Washington's sale of arms to Taiwan has produced threats of retaliation from Beijing, but US-China ties have survived worse disputes. America's economic policy towards China poses a far bigger problem. The present US approach is to pound its chest in bilateral meetings – similar to earlier strategies under presidents Bill Clinton and George W. Bush. This is anachronistic, given how different the world looks today, and it is not working.

During the Clinton years, US military power was at its height and the country was experiencing its strongest ever business expansion. America's information technology was changing the world and its chief executives were regarded as global leaders. China, on the other hand, was just emerging from backwardness. It was logical for America's China policy to be heavily bilateral. The US had the leverage to press China to open markets and deregulate banks. Centre stage was the creation of a Joint Committee on Commerce and Trade and a similar forum for financial matters.

As tsar of China policy in the Bush administration, Hank Paulson, Treasury secretary, established in 2006 the Strategic Economic Dialogue between the two countries. This forum consolidated trade and finance and included a broader array of topics and ministers than the two it replaced, but remained strictly bilateral, based on a premise that Uncle Sam could still compel China to modify its policies.