The Sydney Morning Herald

By Nick O'Malley and John Garnaut

Late one afternoon in mid-February, China's president-in-waiting, Xi Jinping, stood on the front verandah of Sarah Lande's home on a bluff that rises over the little town of Muscatine, Iowa, and looked out over the broad slow flow of the Mississippi River into Illinois.

Over tea, in the rather grand front room of the Landes' polished Victorian home, Xi told Sarah Lande he had dreamt of the Mississippi since reading Mark Twain as a child. Being one of the most powerful men on earth, Xi was not the only guest. Lande remembers Muscatine's mayor, China's ambassador to the United States and assorted Chinese ministers. There were also 14 men and women to whom Lande refers as the ''group of friends'' who Xi had met when he went to the region in 1985 as part of an agricultural exchange.

When we visited earlier this month, Lande showed off the group photo taken on her stairs, and standing by the fireplace where Xi had stood, she explained how he had said: ''For me, you are America.''

It is easy to imagine how the pretty rural prosperity of Muscatine might have impressed a Chinese provincial official less than a decade after the end of the Cultural Revolution. ''We treated him what we like to call 'Iowa nice','' Lande explains, referring to a form of hospitality that tends to include warm, plain talk, corn and pork.

Xi might not feel so welcome now, at the end of a long and bitterly fought election campaign in which China has sometimes been used as a cipher for American fears of economic, social and political decline.

In ads and speeches, the Republican candidate Mitt Romney has accused President Barack Obama of being too soft on China, and has vowed to label the Chinese as currency manipulators ''on day one''. The Obama campaign has portrayed Romney as a vulture capitalist who has enriched himself by exporting manufacturing jobs to China.

In one anti-Romney ad, a worker explains how the new owners of his company instructed staff to remove the American flag.

Allegedly non-partisan independent groups have been on the attack too. Ten days ago, a group called Citizens Against Government Waste revived a highly controversial ad set in Beijing in the year 2030, in which a professor is lecturing a class on why great nations fail. ''America tried to spend and tax itself out of a great recession,'' the professor explains in subtitled Mandarin.

''Of course, we owned most of their debt. So now they work for us.'' The professor titters, the class laughs.

In these dying days of the deadlocked election, both parties have focused on Ohio, where Obama led by just 1.9 points in the Real Clear Politics poll average on Tuesday.

All indications are that yet again this state could decide which party wins the election. There is also evidence that Obama is still enjoying some advantage among the white male demographic as a result of his bailout of the auto industry.

This week Romney's campaign attacked, releasing an ad claiming that the bailout had led to Chrysler, which had been bought out by Fiat, transferring jobs to China.

The ad is not entirely true, as the plant in China is expanding to increase output to feed demand from the burgeoning Chinese middle class. Jobs are not being transferred from the US to China, they are being created in China. But electoral politics is a killing ground for such nuance, and though the ad has been torn apart by the fact-checkers that have been so much a part of this campaign, the response of Romney's team has been to ramp up their broadcasting in Ohio. Clearly, strategists believe it is working.

Two days after the November 6 US election, the Chinese Communist Party will begin its own leadership transition at the Great Hall of the People. The 18th Party Congress, on November 8-14, will be immediately followed by the unveiling of the new general secretary, Xi Jinping, the expected new premier, Li Keqiang and their team, on November 15. The personalities and positions that are set in Washington and Beijing will shape the world.

The coincidence of a US and China leadership transition is a once-in-40-year event. And it is happening at a historic moment, when China is challenging the US position as the world's sole superpower.

If Xi can keep the ship on course, the Chinese economy may well overtake the US as the world's largest economy during his decade-long term. Every country in the region is scrambling to exploit, hedge and otherwise adjust its bearings.

''The weight of the world's economy is genuinely moving in our direction,'' said Prime Minister Julia Gillard this week, unveiling her new white paper on the Asia century. ''When we map the centre of gravity of global consumption, we see it is shifting east by more than 100 miles a year.''

Inevitably, where economic power goes, strategic and military power follows. The global centre of military firepower is shifting towards this region almost as fast as GDP. Canberra has been at the vanguard of building and reinvigorating a latticework of regional security relationships, anchored in the might of the US. A year ago, Obama chose the Australian Parliament as the venue to announce his foreign policy ''pivot'' to Asia.

''The possibility that we could devolve into a much more confrontational relationship is at one of the highest points than at any time since the opening of relations,'' says Bates Gill, the newly arrived chief executive of the US Studies Centre at the University of Sydney, who is also an expert on China security issues.

The Obama administration and the Gillard government have been at pains to avoid naming China as the reason. But others are not so reticent.

''Australians view themselves as facing a strategic threat — this time from a China that is growing in every way and very fast, and that shows every sign of wanting to expand territorially as well,'' writes Pentagon consultant Ed Luttwak in a new book, The Rise of China vs. the Logic of Strategy.

Dennis Richardson, the outgoing secretary of the Ministry of Foreign Affairs, told his new cadets earlier this year that the rivalry between the two powers would last longer than the Cold War, and it would not simply ''evolve so you can tie a ribbon on top'', according to a source in the room. ''The dynamics of the US-China relationship will shape your entire careers,'' said

Richardson, who has recently moved to run the Department of Defence.

The realignment of diplomatic and military power will be more complex and fluid than the Cold War with the Soviets. Growing US-China rivalry is accompanied by growing interdependency.

It is no coincidence that Richardson sent two of his top China hands to key American posts. Graeme Fletcher, the former deputy head of mission at the Australian embassy in Beijing, is now the deputy in Washington. The international adviser to the former prime minister Kevin Rudd, Scott Dewar, is consul-general in Honolulu, where his job is to work with the US Pacific Command as it sends its six aircraft carrier groups, 180 ships and 1500 aircraft across half of the globe.

In June, in Singapore, US Defence Secretary Leon Panetta flagged a ''rebalancing'' that would see 60 per cent of US naval assets positioned in the Pacific. And in a fortnight from now, Panetta and the outgoing US Secretary of State, Hillary Clinton, are scheduled to fly to Perth for the ''Ausmin'' strategic dialogue. They are pencilled in to dine with Gillard on November 14, after discussions with Foreign Minister Bob Carr and Defence Minister Stephen Smith. Gill says both countries will likely be ''quietly exploring'' ways to increase intelligence co-operation, upgrade co-operation in operating space-related assets from Australian soil, and also enhance the capacity to maintain and resupply American naval vessels. It is unlikely that they will use the occasion to act on a suggestion in a recent report to the Pentagon that the local deep-water port, HMAS Stirling, will be expanded to accommodate US aircraft carriers.

The Australian ambassador to Beijing, Frances Adamson, said this week that Smith would not be making any surprise announcements about deepening military ties. His press releases, she said, ''are not necessarily the sorts of things that make you swing into print and write front-page stories''. Not, at least, on the eve of Xi Jinping's rise to power.

Until the start of this year, the consensus among political analysts was that China would have a smooth leadership change with any differences safely locked away behind closed doors.

This transition, however, is the first in the history of the People's Republic that has not been orchestrated by the founding fathers of the 1949 revolution.

It is shaping up as an epic contest at a moment of growing social, economic and political tension and uncertainty. And whereas America's presidential candidates slog it out in public, with clear and independently enforced rules, China's political adversaries face off inside the same tent and without enforceable ground rules.

The scale of the Chinese political scandals that have leaked out from the black box this year make Romney's tax problems look trivial. They include the highest level attempted defection in 40 years; a murder of an English businessman (by the wife of a Politburo member); a top party official covering up his son's death in an exploding Ferrari (reportedly with two semi-clad women) and foreign media exposes that separately found that the families of two of the top leaders controlled billion-dollar fortunes. And then Xi Jinping failed to emerge in public for a fortnight.

''The poor guy — it's like Obama four years ago — facing a completely impossible array of challenges,'' says Professor Geremie Barme, director of the Australian National University's Centre for China in the World. ''That's probably why he took a sickie a few weeks ago,'' he said, referring to Xi's two-week disappearance from the public stage, which remains entirely unexplained.

''It is a state of extreme chaos,'' said one Beijing political watcher, Li Weidong. ''There is nobody in absolute control.''

While the American contestants are sometimes reacting crudely to China's rapidly accumulating power, those in China seem more preoccupied with their own fragility. Chinese leaders have responded by bolstering their personal and collective defences with the strongest, crudest and most dangerous display of nationalism in decades.

Japan has been the target of shrill propaganda and state-sponsored protests, over the Diaoyu/Senkaku Islands, but the spectre of America has been hovering in the background. Chinese politicians and regional security analysts see regional affairs almost entirely through the prism of what they see as the US defending its hegemony against the rising power of China.

That is why many observers see the dispute ''as a time bomb planted by the US'' between China and Japan, a retired senior Chinese official told foreign reporters in Hong Kong this week. ''That time bomb is now exploding, or about to explode.''

If China has emerged as a feature in American politics, then the US is China's obsession, the measure of the country's achievement and also the imagined ''enemy'' by which it defines itself. ''It has been a constant and strong belief that the US has sinister designs to sabotage the Communist leadership and turn China into its vassal state,'' as Wang Jisi, foreign policy adviser to a former Chinese president, explained in a candid report for the Brookings Institution earlier this year.

And while the children of the party elite travel in droves to study in the US, the party itself sees the very existence of the US as a challenge to its monopoly on power. Party leaders seem to have even made a pact with each other — like a gang, or a cult — that they would not succumb to American ideas.

''We have made a solemn declaration,'' said China's low-profile second-ranked leader, Wu Bangguo, last year, ''that we will not employ a system of multiple parties holding office in rotation; diversify our guiding thought; separate executive, legislative and judicial powers; use a bicameral or federal system; or carry out privatisation.''

Later in 2011, Obama responded with his ''pivot'' speech in Canberra, which outlined all the things that China's leaders insist they will resist. ''Certain rights are universal; among them, freedom of speech, freedom of the press, freedom of assembly, freedom of religion, and the freedom of citizens to choose their own leaders,'' Obama said. Within months, the first US marines arrived in Darwin.

If the 2008 US election was about hope and change, this year's ambitions are far more modest. Obama is fighting a rearguard action to protect what change he managed to grind through the recalcitrant Congress he was left with after 2010.

Romney, ignoring his own bold record on health reform as governor of Massachusetts, argues that his business experience qualifies him to cut unemployment, deficit and debt. His broad approach to China seems unlikely to diverge much from Obama's, despite some occasional rhetorical excursions.

In his book No Apology — effectively a job application published two years ago — he describes how in 2006 the former ambassador to China, Clark Randt jnr, told him that many Chinese believed their nation contained an energy, much as an individual does, and that when that energy is blocked, the nation becomes ill.

''When foreigners cut off Tibet, Hong Kong and Taiwan, the theory holds this weakened China and prevented it from regaining its past greatness,'' Romney writes. Mostly, however, Romney is rephrasing the Obama policy.

''It is in our best interests to draw China into the circle of responsible nations and, at the same time, to strengthen our capacity to intervene in Asia, if necessary, to prevent China from imposing its will on independent nations,'' he writes.

One of Romney's advisers is Aaron Friedberg, who served as a national security adviser to then vice-president Dick Cheney between 2003 and 2005.

In September, Friedberg, now a Princeton professor of public and international affairs, wrote in the journal Foreign Affairs that the ''responsible stakeholder'' policy of integrating China was not working.

He said China's at once ''arrogant and insecure'' leadership was prompting increased tension in the Pacific and had failed to help America solve its key diplomatic problems, particularly North Korea's and Iran's nuclear programs.

Friedberg says China's leadership is determined to overtake America as the dominant regional power — a situation he says America could not and should not abide.

He suggests America should adopt a policy of standing its ground, continuing its engagement with China while increasing its force in the region, specifically by increasing its military investment and deepening its alliances in the region, and by supporting arms purchases by those allies.

This sounds like Obama's ''pivot'' in the Australian Parliament, which Friedberg dismisses as a largely symbolic transfer of existing forces. It is perhaps a pivot, but with more teeth.

The heavily contested American election may not change the world. By contrast, in the ''selection'' in China, where there is only one party, the possibilities seem wide open. Xi's treatment of the US will, to a large extent, define the China that he rules for the coming decade. The relationship will shape the world.

On the banks of the Mississippi they reckon that Xi is not a man who pits himself against America.

After his recent visit to Muscatine, The New York Times noted dryly that it constituted something of a propaganda coup, a ''tightly choreographed moment'' intended to deepen his connection with the American heartland.

Well, perhaps. But Sarah Lande does not doubt Xi's sincerity. ''When he walked in the door, the smile, the greeting, the handshake, it was so warm,'' she said.

''We could see he was so happy to see us. It jumped out of him.''

This article was originally published at the Sydney Morning Herald