries is the geopolitical cohesion Washington most fears. Instability would be an ideal way for Washington to weaken that growing cohesion of the Shanghai Cooperation Organization nations.’

And: ‘Some of China's most important oil and gas pipeline routes pass directly through Xinjiang province. Energy relations between Kazkhstan and China are of enormous strategic importance for both countries, and allow China to become less dependent on oil supply sources that can be cut off by possible US interdiction should relations deteriorate to such a point.’

So geo-politics finally makes the papers. I can’t imagine that nationalists within China would be too happy about all of this. Watch this space.

The latest is that Rebiya Kadeer is off to Japan and Australia, good allies of the United States in Asia.

Following closely on the heels of the unrest was the arrest of two businessmen working for Rio Tinto, an Australian mining company that had been in talks with China over iron ore prices.

There was talk within Australia whether this was payback for the collapse of a deal that had a China’s Chinalco taking a 19 billion dollar or 18% stake in the company.

Payback is very hard to prove, but what isn’t hard to prove is that China’s access to resources in a weak global economic climate is vital. With increasing security tensions in the region it also takes on the air of national importance. And thus, any attempt by others to reveal information concerning their bottom line in iron ore negotiations is serious enough for authorities to get involved.

And all of this is again taking a nationalist dimension - Australian politicians played the race and national interest card endlessly during the debate over Chinalco’s stake in Rio Tinto.

That said, it can’t be good for China’s reputation to be locking up international mining executives in this climate, and perhaps stimulating domestic demand is exactly what they’ll need to focus on in the near future.

India has decided to launch, and announce the launch, of its nuclear submarine, ratcheting up the arms race in Asia that I have talked about plenty of times.

To quote the Sydney Morning Herald: ‘This will mean India has the capacity to fire nuclear weapons from land, air and sea.’

Now, India, who is this aimed at? And aren’t there enough nuclear submarines trolling around the place at the moment? Or are you concerned about something else in the Indian Ocean?

If Australia has been America’s sheriff in the Asia-Pacific, India has had its own role in South Asia. Its growth rate is projected to pass that of China’s in 2010.

Something else that caught my eye was Japan’s 2009 Defense Paper. It talked about the need to build up its maritime defense capabilities; to develop a permanent law on sending defense troops overseas, and an increase in Japan’s military budget. Which is interesting because last time I looked, it had the fifth largest military budget in the world, bigger than Britain’s, which is interesting for a self-proclaimed ‘pacifist’ nation.

An academic from Peking University was quoted as saying: ‘In the long run Japan’s biggest security concern will remain China' adding that Japan actually started to consider China a major concern since the late 1990’s.

And of course that is the subject of my interest: when did China become a ‘strategic’ adversary in Asia, and why?

I am going to leave you with a few quotes from my readings on US-China relations over the last few months: there are some great lines in foreign policy papers that constitute a simple paper trail indicating possible future conflict between these two powers.

Hopefully of course I am wrong.

The first quotes are to do with North Korea.

Wang Jisi: ‘Nuclear power so close to the very centre of China’s territory would not only provide lasting problems for China’s security: it would also provide the rationale and pretense for other regional players to develop nuclear arms, notably Japan and Taiwan’.

Jonathon Pollack: ‘A busier ‘crowded’ security environment, especially one involving unprecedented military activities near Chinese territory in which China is not vested, would be decidedly unfavorable to Beijing’s interest’.

I think we have a ‘crowded security environment’ at the moment.

And Evan Medeiros: Strategic Hedging and The Future of Asia-Pacific Stability.

'The United States and China are shadowboxing each other for influence and status in the Asia Pacific. Rhetorically pulling punches but operationally throwing jabs, both are using diplomacy and military cooperation to jockey for position as the regional security order evolves.

Driven by China’s ascending role in Asian security and economic affairs and the United States’ desire to maintain its position of regional preponderance, policymakers in each nation are hedging their security bets about the uncertain intentions, implicitly competitive strategies, and potentially coercive policies of each other.

To hedge, the United States and China are pursuing policies that on one hand stress engagement and integration mechanisms and on the other, emphasize realist-style balancing in the form of external security cooperation with Asian states and national military modernization programs.

Neither country is openly talking about such hedging strategies per se, especially the security balancing, but both are pursuing them with mission and dedication.

U.S. and Chinese leaders regularly recite the bilateral mantra about possessing a “cooperative, constructive, and candid” relationship, even as policymakers and analysts in each nation remain deeply concerned about the other’s real strategic intentions.

Such balance-of-power dynamics certainly do not drive each and every U.S. or Chinese policy action in Asia, but mutual hedging is fast becoming a core and perhaps even defining dynamic between the United States and China in the Asia-Pacific region.'

That was written by the way, way back in 2005.

And my last quote from Michael Yahuda, from something he wrote called ‘The Evolving Asian Order’: ‘The United States will continue to be the principal guarantor of order in East Asia for the foreseeable future.’

Thanks Michael I couldn’t have said it better myself.

Thanks for listening, have a great week.