'Dealing with China', by Henry Paulson

This book is a must-read for anyone who deals with China and possesses an aircraft carrier or two. Former US Treasury secretary Henry (Hank) Paulson has for more than a decade enjoyed a level of meaningful access to the Chinese elite that may be unrivalled among westerners, with the single exception of Henry Kissinger. For that reason, Dealing with China is an important book. But the dealing that Paulson describes is of an order that is hardly likely to trouble mere mortals. His world is one of private jets (on one occasion escorted by F-16s on each wing), billion-dollar agreements with Chinese corporate titans and exclusive meetings with Chinese leaders as a top official in George W Bush's White House. Thus the book's main strength is also a shortcoming; his extraordinary experience of China yields lessons that may only be useful if you happen to govern a great power.

For general readers, the payback from 400-odd pages is more likely to come in numerous asides revealing a human authenticity that Chinese leaders usually strive to expunge from the images they present to the world.

Some of his stories are truly thought-provoking. One episode started at the dead of night on September 11 2001, when Paulson, then chief executive of Goldman Sachs, was in a private jet over the Pacific flying towards China. The pilot emerged from the cockpit to inform him of an urgent call from headquarters. Planes had flown into the World Trade Center, a colleague told him as he listened to the shouts of Goldman staff in the background.

Paulson's first reaction was to order the plane to fly back to New York, but he was thwarted by the closure of US airspace to all but military aircraft, leaving him no choice but to go on to Hong Kong. After a sleepless night, he decided to go straight into a day of meetings. "I wanted to lead by example," he writes. "I didn't want anyone to think we could be stopped by these attacks." But the first meeting he had that day was with Gao Yan, chief executive of China's State Power Corporation, who appeared supremely unsympathetic. "When I mentioned the attack, trembling with shock and sorrow, he didn't say a word. I mean not one word," Paulson writes.

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At other points, the book glimmers with both the craft and unintended humour that Chinese diplomacy throws up. On one occasion the Chinese side, led by Wu Yi, a senior official who was responsible for commerce, told Paulson she wanted to arrange a treat for him. The nature of it was kept as a surprise until Paulson was led on to a balcony in central Beijing after dark one evening and shown a vista over the Forbidden City, the imperial palace of dynastic emperors. Only this was no ordinary sight: all the lights inside and around the complex had been turned on. "The vast old palace complex, witness to centuries of empire, war, revolution and protest, was ablaze in a welcome just for us," Paulson writes.

Another Chinese gift, however, was more tricky to handle. The US delegation were watching a fireworks display on a cold evening and Paulson's teeth were already chattering when the Chinese gave their guests Red Army coats with fur collars and star-stamped brass buttons. "I craved the warmth but didn't dare put mine on. What a photo that would have made: the US Treasury secretary dressed like a Red Army soldier! Talk about the Manchurian candidate."

Such vignettes - and there are many of them - provide a welcome leavening to the heavy loam of dealmaking details, statistics, names, titles and acronyms that Paulson deploys to reinforce a central argument. Indeed, from the preface onward, the author is straightforward about the book's aim.

"China has become as much a source of concern as a source of awe," he writes. "We find ourselves at cross purposes with an ever more competitive China as it flexes its newfound muscles in a world of markets and in bitter territorial disputes with its neighbours, while it seeks to challenge the US-led order in Asia and in aspects of the system of global governance that has prevailed since World War II," he writes.

<>His prescription for the US to meet these multi-faceted challenges is simple: clear-eyed, constructive co-operation. China may be a formidable competitor, he says, but the US should not shrink from competition. The idea that the "China model" represents a superior form of capitalism that is triumphing over the pre-existing US-led system is a misconception that haunts the way some people view the relationship. Americans should root for China to succeed, he argues, because it is in the US self-interest to do so. Almost every global challenge of the current era - from environmental and economic issues to food security and nuclear proliferation - will be almost impossible to solve unless the world's two most important powers can work together.

But although he is clear about the direction the US should take, he is often critical of the way Washington conducts the relationship. He forwards eight principles to guide US policy makers toward fruitful co-operation with China. Some of these - such as supporting moves within China for greater transparency and adherence to international standards - are reiterations of longstanding US policy. Others, though, seem more distinctive. Urging the US to "Speak with One Voice" with official Chinese interlocutors, he decries the confusing array of messages that democracies often communicate to Beijing. He also suggests that Washington should try to "Find China a Better Seat at the Table", meaning it should pro­actively support Chinese leadership roles in international groups such as the World Trade Organisation.

In summary, Paulson's prescriptions all tend toward forging better relations with China by supporting what China wants. This dealmakers' formula may win friends in Beijing but will be less popular among US allies in Asia - such as Japan - that have deep misgivings over their giant neighbour's territorial claims and strategic ambitions. And for those of us who do not control the levers of state, the lessons Paulson takes away from an extraordinary and privileged association with China are likely to remain somewhat academic.

Dealing with China, by Henry Paulson, Headline, RRP£25/ Twelve, RRP$32, 448 pages

James Kynge is the FT's emerging markets editor and a former bureau chief in China

Photograph: Reuters

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