In China's industrial zones today, there is a palpable feeling of the great wheels of this enormous, complex economy grinding down. The northeast city of Harbin is deep in state-owned-industry territory - part of the Heilongjiang region where the then-premier Zhu Rongji was in the 1990s willing to see millions laid off work in order to rationalise and streamline the state sector. Kerry Brown is an associate fellow on the Asia programme, Chatham House, and director of Strategic China Ltd. He is the author of Struggling Giant: China in the 21st Century (Anthem Press, 2007)

Also by Kerry Brown on openDemocracy:

"Beijing's political tightrope-walk" (12 March 2008)

"China on Olympic eve: a globalisation of sentiment" (10 July 2008)

"The Olympics countdown: Beijing to Shanghai" (6 August 2008)

"China changes itself: an Olympics report" (20 August 2008)

"China's nervous transition" (22 September 2008)

"China in 2009: a year for surprise" (14 January 2009)

"China's giant struggle" (5 February 2009)

After that painful period, what is happening now should be easier to digest. Much indeed looks normal. Tourists from Russia - the main source of foreign visitors and businesspeople in Harbin - wander around the newly expanded ice-festival in its stage-set beside the Song river that runs grandly through the city-centre. Yet the burgeoning black-market generates rumours that the tourist-zone Tiger Park is funding itself by running a sideline in tiger-parts for Chinese medicine. Perhaps that is why these fierce animals scuttle away at the first sign of humans; they really do look terrified. 

There are other reversals. It is hard for the college students I talked to who are facing unemployment, the first time in a generation this is happening. The government wants its debts repaid in 2009, on time - not (as in the past) kicked into a never-arriving future. The local colleges are being told to sell more land, or get more fee-paying overseas students (a familiar story to a visitor from Britain). The flash new shopping-centres downtown look emptier than usual. A clothing factory in a nearby town is now heavily reliant on government procurement, after private orders dried up.

In short, the credit-crunch has arrived with a vengeance. The economic trends are feeding the power of local officials, and the undercurrent of complaints about corruption is becoming constant. But in the local institute for the study of Marxism-Leninism there is a feeling of vindication. Academics and researchers who survived through the (for them) tough years when the non-state sector was king and capitalism ruled in all but name now hint that they were right all along. The once-mighty system of western capitalism is in deep trouble. It is a better time than it was to be a true-believing Chinese communist.

Those college students are competing for now prized, because stable and secure, government jobs. China's wealthiest man, the owner of the electrical-appliance manufacturer Goumei, has been arrested - another sign of entrepreneurship in retreat (see "So much for capitalism", Economist, 5 March 2009). The government leaders are talking the more familiar language of "people-centred socialism".

A changing reality

From the perspective of Harbin, the high-level global diplomacy in which this government is engaged seems far away. Yet the leadership in Beijing is acutely aware that its ability to manage the difficulties faced in the People's Republic of China's industrial heartlands is intimately connected with its relationships with overseas trading and financial partners, the United States above all.

This reality was on show when Hillary Clinton and her entourage descended on China on 20-22 February 2009, in her new role as United States secretary of state. The circumstances were notably different from those of her earlier high-profile diplomatic trip to Beijing in 1995, when - as the United States's "first lady" - she participated in the United Nations's fourth World Conference on Women.

This conference was for Beijing part of the long process of its international rehabilitation after the 1989 uprising, and a major morale-boost after the shock of failing in 1993 in its bid to host the Olympics games in 2000 (a decision that went in favour of Sydney by two votes). The event was surrounded by fractiousness: some groups were refused entry to China, others (largely representing minority groups within China) bundled away from the main conference venues. Hillary Clinton was relatively free to express forceful opinions, and in her way foreshadowed the public statement of her husband to his counterpart Jiang Zemin in October 1997 that - on the matter of the Tiananmen events and human rights in general - the Chinese leadership was "standing on the wrong side of history". Among openDemocracy's recent articles on China:

Li Datong, "China and the earthquake" (2 June 2008)

Emily Lau, "Tiananmen, 1989-2008" (4 June 2008)

Li Datong, "Death in Shanghai, law in China" (15 September 2008)

Jeffrey N Wasserstrom, "China's long march to modernisation" (7 October 2008)

Perry Link, "Charter 08: a blueprint for China" (5 January 2009)

Wei Jingsheng, "China's political tunnel" (22 January 2009)

Jeffrey N Wasserstrom, "China's anniversary tempest" (24 February 2009)

Li Datong, "China's stalled transition" (19 February 2009)

Li Datong, "The CCTV fire: a voice without restraint" (5 March 2009)

How times have changed! The then-president Bill Clinton is now the kept man, while his wife has become the world's most powerful diplomat. Moreover, a US scarred by soaring unemployment in an economy in deep recession cannot afford combativeness towards a key global partner. The fact that Hillary Clinton's first overseas trip was to Asia rather than to the middle east or even Europe can be taken to reflect Washington's reordered priorities at a time of exceptional stress. 

The high stakes and high risks that now underlie the relationship were signalled by Clinton's apparently casual but evidently quite deliberate remark to journalists travelling with her by plane that the issues of human rights and Tibet must be put in a larger context that embraces the economy and the environment too. If the momentous area of climate change is included - one where China's involvement is absolutely crucial - the rationale for an approach that favours political calculation over principled commitment is even clearer. 

A cold logic

On their side, Chinese leaders are fully aware that their views and actions are taken more seriously in the world than ever. If Hillary's visit is one indication, Wen Jiabao's brief "trip of confidence" tour of five European states in January-February 2009 is another. (Even having a shoe thrown at him by a disgruntled researcher in Cambridge - a distinction shared with the world's previously most powerful man, ex-president George W Bush - can be seen as a sort of tribute.) The next major indication will be the gathering of leaders of the world's largest economies in London at the G20 summit on 2 April 2009.

There is cold logic at work in the current, delicate phase of elite diplomacy between Washington and Beijing. Both sides are anxious not to let issues such as Tibet or a discomfiting naval spat get in the way. Hu and Wen understand that no generation of Chinese leaders can afford to allow a return to the poverty and bloodshed of the past - but that they also need the rest of the world if they are to avoid this fate.

The message of the good people of Harbin is that it will take more even than a severe economic downturn to deflect them from their thirty-year path of prosperity and development. The thread that connects the Chinese local and the Chinese global is more frayed than it was; but it has not yet broken.