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Coming out of the crisis

Who will emerge a winner from the economic downturn?

An employee counts Renminbi banknotes at a branch of Bank Of China in Changzhi, Shanxi province, March 31, 2009. (Stringer/Reuters)

WASHINGTON — This being a town where any change is immediately assessed for its potential to alter the equations of individual and collective power, the emerging belief that the world has seen the worst of the economic crisis is inspiring folks to pick winners and losers.

One focus is the stunning extent to which the return to prosperity will depend on the cooperation of the United States and China — two former Cold War foes that still harbor a political and strategic rivalry, but which will emerge from the downturn in intricate interdependence.

Indeed, if a winner does emerge from the current crisis, it may well be China. Though the United States still has commanding military supremacy and mighty economic assets, it is now but one of several powers — along with China — that will shape the post-recession terrain.

The "Great Recession" will "mark a turning point at the way the global economic world operates,” predicted Flynt Leverett, a senior fellow at the New America Foundation. From this point on there will be a “trend for greater Chinese assertiveness,” as the United States “increasingly comes to term with the limits” of its own clout.

One need only look at the itineraries of U.S. officials to gauge China’s importance.

Hillary Clinton made her first trip as secretary of state to China in February, and announced that the new Obama administration would not let human rights issues interfere with the U.S.-Sino relationship. House Speaker Nancy Pelosi and John Kerry, chairman of the Senate Foreign Relations Committee, visited China during last week’s congressional recess, talking about climate change and economic issues. And Treasury Secretary Timothy Geithner is in Beijing this week. He will meet with President Hu Jintao and pave the way for a cabinet-level summit between U.S. and Chinese officials this summer.

“No one at the National Security Council, the Department of Defense or the State Department is lying awake at night worrying about the rise of India,” said Gary Schmitt, an analyst at the American Enterprise Institute. “However, that is not the case when it come to China.”

The economic downturn is, of course, far from over. Treasury officials are quick to note how the American economy of the 1930s witnessed several false starts, amid premature joy that the depression had run its course.

Still, last week brought good news about job losses, factory orders, economic growth and consumer confidence in the United States. There were signs that traders were looking past the need for economic stimulus, and beginning to worry about inflation and America’s long-term debt.