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The China Shock: So who’s afraid of red dragon?

It not only has the wherewithal to tender a serious purchase bid for brand-name US oil companies like Unocal, it now harbours enough Treasury bonds to make it one of our government’s most prominent creditors — and it looks to be emerging as a major military and economic power.

China Shock could not have materialised had, over the years, the US news media and political establishment (generally speaking) properly prepared the American people for the realisation and acceptance that the China story has grown far beyond the usual dreary and predictable narrative about jailed dissidents, treacherous Communists and government inefficiency.

Once something of a very-sprawling joke in the eyes of the US media and public, China has now miraculously morphed into a major military, economic and espionage threat.

In fact, it was the infamous Cox Commission Report that floated just such a view in 1999. The general picture that report conveyed seemed to be one of Chinese spies buzzing around virtually every beehive of U.S. industrial, military and technological activity. But after a few weeks of furious media-generated Red Scare, the charge couldn’t stick — China wasn’t quite there yet in the US imagination as a major menace.

Now, however, the growing public realisation of China’s actual economic and military progress has suddenly made anti-Beijing talk seem less like warmongering and more like the stuff of national interest. Critics in the European Union as well as the United States are getting on China’s case for what they regard as excessive international trade imbalances driven in large part by its undervalued currency and remorselessly predatory pricing methods.

And so this week US trade negotiators, under pressure from US textile producers, are meeting with Chinese officials in San Francisco in search of a textile-war cease-fire. The former wants the latter to reduce exports to the US that consistently undersell U.S. manufacturers — but that one should note — also reduce prices to US consumers.

And in Washington, the Pentagon has raised alarms about China’s continuing military buildup, while the influential US-China Economic and Security Review Commission has been working hard to raise doubts about everything from the credibility of China’s political reforms to the quality of stock offerings by Chinese companies in the US.

Among the anti-China leaders (it is getting to be an increasingly crowded field) is the former Maryland legislator and U.S. Naval Academy faculty member C. Richard D’Amato. But D’Amato is no overnight anti-Red, for years he has served as a consistent sceptic about China. His views are usually taken seriously in the nation’s capital.

This week D’Amato, who prominently opposed the attempt of a Chinese oil company to buy California-based Unocal, presided over hearings that could only serve to scare US investors away from Chinese equities. He suggested that somehow they would prove questionable if not shady investments, because ‘investors may not have sufficient information to make informed decisions about the risks of these investments.’ D’Amato expressed the hope that the new chairman of the US Securities and Exchange Commission would probe this potential ‘China bubble’ thoroughly.

Turns out, that new SEC chairman is none other than you may have guessed it — Christopher Cox, of Cox Commission infamy. The Republican congressman from Orange County, California, is very sharp — a University of Southern California graduate who went on to Harvard Law. But Republicans cruelly used him in 1999. That Cox Commission report, in hindsight, seems far more political (suggesting that the Democratic Clinton administration was soft on China) than substantial (China does spy on us — so do other countries). One worries if the ambitious Cox will find himself used again this time by vested interests in America who stand to gain economically or politically from a re-floated national obsession with Red China.

But now the otherwise able Republican congressman from California will get a second chance to prove whether his career is to move in the direction of true American statesmanship or is to return to cheap demagoguery. His decision could go a long way to determining whether America’s current China Shock turns into a national China Scare.

With China’s President Hu Jintao slated to visit the United States next month for a summit with President George Bush, let’s hope that present anti-China trends in the US do not continue at its present rate. With the way things are suddenly developing here in America, the leader of the world’s most populated nation may soon be forced to think twice about the trip.

Tom Plate is a veteran US journalist who has held senior positions at TIME, CBS, The Los Angeles Times and Newsday