Hu’s rare trip to Washington is being viewed as something less than a success, which means for the Chinese a missed opportunity. A visit to the White House is a rare and precious thing. Hu was viewed as formal and scripted, and there was therefore no sense of a shift in the underlying nature of US-China relations, which is unfortunately and unnecessarily frosty and and slightly strained.

Hu is great in so many ways. His inscrutibility is a huge benefit in the Chinese political context. He is, I believe, a reformer and is pushing the agenda forward by keeping his mouth shut. Jiang Zemin style ad-libbing would only give the opposition opportunities to undercut him. But the stiff silent visage that works so well in the Chinese context doesn’t work well at all in terms of the rest of the world.

It may be that Hu’s formality and scripted approach is a reflection of home issues rather than an indicator of the depth of US-China problems. But in the end, and maybe before too long, the Chinese leadership will have to find a way of linking more closely the domestic message and the international message. Not easy for them, but it is hard to see an alternative.

Welcome to the 21st century, guys.

A friend of mine who works in a US senator’s office and was at the White House ceremony of Hu Jintao contacted me over the weekend, apparently concerned that due to the media censorship employed on the mainland, I might not have heard about the outburst from the protester during the Chinese president’s speech. As he wrote, "the live broadcast carried on CNN International was CUT OFF in China for a minute and a half during the reporter/protester’s outburst."

Well, without trying to sound too callous, of course it was! Yet the more puzzling aspect, for me, is why my friend might think I would get my news from watching CNN. Obviously he isn’t aware that CNN is routinely blacked out by the authorities, pretty much anytime the network begins to talk about China. Clearly, this is an arrangement that CNN has agreed to in order to broadcast on the mainland. So why is there no outrage about that, when only a few weeks ago Google and the other internet companies were lambasted by some Congressmen for agreeing to self-censorship in return for access. No outrage is warranted. To do business with a country, you have to abide by their laws, even when those laws are wrong. And the fact is, engagement will lead to change faster than non-engagement.

Now, as to the particular incident, in which a reporter for the Epoch Times yelled at Hu for imprisoning Falun Gong members: yes, it is regrettable that Chinese are not free to practice whatever religion they want, or to truly speak their minds, or to gather openly in protest. It is shameful for the government to exercise so much control over their lives. But it is decidedly better than it was 17 years ago, when the military was deployed against the people, and it is a far cry from the days when listening to Western music would have put you in the lockup.

The point is this: fabulous that a protester interrupted Hu’s speech. Let him taste a little open dissent for himself. That is what America is all about. But at the same time, I wonder about the image of China in most Americans’ minds. When my friend refers to the government as "the repressive regime of the PRC," does he have any idea how much change has occurred here? Surely there is a long way to go, but Rome wasn’t built in a day. Neither was Beijing.

Sumitomo has just done a deal which looks very significant. The Japanese trading house has reached agreement to buy a large block of non-tradeable shares in a listed state-owned pharmaceutical company. The terms are that it has to abide by a three-year lock-up period, the implication of which is they are free to sell on the 3years+1 day. Guaranteed exit at a known future date. Pretty good.

The FT’s report also indicates Sumitomo also got the seller to agree to US transactional legal terms. Which presumably means that if material differences or issues emerge after the close, Sumitomo has a means of getting restitution.

For the Chinese company and for the stock market of course, it is a huge win, because it opens a mechanism for offloading large amounts of non-tradeable shares onto foreign investors. Which will help deal with the overhang and keep the Chinese markets marching upwards towards some degree of equivalence with the Chinese economy.

Chinese shares, bought selectively, are a buy.

My brain is still jangling with the implications of a sentence Chinese communist Party chief Hu Jintao uttered in Seattle, and it had nothing to do with China’s willingness to do better on IPR. "Bill Gates is a friend of China, and I am a friend of Microsoft," he said.

There are so many levels on which this is significant, it is difficult to know where to begin.

The leader of China putting his country on the same level as an American company, referring to the world’s richest capitalist as a friend of the People’s Republic. The chief of China’s Communist Party declaring friendship with one of the world’s most powerful corporations.

This statement, more than any other I have seen for years, illuminates what is really going on in this country.

I am going to Los Angeles this weekend, to attend the Milken Institute’s Forum, one of the top annual gathering of the world’s rich and powerful. I will be moderating a panel on China’s environment, and have advised my panelists that gas masks or SARS-era face wraps are optional but preferred.

I am an eternal optimist and will take an optimistic line in the panel. But the pall of shit that hangs these days over the cities of Shanghai and Hong Kong makes it difficult to defend the position. I raised this with a reasonably senior Shanghai official the other day and he said: “Not to worry, all will be well by 2010. By that date, all the basic and major public infrastructure projects in the city will have been completed, and emissions standards for vehicles will have been significantly raised.”

I think he is right. But I would, wouldn’t I.

My back-up argument is that China is a shame culture. And Shanghai officials are very proud of their city and of the position they believe it should occupy on the list of the world’s Top Cities. People are talking more and more about Shanghai’s shitty air. The leaders will want to do something about it, and thanks to the political system the city enjoys – centralized proletarian dictatorship – they have the ability to make changes and implement measures in ways that Bombay, Hong Kong and New York can only dream of.

I wish to make it clear that this is a statement of fact rather than an endorsement of a particular political party.