John Dundas, the U.S. undersecretary of commerce for IP, told reports in Beijing Friday that IP was on the agenda for the last meeting between President George W. Bush and his Chinese counterpart President Hu Jintao, and would also be raised at their next meeting, and at the broader Asia-Pacific economic summit in South Korea later this month.

Which means that the Bush administration, along with Henry Kissinger, U.S. Chamber of Commerce President Tom Donahue and other top U.S. businessmen must have been reading James McGregor's new book, 'One Billion Customers', published this week by Wall Street Journal books at $27.

Formerly the Wall Street Journal's bureau chief in China, then head of Dow Jones operations in China and a chairman of the American Chamber of Commerce in China, the Mandarin-speaking McGregor has written a how-to and how-not-to guide for Western businessmen trying to break into the world's fastest-growing market.

He warns of the perils of fraud and corruption, of banquets designed to get the unwary businessman drunk enough to sign a bad deal, and of levels of air pollution so bad in Beijing that he has moved his own children away to schools in the United States rather than subject their lungs to the damage.

"Fatigue, food and drink are negotiating tools," McGregor warns in one of a series of tips that pepper his book. "If your Chinese counterpart wants to finalize a deal after a mao-tai soaked banquet, it is better to throw up on the contract than sign it."

But above all, he has been ramming home the message that the Bush administration's former strategy for China to revalue, still being strongly urged in Congress, simply plays into China's hands. It will not solve the real problem of U.S.-China trade, which is the wholesale theft of intellectual property and the demands for 'technology transfer.'

"They will try to rob you blind," McGregor told United Press International. "You just have to try to work around it, for example by keeping crucial technology in parts that are not made in China. And businessmen, politicians, officials and everybody else who wants to make China's growth into a win-win process for everybody have to keep on stressing that it is China's own best interests to abide by the rules on IP."

McGregor, whose book contains a series of case histories of how Western companies have succeeded or lost their shirts in China, tells the story of his own battle. In alliance with Reuters, Dow Jones's main competitor in the news and financial information business, McGregor had to fight off new decrees from the Xinhua state news agency that would have taken over their business and their profits by inserting Xinhua controls between the Western agencies and their Chinese customers.

He used every ounce of political leverage he could apply through the White House and on Capitol Hill and internationally, to get the message through to Beijing that Xinhua would destroy China's hopes of joining the World Trade Organization, and also cripple China's banks and currency traders by slowing their access to crucial trading information.

The striking feature of this story, which ended happily, was less the bullying tactics of Xinhua than the difficulty that China's progress-minded governing elite had in blocking Xinhua from doing something so fundamentally damaging to Chinese self-interest.

"The Chinese system today is almost incompatible with honesty," McGregor writes. "China has a system of checks but no balances. The Communist party wants to root out corruption at the same time that it allows the families of the ruling elite to accumulate assets so they can remain the ruling elite in a country dominated by commerce. The Party also wants to employ laws and the courts to prosecute offenders while keeping the party's ruling elite above the unless their behavior or party politics necessitates making an example of them."

McGregor sees this is a transitional stage, and that China, under the right kind of Western pressure, will eventually settle down and realize that honesty is the best policy, and that a rule-based system, arbitrated by an honest judiciary, creates the most fruitful environment for stable prosperity. But in the meantime, the Wild East is like a turbo-charged Wild West on speed, in which everything happens at once.

"China is undergoing the raw capitalism of the Robber Baron era of the late 1800s; the speculative mania is the 1920s; the rural-to-urban migration of the 1930s; the emergence of the first-car, first-home, first fashionable clothes, first college education, first family vacation, middle class consumer of the 1950s, and even aspects of social upheaval similar to the 1960s," McGregor says.

Social and economic transformations that took the United States over a hundred years have all taken place in China within little more than a decade. The dislocations, therefore, are just as immense as the commercial and business opportunities that he describes -- if the Bush administration and other Western governments can continue to apply pressure on Beijing's rulers for the real priorities of IP rights, with an efficient and honest legal system to enforce them.

If they want to know how, McGregor offers a step-by-step account of the way the Clinton administration's top Trade official, Charlene Barshefsky, negotiated the WTO deal with Beijing. Along with a handful of Chinese, Barshefsky is the heroine of the this book.

McGregor does not really address that other side of the coin of China's breakneck growth, its military modernization program and the nervousness of its Asia-Pacific neighbors at China's likely rise to great power status. He dismisses the warning of "a powerful alliance of old Cold Warriors and younger neo-conservatives" about a Chinese threat as "stir-fried Kremlinology -- China today is not the Soviet union of yesterday."

The people of Tibet might disagree with this, but McGregor insists that "any serious effort to 'contain' China is a fool's mission. The China market is simply too voracious, the Chinese economy too powerful, and the political allegiances and alliances of the Cold War that could even attempt such a thing no longer exist."

He may be right, but just as China already buys 25 percent of the world's steel; and 30 percent of its cement and is already becoming one of the dominant players in the global economy, so the diplomatic and strategic implications of China's growth are going to dominate the geo-politics of the coming decades.

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