China may have no intentions of using its growing military might, but that is of little comfort for Western countries. From the World Trade Organization to the United Nations, Beijing is happy to use its soft power to get what it wants - and it is wrong-footing the West at every turn.

Former Chinese Foreign Minister Qian Qichen once told me, half with amusement and half with resignation, that military people around the world are all more or less the same. "They can only be happy when they have the most up-to-date toys," he said.

If this is true, Beijing's generals must be very happy at the moment. China has increased its military budget by 7.5 percent in 2010, making funds available for new fighter jets and more cruise missiles. Beijing's military buildup is a source of concern for Western experts, even though the U.S.'s military budget is about eight times larger. Some feel that China poses a threat to East Asia, while others are even convinced that Beijing is preparing to conquer the world militarily.

Nothing could be further from the truth. Unlike, say, the United States, the People's Republic has not attacked any other country in more than three decades, not since it launched an offensive against Vietnam in 1979. And even though Beijing's leaders periodically rattle their sabers against Taiwan, which they refer to as a "renegade province," they have no intention of entering into any armed conflicts.

Unlike many in the West, they have long since recognized that bombs are little more than deterrents these days. In today's asymmetric conflicts, it is difficult to hold on to territory captured in bloody battles. War is an instrument of the past, and Mao's argument that "political power grows out of the barrel of a gun" no longer holds true today.

Soft Is the New Hard

It is, however, true that the Chinese are in the process of conquering the world. They are doing this very successfully by pursuing an aggressive trade policy toward the West, granting low-interest loans to African and Latin American countries, applying diplomatic pressure to their partners, pursuing a campaign bordering on cultural imperialism to oppose the human rights we perceive to be universal, and providing the largest contingent of soldiers for United Nations peacekeeping missions of all Security Council members. In other words, they are doing it with soft power instead of hard power.

Beijing is indeed waging a war on all continents, but not in the classical sense. Whether the methods it uses consistently qualify as "peaceful" is another matter. For example, the Chinese apply international agreements as they see fit, and when the rules get in their way, they "creatively" circumvent them or rewrite them with the help of compliant allies.

But why are politicians in Washington, Paris and London taking all of this lying down, kowtowing to the Chinese instead of criticizing them? Does capturing - admittedly lucrative - markets in East Asia and trying to impress the Chinese really help their cause?

The Communist Party leaders manipulate their currency to keep the prices of their exports artificially low. The fact that they recently allowed their currency, the renminbi, to appreciate slightly is evidence more of their knack for public relations than of a real change of heart. They are known for using every trick in the book when buying commodities or signing pipeline deals, with participants talking of aggressive and pushy tactics. Meanwhile, these free-market privateers unscrupulously restrict access to their own natural resources. They denounce protectionism, and yet they are more protectionist than most fellow players in the great game of globalization.

'21st-Century Economic Weapon'

Beijing recently imposed strict export quotas on rare earths, resources that are indispensable in high technology, where they are essential to the operation of hybrid vehicles, high-performance magnets and computer hard drives. Some 95 percent of metals such as lanthanum, neodymium and promethium are mined in the People's Republic, giving Beijing a virtual monopoly on these resources. It clearly has no intention of exporting these metals without demanding substantially higher export tariffs. In fact, China apparently wants to prohibit exports of some rare earths completely, starting in 2015. Concerned observers in Japan have described the valuable resources are a "21st-century economic weapon." The Chinese have dismissed protests from Washington and Brussels with the audacious claim that World Trade Organization (WTO) rules allow a country to protect its own natural resources.

China, a WTO member itself, is now playing a cat-and-mouse game with the organization. Despite several warnings, Beijing still has not signed the Agreement on Government Procurement, and it continues to strongly favor domestic suppliers over their foreign competitors in government purchasing. To secure a government contract in China, an international company has to reveal sensitive data as part of impenetrable licensing procedures and even agree to transfer its technology to the Chinese - often relinquishing its patent rights in the process.

China, for its part, is waging a vehement campaign in the WTO to be granted the privileged status of a "market economy." If it succeeds, it will be largely spared inconvenient anti-dumping procedures in the future. But do China's Communist Party leaders seriously believe that the rest of the world will actually reward them for their dubious trading practices?

The answer is yes, and they have good reason to be optimistic. When it comes to diplomacy, Beijing knows how to win. Whether it's at the WTO, the United Nations or other international organizations, China is in the process of out-maneuvering the West everywhere.

How China Cultivates Relations with the World

The Chinese have paid particular attention to nations with large oil and natural gas reserves, such as Venezuela, Kazakhstan and Nigeria, but they also cultivate relations with third-tier countries - countries that the West tends to ignore but that have voting rights in international bodies like anyone else. Beijing has forgiven billions in loans to African nations and pampered them with infrastructure projects. It has generally tied its assistance merely to two conditions that are relatively painless for the countries in question, namely that they have no official relations with Taiwan and that they support the People's Republic in international organizations.

What Beijing is not demanding of these countries is even more telling. Unlike Washington, London or Berlin, the Chinese do not tie their development aid to any conditions relating to good governance. While the West punishes authoritarian behavior by withholding funds (and, in some cases, indirectly threatens "regime change"), Beijing has no scruples about pampering the world's dictators by building them palaces and highways to their weekend villas -  and assuring them territorial integrity, no matter what human rights violations they are found guilty of.

Opportunity, not Problem

China has friendly relations with some of the world's most problematic countries, including failed states and countries on the brink of failure such as Zimbabwe, Sudan, Myanmar and Yemen. "For the West, failed states are a problem. For China, they're an opportunity," writes American expert Stefan Halper in the magazine Foreign Policy,  referring to these countries as "Beijing's coalition of the willing."

The diplomatic weapon is having its intended effect. Already, the pro-Chinese voting bloc led by African nations has managed to obstruct progress in the WTO. Meanwhile in the United Nations, the People's Republic's influence is clear: Within the last decade, support for Chinese positions on human rights issues has risen from 50 percent to well over 70 percent.

Washington, in turn, is no longer even included in certain key groups. The United States was not invited to take part in the East Asia Summit, and it was denied the observer status it had sought in the Shanghai Cooperation Organization, a sort of anti-NATO under China's de facto leadership that includes Russia and most of the Central Asian countries. Iran, on the other hand, was.

A Model Worth Emulating

Of course, none of this means that the West has already lost the battle for influence in Africa, Latin America and Asia. While Beijing cozies up to dictators, an approach the West cannot and should not take, America and Europe can compete, and even excel, in another area: by offering the ideal model of a democracy worth emulating.

There has been much speculation in recent months that developing countries could be increasingly eyeing China's blend of a market economy and Leninism, economic diversity and strict one-party control as an attractive alternative to democracy. The United States engages too little in self-reflection while the Europeans are too involved with themselves, and both make themselves less attractive as a result, says former Singaporean diplomat and political science professor Kishore Mahbubani. He believes that China's momentum is ultimately unstoppable. Many people in the West who have always viewed trade unions as disruptive and given little heed to human rights violations agree with him.

Yet, even though the People's Republic may have become more attractive for some authoritarian rulers, only a few see it as a model. Beijing has already installed more than 500 Confucius Institutes around the world, in hopes of promoting what it views as China's cultural superiority. One of the results of a 10-fold increase in scholarships at Chinese universities is that almost twice as many Indonesians are now studying in China as in the United States.

Whether it's Harvard, high-tech cell phones or Hollywood, people in many parts of the world still see the West as the home of everything desirable. Besides, many who flirt with Chinese-style dirigisme see it only as a transitional phase that makes sense from an economic point of view, and that ultimately - as in South Korea, for example -- leads to a democracy with functioning institutions.

More Forceful Approach Required

What no one in Asia, Latin America or Africa wants is another messianic U.S. president in the vein of George W. Bush, who believed that he could forcefully impose the American model on other countries. Many people in developing countries can easily distinguish between pompous arrogance and healthy self-confidence. And especially in China, people tend to regard an excessive willingness to compromise as a weakness, and the stubborn adherence to one's own positions as a strength.

Chancellor Angela Merkel, the woman at the helm of the world's former top exporting nation, ought to take a much more forceful approach to dealing with the leaders of the current export champion than she did during her recent visit to Beijing. She ought to point out that Germany has to draw the line somewhere: for instance, that it will not support China's bid for preferential status in the WTO as long as Beijing violates its rules. She should also make clear that Germany will not condone the ongoing industrial espionage activities of Chinese agents in German high-tech centers, the continued illegal copying of patents and the fleecing of German small and mid-sized companies in China.

When China asks for the lifting of visa restrictions, Germany should ask the Chinese what it can expect in return. And Berlin needs not be concerned that China could react to such criticism by no longer doing business with Germany. The People's Republic acts out of self-interest and needs the West about as much as the West needs China. Besides, the Chinese are used to playing hardball.

How Taiwan Gets What It Wants

Ironically, Taiwan serves as a prime example of how to deal with Beijing. In a SPIEGEL interview 15 years ago, then Prime Minister Lien Chan complained to me that the People's Republic was cutting the ground from under Taipei's feet. He said that, although only 30 nations recognized Taiwan at the time, that would change. But it didn't. In fact, the total is now only 23 nations.

Nevertheless, Taiwan's new leadership is taking a pragmatic approach and, realizing that it cannot win against China, has decided to embrace the mainland Chinese. After tough negotiations, the Taiwanese are now making deals with their big brother. In a trade agreement signed in late June, Taiwan achieved a reduction in Chinese tariffs on $13.8 billion (€10.6 billion) worth of goods it sells to China each year, while Beijing came away from the trade deal with a reduction of tariffs on only $2.9 billion of the goods it exports to Taiwan.

"We did not make any compromises when it comes to our independence, and we achieved a favorable agreement," says Wu-lien Wei, Taiwan's representative in Berlin. Perhaps one needs to be Chinese in order to avoid being ripped off by Beijing.

Intellpuke: You can read this article by Spiegel journalist Erich Follath in context here: www.spiegel.de/international/world/0,1518,708645,00.html
This article was translated from the German for Spiegel by Christopher Sultan.