China has changed a lot over the past decade. Its diplomats — and many of China's leaders — are very intelligent, and well educated. They are capable, and far more confident.

Before and during the Clinton administration, phone calls between top officials or senior diplomats were unusual, and sometimes they took 24-36 hours to arrange. During much of the EP-3 incident, no one on the Chinese side was taking calls. Now, we have as many as four to five senior-level calls a month, some with only 30 minutes notice on either side.

Overhanging this is a complex and important economic relationship. The United States has an enormous trade deficit with China, and U.S. companies have invested significant amounts of money in China.

For its part, China (as has Japan and others) has huge foreign exchange reserves that are invested in U.S. Treasury instruments, and that has a powerful impact on the U.S. economy.

Two important domestic factors shape Beijing's thinking: the first is economic growth and improvements in the lives of many Chinese; the other is rising nationalism. There are many causes of that nationalism, but it's fair to say most Chinese people are sensitive to what they believe to be 200 years of mistreatment by foreigners and they "are mad as hell and not going to take it anymore."

This cultivated but real sense of victimization does put some limit on Chinese government action. But does that tell us where a most untransparent China is going to go?

Some, not many, believe that China is headed for a bad end and we had better be prepared for a new Cold War. Others are optimistic, given China's movement into status as a global power.

There are conflicting possibilities, and the United States must be mindful of both sets.

Another point of emphasis for the Bush administration has been its alliances in Asia. That is something we feel pretty good about. The U.S.-Japan relationship has never been stronger. That is the product of hard work on both sides and important changes in Japan.

North Korea's admission that it abducted Japanese citizens and its development of ballistic missiles have helped make Japan a supporter of ballistic missile defense. The joint declaration produced by the Feb. 19 Security Consultative Committee should not be seen as new or shocking, but it is a robust statement that goes beyond what earlier Japanese governments would have said.

The press is full of stories about how the U.S.-South Korea alliance is beset with difficulties. It is true that there are some problems but not as much as media suggest. There are tangible accomplishments, too.

South Korea has the third largest number of military forces in Iraq (behind only the U.S. and Britain). After years of effort, we have reached agreement on moving U.S. forces out of Yongsan Base in Seoul. We have agreed on the realignment of U.S. forces in Korea. And, President Roh Moo-hyun has excellent communication with President Bush. He speaks directly and sincerely.

On North Korea, when it counts, we are on the same page. The determination to have a Korean Peninsula free of nuclear weapons is clear.

At the same time, South Korea has an understandable preference for keeping things calm. If tensions go up, the risk premium on South Korea's extensive public and private borrowing goes up. As a result, there is a powerful economic disincentive to raising tensions on the DMZ.

South Koreans, with 52 years of hard work to build prosperity south of a mostly peaceful DMZ, have complex views about the North that complicate issues, but the alliance endures for good reasons.

When I got back to Washington four years ago, I was surprised at the deterioration of U.S.-Philippine relations.

Concern for the war on terror and good leadership chemistry has improved relations, but there are still problems with the basic approach of the Republic of the Philippines to life in East Asia. Forty years ago, the Philippines was Asia's most prosperous country (less Japan) and that is not true today. Why?

When the Philippines finds the solution to that question and unlocks the unquestioned talent of its 80 million people, that will be very good news.

Our relationship with Thailand has been strengthened. Prime Minister Thaksin Shinawatra has proven to be a strong and occasionally mercurial leader.

While Indonesia is not a treaty ally, our relationship with that country also is very important. Last year was a remarkable experience in democracy with three national elections that ended with Susilo Bambang Yudhoyono as president.

The tsunami has been a setback for the new administration, and there are a host of other problems, but at the same time these have provided a catalyst for the United States to improve relations with that country.

The Indonesian experience is a reminder that the spread of democracy in the Asia-Pacific region has been a very strong story in many respects. Last year witnessed a long list of elections in more than 10 countries. Much is now routine, but no less remarkable given where Asia and the Pacific have been.

Our relationship with Vietnam has significantly improved. But Vietnam is still — with delays in its World Trade Organization membership — behind the economic power curve.

Four years ago, we signed a bilateral trade agreement, but for internal political reasons, Hanoi had delayed that for two years. It has since discovered that that action in turn delayed its accession to the WTO, putting it behind competitors and, in particular, adversely affecting the textile sector.

Although there is still lots of distrust, there has been a significant improvement in relations. Vietnam's prime minister is expected to visit Washington later this year.

The Vietnamese have a love of education and a determination to move ahead that is as strong as that in China and perhaps stronger than much of the rest of Southeast Asia. It will take them a few more years to sort though internal political impediments, however.

Now, I'll turn to regional organizations and opportunities.

Just a few years ago, China seemed to hate the idea of multilateral organizations. Beijing felt such gatherings were occasions to criticize China and its activities. Still, China decided to grit its teeth and join.

As a result, there is now a significant group of educated and experienced people who attend the events, and China is eager to participate in multilateral organizations. And if the United States isn't in them, that is just fine with Beijing. This applies to the various ASEAN plus 3 (or more) groupings and, now, the East Asia Summit.

Some worry that the United States is giving the initiative to China in the region. In particular, the China-ASEAN free trade agreements have won a lot of attention.

But the United States is not being dealt out. The Enterprise for ASEAN Initiative — a series of Trade and Investment Agreements with strong support from former Trade Representative Zoellick, are moving forward.

Leading emphasis continues to be on Asia-Pacific Economic Cooperation, the region's sole all-inclusive gathering, both for following through on its agreed trade liberalization and in relating it to political/security concerns that directly impact trade. We are still unclear about the proposed and poorly defined East Asia summit.

Is it different from the ASEAN Plus Three? No one knows. Possibly India is going to go to the meeting, but probably not Australia and New Zealand. The United States has not been invited.

Challenges remain. The threat raised by North Korea and the nuclear weapons it undoubtedly has remains a most serious problem. North Korea has had at least 14 years to work with plutonium and to make a weapon. It has hard workers who are smart and well educated. Logic alone says the North could have weapons — you don't need particular intelligence.

It was reported that Pakistani A.Q. Khan has said that he was taken to a cave and shown three nuclear weapons ready to fit on a missile. Eight or 10 times the North has said that it has such weapons, and it has certainly worked hard to that end in various kinds of technology.

The six-party talks are an appropriate venue — involving each national player with essential interests — but North Korea has been working on nuclear weapons for very many years and it is not about to easily give them up.

Pyongyang will certainly make a deal, but it wants an arrangement that guarantees what it sees as its security, avoids any issues like human rights, pays generously and only requires it to give up some of its nuclear-weapons capabilities. Solving this problem is going to be a long and difficult process. Delay involves risks.

The possibility that the DPRK might sell weapons or other fissile material to any buyer, although it says that it would not, is a potential nightmare. Yet, various ideas for a "quick" solution are unattractive. Patient, but persistent, diplomacy is needed.

Resolution is not impossible. Although there have been some economic reforms, North Korea still requires certain resources from the outside — food, fuel, and cash. Its illicit attempts to seek such resources offer vulnerabilities. Japanese measures and diminished missile sales have hurt cash flow to the North. The prolonged opposition of Japan and the United States, and the careful attitude of the ROK put a certain amount of pressure on North Korea.

But is it enough? That is another question.

Cross-strait relations remain a serious problem. The Lunar New Year flight charters were a good step but considerable difficulties remain. PRC leaders seem to vie to be seen with the hardest line.

There is the anti-secession law, which just passed the National Peoples' Congress. The law authorizes a military attack against Taiwan if it declares independence. The timing of the law is poor.

U.S. policy on the Taiwan Strait remains necessarily steadfast, as it has since the 1979 normalization, notwithstanding the changes on both sides.

The phrases: "peaceful resolution," "our one-China," "three communiques," "Taiwan Relations Act," "non-support of independence," and "opposition to those who seek unilateral change to the status quo," remain arcane, but essential.

Taiwan is a vibrant democracy that is deeply involved in both the global economy and that of China. But, frankly speaking, there are some difficulties in the very important, "unofficial" relationship between Washington and Taipei.

These are less problems in communications than in a desire to hear what is wanted rather than what has been said. It is hard to discuss sensitive issues when so much is likely to turn up in the newspaper the following day. Moreover, Taiwan's inclination to hear what it wants, means the United States sometimes has to say things publicly to get the message through.

The situation in Burma just gets worse. Years of looking for improvement signals seem fruitless. Sanctions neither satisfy nor work, but should not be lifted. More and more, Myanmar, as Burma's junta calls itself, seems to be moving toward effective rule by one man, Than Shwe.

Then there is the war on terror. Terrorism is part of the scenery all over the world, and especially in places with significant Muslim populations in Southeast Asia .

We have made progress but there is more work to do.

The tsunami crisis demonstrated broader U.S. engagement with the region. Notwithstanding some criticism, the United States responded quickly. Remember, even 72 hours after the tsunami, the estimates were still only 5,000 dead in Aceh.

Now the death toll there is estimated to be 200,000. For affected governments' ministers, the first call offering help came from then-Secretary of State Colin Powell. U.S. military aid was critical early on, but help from others was needed, too, such as Australia. Singapore was also quick to respond, and the countries affected responded well.

Now, the U.N. and relief organizations have much to do in helping, at least for Indonesia and Sri Lanka.

U.S. policy in Asia is practical and sound. I remain optimistic.