Feb. 13 (Bloomberg) -- When Hillary Clinton arrives in East Asia next week on her first trip as secretary of state, she will discover there are limits to what the U.S. can expect of China, the region’s rising power.

As China struggles to cope with its worst economic decline in more than a decade, it is unable to act as a leading partner in rescuing the international financial system or cutting greenhouse gases in the way President Barack Obama’s advisers have signaled they want, according to experts on the relationship.

“China’s much bigger than they were, but they’re not big enough yet to take the lead,” says Richard Cooper, a professor of international economics at Harvard University in Cambridge, Massachusetts, and chairman of the National Intelligence Council under President Bill Clinton. “We ought to stop asking the Chinese to do things and engage them in conversation.”

With policies under review and top advisers not yet in place, the greatest value of Clinton’s seven-day trip to Japan, Indonesia, South Korea and China will be symbolic. Clinton will reassure allies who host U.S. forces of America’s security commitment at a time of threatening North Korean rhetoric, signal support for Indonesia -- the largest Muslim democracy -- and explore cooperation with Chinese leaders, advisers say.

Asia First

A sign of how much times have changed is that Clinton, 61, included China in her first itinerary as Obama’s top diplomat, rather than the Middle East and Afghanistan, where she sent top envoys. Her husband, President Clinton, didn’t visit Beijing until his sixth year in office.

A dozen years ago, when the Asian financial crisis rocked the continent from South Korea to Indonesia, China was a bit player. It wasn’t asked to bail out faltering economies, though it helped by not depreciating its currency and by giving limited aid to countries including Thailand.

This time, as the world is dragged into a recession driven by a credit crisis in the U.S., policy makers point to China’s new clout: an economy now bigger than Germany’s and the largest foreign holder of U.S. Treasury bills, with $682 billion.

The two economies are interdependent as never before: China is the U.S.’s second-largest trading partner, buying $71.5 billion in U.S. exports last year as the U.S. took $337.8 billion in Chinese imports.

Possible Partnership

One idea under discussion is to create a “G-2” partnership between the U.S. and China for economic, environmental and strategic dialogues overseen by Vice President Joe Biden and Chinese Premier Wen Jiabao, according to a senior administration official.

Following on the Bush administration’s policy, the Obama team wants China to allow its currency to appreciate or float freely and to avoid protectionism.

Treasury Secretary Timothy Geithner said this week that the U.S. will look at the broad global picture in the coming months and judge “carefully” whether China is manipulating its currency. Geithner upset China by saying it is “manipulating” the yuan in a written answer last month to the Senate Finance Committee. Officials said Geithner merely repeated comments Obama made as a candidate and wasn’t stating official policy.

Since China dropped its peg to the dollar in July 2005, the yuan has appreciated 21 percent against the dollar through the end of 2008, with the yuan holding about steady in the second half of last year.

‘Same Storm’

Concrete agreements are unlikely on a first trip. Without even her picks for economic undersecretary, Lael Brainard, or East Asia assistant secretary Kurt Campbell in place, Clinton should simply convey that “we’re not in the same boat, but we’re in the same storm, and we need to cooperate to get out of it,” says Cooper, a former undersecretary of state for economic affairs.

Those calling for a greater contribution from China forget that its economy is less than a quarter the size of the U.S. economy and that one in three Chinese live on less than $2 a day. Many economists are dubious of the government’s claim of 6.8 percent growth in the last quarter of 2008, as exports, imports, electricity production and jobs all plummeted.

China’s capacity to influence the world economy is limited by the need to create jobs for more than 40 million people, including migrants, the urban unemployed and graduates entering the employment market, says David Michael Lampton, director of China studies at Johns Hopkins University’s School of Advanced International Studies in Washington, and a former president of the National Commission on U.S.-China Relations.

Wen’s View

During a visit to Britain on Feb. 2, Wen said while nations should cooperate in every way possible to get out of the downturn, “countries should first and foremost run their own affairs well and refrain from shifting troubles onto others.”

That’s been the consistent refrain, and the new administration would be unwise to “set the U.S.-Chinese relationship on a pedestal or raise expectations,” says Elizabeth Economy, director of Asian studies at the Council on Foreign Relations in New York.

The notion that China could deploy its estimated $1.9 trillion in reserves for domestic stimulus or to rescue world markets is wrong, economists say. With a non-convertible currency, a $266 billion trade surplus with the U.S. last year and a limited and disappointing track record of overseas investments, China has no better option than to buy U.S. debt.

More Lending

“The Chinese are in no position to help anyone,” says Derek Scissors, Asia economics fellow at the Heritage Foundation in Washington. The most they can be expected to do is to avoid protectionism and export promotion, keep their currency stable, and stimulate demand through expanded consumer lending, he says.

When Pakistan, a close Chinese ally, was in crisis last fall, China didn’t take the lead in offering financial help, Scissors says. They don’t want to become “the world’s banker. It would be a nightmare: how much do you give, and to whom?”

On the environmental front, the U.S. wants China to adopt hard targets on greenhouse-gas reductions. Clinton is bringing her new climate-change envoy, Todd Stern, on the trip in a demonstration of Obama’s intent to engage China, the world’s largest source of carbon emissions, on the issue.

Clinton says she is committed to the six-nation talks hosted by China and aimed at persuading North Korea to give up its nuclear weapons program. She will be accompanied on her trip by Obama’s senior Asia official at the National Security Council, Jeffrey Bader, and Christopher Hill, the top U.S. negotiator on North Korea since 2005.

Korean Concerns

In public remarks this week, Clinton cautioned North Korea’s regime against any action that would “threaten the stability and peace and security” of its neighbors -- a nod to worries in South Korea that the North may be planning a missile test.

Douglas Paal, a former Asia director at the National Security Council, says Obama’s first conversation with Chinese President Hu Jintao touched on efforts to spur Chinese consumption, curb global warming and influence the governments in Sudan and Myanmar through its economic ties with both. The U.S. accuses Sudan’s government of involvement in genocide in its Darfur region, and says Myanmar’s military rulers must stop suppressing a democracy movement.

“The Chinese have been concerned about the Democrats’ traditional emphasis on trade protectionism and China’s human rights, and they more than welcome that those are not the leading issues,” says Paal, vice president for studies at the Carnegie Endowment for International Peace in Washington.

Orville Schell, director of the Asia Society’s center on U.S.-China relations in New York, where Clinton will make a policy address today, says there’s a positive aspect to the economic crisis that has the U.S. looking for cooperation.

“It has leveled the playing field,” he says. “For the first time in 150 years, we cannot but deal with China as a more equal partner.”

To contact the reporter on this story: Indira Lakshmanan at in Washington or ilakshmanan@bloomberg.net

Last Updated: February 12, 2009 20:01 EST