China and the U.S. are in the midst of a hissy fit over whether Beijing manipulates its currency, the renminbi, to keep its value low relative to the U.S. dollar and other currencies.

If true, China presumably is in violation of the rules of the World Trade Organization, to which both it and the U.S., as well as most of the developed world, belong. Keeping the renminbi low means Chinese goods are priced below their actual value, thus encouraging China's already huge export trade, mainly with the U.S., whose trade deficit with China is enormous. China says it does no such thing; the U.S. and other countries, which also have trade complaints against China, say otherwise.

The U.S. has already told China that currency policy will be high on the agenda when the two countries meet for important economic talks later this year. The renminbi question is only one of a number of problems that now bedevil U.S.-China relations. Among the others: In two weeks, President Barack Obama is scheduled to meet with the Dalai Lama, Tibet's spiritual leader. China regards the Dalai Lama as a subversive and has condemned the meeting. Then there is the scheduled sale of advanced U.S. weapons to Taiwan, which China regards as a breakaway province. Historically, both Gen. Chiang Kai-shek, the Nationalist leader, and Mao Tse-tung, the Communist leader, regarded Taiwan as part of China. The only question was which China? Nationalist or Communist? We know the answer to that one. Then there are the accusations that China hacked into Google, censoring the Internet.

China's star continues to rise. It is rebounding from the world-wide recession faster than the U.S. and Europe; already it is the world's largest exporter of goods, and in 15 years China is expected to be the world's biggest economy. It is also the biggest buyer of U.S. treasuries, or U.S. debt, so Washington must tread carefully in its criticisms. At this point, both China and the U.S. need each other, but the balance is rapidly tilting in China's favor. Already Beijing carefully monitors U.S. domestic economic policy, and there may come a time when China might dare to suggest changes, on the grounds that it needs to protect its money and its investments. What then?

In general, power is shifting from West to East for the first time in 400 to 500 years, possibly longer, but certainly since the age of European expansion, which of course meant the eventual rise of the U.S. itself. A new shift is under way in which power and influence are flowing back again to China, India and the East. This is not a U.S. or Western failure, but simply the result of Chinese, Indian and Asian development. As they grow stronger, we, relatively speaking, grow weaker. Ultimately, China, and perhaps India as well, may well replace the U.S. as the world's most powerful nation. Then again, that may not happen.

Writing in the latest issue of the London Review of Books, Perry Anderson, who teaches history at the University of California, Los Angeles, notes that throughout the centuries, the Western world has gone through periodic bouts of Sinomania and Sinophobia. Right now we're in a period of Sinomania, in which everything Chinese is regarded as wonderful and marvelous. Eventually, the Sinomaniacs believe, the world will be dominated by a China whose traditional Confucian values, with their respect for family, education and the state, mixed with practical economics, will help to shape us all. After all, they note, China was the world's leading economic power for more than a thousand years, a period that only ended sometime in the middle of the 19th century. Not so long ago.

Much of that is true, but it needs to be put into a larger context. China is not a nation-state in the usual sense, but more like a civilization-state, "inheritor of the oldest continuous history in the world, whose underlying cultural unity and self-confidence are without equal." China has a "Middle Kingdom" mentality that imbues the Chinese with a sense of ethnic, perhaps racial, superiority that makes them impervious to what the rest of the world thinks or does.

There are two major aspects to this attitude. The first is the "we-don't-need-you attitude." In the Song dynasty (roughly A.D. 900 to A.D. 1200) there is no doubt that China led the world in technology and the arts of government. China neither needed nor wanted foreign influence. For almost a thousand years that attitude prevailed. But by the time of the 18th century, much of China's government and technology had ossified, leaving it open to European domination.

The second aspect is that the Middle Kingdom attitude, source of so much of China's inner strength, means that China's values cannot be easily exported. What is unique to China is simply that — unique to China. Its self-confidence is also self-limiting. In other words, there is a limit to China's power and influence despite its size and its economy. In the coming years, we will need to keep all this in mind.

William M. Stewart, a former U.S. Foreign Service officer and Time magazine correspondent, lives in Santa Fe. He writes weekly on politics and foreign affairs.