We Can't Pick a Fight With the Chinese But Here's What America Needs to Do Now

Let's be frank. -- Chinese leaders are the most hardheaded, pragmatic people on the planet. They respect strength. They take advantage of weakness. To them it's all business and leverage and who owes what to whom.

For the last forty years, ever since Henry Kissinger’s secret trip to China, U.S.- Chinese relations have been harmonious with China playing the junior role to American leadership. Throughout that time China kept its focus on the home front. They avoided conflicts with neighbors, kept defense spending low and devoted all their resources and treasure into bringing hundreds of millions of people out of poverty. They did it by manufacturing and exporting low cost goods to America. When America needed ever more money to buy those goods, the Chinese lent us the money.

But two years the world economic crisis changed everything. The Chinese, with their large sovereign debt funds and financial reserves, rebounded quickly. The United States, hundreds of billions in debt, did not. --Under the Obama administration, the U.S. deficit spending habit became an addiction, and China continued to support it by lending us more and more money.

We now owe China nearly a trillion dollars, and hope to borrow even more in the years ahead. For every dollar the U.S. government now spends, we have to borrow 50 cents, and China is our major foreign lender.

The ever pragmatic Chinese now see an opportunity they can exploit.

Two years ago the U.S.-Chinese relationship entered a new phase. The Chinese rebuffed U.S. efforts to  cap greenhouse gases. They’ve stiffed us on reining in North Korea or sanctioning Iran. They’re cornering the market on raw materials around the world, buying from anyone regardless of how rogue the regime. They’ve accelerated their military buildup, and invested in anti-access capabilities in land, air, sea and cyberspace. They’ve acted more aggressively toward Pacific powers and claim a 200 mile security zone.

Not only that, but in a move that something that would have been unthinkable just a few years ago, the Chinese gave Defense Secretary Gates a rhetorical slap in the face last week when they tested a new stealth fighter while he was sitting down to meet with Chinese President Hu and lectured him publicly over routine U.S. arms sales to Taiwan.

This attitude is not likely to change just because President Obama is rolling out the red carpet this week for Chinese President Hu Jintao. The pragmatic Chinese won’t be nice to us until they have to. Much of their leadership has concluded that America’s best days are behind it. Including, according to President Hu, that the U.S. dollar is a currency of the past.

If America can pivot and reverse course – fix our economy, stop spending and borrowing, make American business competitive again, and encourage international businesses to come back to America by cutting corporate taxes to and streamlining regulations – in essence get our MoJo back, China’s attitude will change accordingly.

If not, the Chinese and the world will conclude America’s decline and China's rise are inevitable. Forget about picking a fight with our banker, we’ll have to start listening to what the banker wants and adjust our behavior accordingly.

Kathleen Troia "K.T." McFarland is a Fox News National Security Analyst and host of FoxNews.com's DefCon 3. She is a Distinguished Adviser to the Foundation for the Defense of Democracies and served in national security posts in the Nixon, Ford and Reagan administrations. She wrote Secretary of Defense Weinberger’s November 1984 "Principles of War Speech" which laid out the Weinberger Doctrine. Be sure to watch "K.T." every Monday at 10 a.m. ET on FoxNews.com's "DefCon3" already one of the Web's most watched national security programs.