Americans are happy with their new President Elect, Barack Obama.  As for the rest of the Democratic administration that now controls both the House of Representatives and the Senate, we’ll have to see.  When Democrats control this many levers of power in Washington their first impulse is to move pretty sharply to the left.  Unfortunately that will put US leadership squarely at odds with Chinese leadership.  On the other hand, the Obama administration is going to be so beset with domestic crisis and foreign threats that China is looking like an old, trusted partner.  Yeah, times have changed that much that quickly.

Obama comes to office weighed down by enormous challenges and responsibilities – and he will doubtless focus on the US economy and Iraq first.  But those of us with business interests in China are already anxious about how the new administration will deal with the subtleties and peculiarities of managing relations with the Chinese Communist Party.  We know from hard experience that good intentions mean little when it comes to US-Sino relations.  Small slips can lead to violent schisms.  Sure, the policy statements will be grand and ambitious.  But when House Speaker Pelosi or Obama’s still unnamed cabinet officials get in front of an open microphone, how much damage will they do until they figure things out and learn to deal with China?

Put another way, what can go wrong in the first 100 days?

            Territorial issues.  (Note:  DiligenceChina has found itself on the wrong side of China’s fire_wll  a few times in the past, so we’re gonna be kind of oblique here.)  The Island and the Mountain Kingdom.  Westerners constantly under-estimate just how sensitive these issues are to Beijing, and Pelosi has already staked out a position that really annoys the party faithful in China.  It disturbed Beijing when she was a relatively minor player – now that the Democrats are running things, a few off-hand comments could cause major negative reverberations for years to come.  Sure, the grown-ups on Capitol Hill will craft a fine set of policies – but one or two stupid remarks to the media will undo years of diplomatic and commercial efforts.

            Human rights.  Bipartisanship and ‘reaching across the aisle’ in Congress sound great, but it’s a Democratic administration now and they are going to move the political and diplomatic center of the nation to the left.  That means that human rights are back on the agenda.  Look for the Dems to celebrate the dismantling of Guantanamo Bay detention facilities with a holier-than-thou attitude towards human rights around the world.  Every year the State Department issues its boilerplate condemnation on the state of human rights in China, and for the last few years they have been roundly ignored by just about everyone.  Well, not any more.  You may not care, your Chinese counter-parties may not care and your partners, clients, staff, and suppliers may not care – but that’s not really the key to this thing.  A Democratic congress is very likely to put a spotlight on the China human rights debate again.  

            Ignoring China.  Ironically, the single biggest danger facing the new administration vis a vis China is overlooking it completely.  Those of us involved in Chinese business tend to see the US-China relationship as vital, valuable and high-maintenance.  If you are President Elect Barack Obama’s transition team, however, you probably view China relations as ‘not broke’ – so they don’t require much attention.   With the economy, Iraq, Afghanistan, Russia, Georgia, climate and a host of other fires to put out, the transition team may put China policy on the back burner and not get around to it for months.  Sure, this seems like a great option for you and me, but the old guys in Beijing are apprehensive enough about this administration.  We all know the drill about how important relationships are to the Chinese.  It’s true on the managerial level – and it’s even truer on leadership level.  The new administration ignores China at our peril.

            Blaming China for unemployment and other economic woes.  The Chinese party line is the US caused the global recession through greed, irresponsibility and lack of oversight – but they have pretty much held their tongue and avoided criticism.  If Democratic leaders start blaming China for stealing US jobs (as happened on the campaign trail) or undermining the economy, we could see things get a little nasty.  If it is accompanied by trade restrictions or refusal to allow Chinese corporates to buy US firms, we could find ourselves in an ugly little tit-for-tat spiral of trade barriers and bureaucratic resistance.

             Expecting too much from China.  On the other hand, the Democrats may try to embrace China as their newly discovered rich uncle who they expect to save the day. China has little interest in doing this – and will resent being asked to pick up the check to a banquet it wasn’t invited to - especially when it’s own economy is having problems.