First off, the new year here in Beijing has started with a relatively nasty snowstorm (yesterday) and deep freeze (today/tomorrow). Since I don’t drive, I could care less about the traffic problems, but I suspect that there are a lot of grouchy people coming back to the office this morning.

Unfortunately, I fear that this unpleasant atmosphere is going to carry on throughout 2010. Things don’t look so cheery for China’s relationship with the U.S. and EU, and while I do not see anything dramatic occurring in the short term, there is also little to be enthusiastic about.

Note that I’m not referring to the general business climate, probable GDP numbers, etc. That’s another story. No, I’m talking about these important bilateral relationships – China’s interaction with other nations.

Why so glum?

First, climate change. I have about 100 news articles sitting in my Inbox in case I decide to post on this topic. So far, I haven’t felt the urge, despite the significant developments last month in Copenhagen. The reason for this is my confusion over the PR spin, watching the “blame game” post-conference, and essentially waiting to see what happens next.

If you were tuned out last month, the Copenhagen conference was, in the minds of many, a wasted opportunity at best. Some say that it was at least a step in the right direction, others opine that it was too little, too late, and that we’re all going to drown someday, which is kind of a bummer. (I’ve never been a strong swimmer.)

To me, the second-most important result of Copenhagen was the finger pointing. A whole lot of it was in the direction of China, and to the extent that the “story” of the conference was that an arrogant China put its needs over those of the rest of humanity — well, that’s not so good. The pushback from the usual domestic sources over here has been of the usual blunt, ineffective and tone deaf government variety.

The big worry is that the U.S. and/or EU get pissed off and look to non-traditional solutions, such as carbon taxes on imports. These are extra-legal solutions (in my opinion), but bilateral relations will get very messy quickly if such policies gain ground.

Second, and related, are ongoing trade tensions. Again, nothing dramatic on the horizon, but things don’t seem to be getting any better. If we get some double-dip recession action in the U.S. this year when stimulus money runs out, then all of these trade issues become even more important politically.

China’s economy hasn’t done all that much rebalancing yet, and with a rather precarious situation looming out there with respect to real estate and securities, the export market is still very important. If the government response is to protect/encourage that market as much as possible through domestic incentives and trade barriers (i.e., the same kinds of things I expect from the U.S. and EU), then the name-calling and tit-for-tat will continue, if not worsen, this year. Oh joy.

Third, of course, is the RMB. Nothing much has changed, which is the problem. All of the people that have urged patience over the years (myself included) have run out of patience themselves. Seeing multiple columns from the usually moderate Paul Krugman (on econ issues) on the value of the RMB and its effect on U.S. trade and macro economy is worrisome. Krugman is usually portrayed as a denizen of the political far left, but he is quite moderate on international trade and monetary policy matters. I find him a pretty good belweather on the RMB debate, so if he’s run out of patience, expect a lot of U.S. politicians to once again turn up the heat on Beijing.

In general, the big concern here is that international opinion of China is starting to develop into a theme: China is screwing over everyone else to further its own interests. That’s the narrative, anyway.

Sure, China has always adopted a realist foreign policy, so this is nothing new. Additionally, many arguments can be made that most other countries are following their own interests as well, and that China should not be compared unfavorably. This is going to sound trite, but I think the key to all of this for a nation is to get the best deal it can, in other words give up as little as possible, while ensuring that it can still portray itself as working toward the greater good. In other words, be a realist during the negotiations, and then an idealist or internationalist during the press conference afterwards. The last thing you want to do is to be marginalized politically as the “bad guy.”

Unfortunately, that is the narrative that is emerging. If China becomes the international “bad guy” on climate change and international trade, this will be a major setback in its global charm offensive and will impact what China can accomplish on the world stage. I think this is primarily a PR matter, as opposed to policy. But if China fails to step up on the PR front, there could be some major policy results, particularly with respect to trade, that could lead to a ratcheting up of trade protectionism and, possibly, much worse treatment for foreign investors over here.

Well, that’s enough unsubstantiated pontificating for one morning.

UPDATE: According to John Pomfret, some of the US-China tensions will be front-loaded this year. Two words I hate to see in the news: “weapons” and “sales.” Always a stupid move when the U.S. gives Taiwan weapons, but hey, I’m sure someone’s making a healthy profit off the deal, and that’s what matters most in D.C.

Coupled with the usual inexplicable bowing and scraping to a minor, yet famous, exiled religious leader, and you’ve got a recipe for a lot of name calling and diplomatic retaliations.

Looking forward to all that.