HONG KONG, China (CNN) -- The Iraqi war has convinced the Chinese Communist Party (CCP) leadership that some form of confrontation with the U.S. could come earlier than expected.

Beijing has also begun to fine-tune its domestic and security policies to counter the perceived threat of U.S. "neo-imperialism."

As more emphasis is being put on boosting national strength and cohesiveness, a big blow could be dealt to both economic and political reform.

That the new leadership has concluded China is coming up against formidable challenges in the short to medium term is evident from recent statements by President Hu Jintao and Premier Wen Jiabao.

Hu indicated earlier this year Beijing must pay more attention to global developments so that "China make good preparations before the rainstorm ... and be in a position to seize the initiative."

Wen also pointed out in the first meeting of the State Council, or cabinet, last Saturday the leadership "must keep a cool head."

"We must boost our consciousness about disasters and downturns -- and think about dangers in the midst of [apparent] safety," he said.

Alarm bells about a deteriorating international situation have been sounded by the CCP's secretive Leading Group on National Security (LGNS), which coordinates policies in areas including diplomacy, defense and energy.

The LGNS, which is headed by Hu, has since early this month called a series of meetings to discuss ways to handle the Iraqi crisis.

In the near term, of course, the focus is on the impact of rising oil prices -- and on the need to build up a strategic oil reserve that can last at least 30 days.

However, economic concerns are not the top priority. Given the likelihood oil prices will drop after the resolution of the conflict, some government economists are saying the war's impact on this year's economic performance will be insubstantial.

Officials even cite the safe haven theory to predict foreign direct investment flowing into China will exceed the record $52 billion last year.

Of more concern to the LGNS is the perceived expansion of American unilateralism if not neo-imperialism.

As People's Daily commentator Huang Peizhao pointed out last Saturday, U.S. moves in the Middle East "have served the goal of seeking world-wide domination."

State Council think-tank member Tong Gang saw the conflict as the first salvo in Washington's bid to "build a new world order under U.S. domination."

Chinese strategists think particularly if the U.S. can score a relatively quick victory over Baghdad, it will soon turn to Asia -- and begin efforts to "tame" China.

It is understood the LGNS believes the U.S. will take on North Korea -- still deemed a "lips-and-teeth" ally of China's -- as early as this summer.

These developments have prompted China to change its long-standing geopolitical strategy, which still held true as late as the 16th CCP Congress last November.

Until late last year, Beijing believed a confrontation with the U.S. could be delayed -- and China could through hewing to the late Deng Xiaoping's "keep a low profile" theory afford to concentrate almost exclusively on economic development.

"Now, many cadres and think-tank members think Beijing should adopt a more pro-active if not aggressive policy to thwart U.S. aggression," said a Chinese source close to the diplomatic establishment.

He added hard-line elements in the People's Liberation Army (PLA) had advocated providing weapons to North Korea to help Pyongyang defend itself against a possible U.S. missile strike at its nuclear facilities. Forestalling the challenge Hu was elected president of China by the NPC this month. Hu was elected president of China by the NPC this month.

Even less hawkish experts are advocating beefing up the national security apparatus.

Chinese Academy of Social Sciences (CASS) economist Yang Fan pointed out the recent global flare-ups had alerted China to the imperative of improving national security and cohesiveness.

"Equal weight should be given to economic development and national security," Yang said. "As we become more prosperous, we must concentrate our forces [on safeguarding national safety]."

What is China doing to forestall the perceived U.S. challenge?

Firstly, the CCP leadership is fostering nationalistic sentiments, a sure-fire way to promote much-needed cohesiveness.

While not encouraging anti-U.S. demonstrations, Beijing has informed the people of what the media calls "increasingly treacherous international developments."

This explains what analysts including Beijing scholars considered the unexpectedly virulent official reaction to the start of the Iraq war.

Foreign Ministry spokesman Kong Quan said the U.S.-led military campaign had "trampled on the U.N. constitution and international law" and that it would lead to regional and global instability.

Equally tough statements were issued by the National People's Congress (NPC) and the advisory Chinese People's Political Consultative Conference.

Major official media such as Xinhua and People's Daily have run dozens of articles and analyses whose gist is that, in the words of commentator Li Xuejiang, the invasion of Iraq had "damaged the international order."

In an apparent departure from Beijing's cautious attitude at the beginning of the Iraqi crisis, authorities last weekend allowed a group of nationalist intellectuals to hold a conference condemning U.S. "hegemonism."

The corollary of boosting national cohesiveness could be the suppression of dissent, particularly politically incorrect views expressed by "pro-West" intellectuals.

The warning and punishment that party authorities recently meted out to several Beijing and provincial publications may augur a relatively prolonged period of ideological control in the interest of promoting "unity of thinking."

On the economic front, the authorities may play up the imperative of concentrating resources to boost China's "economic security" and "energy security."

"The Wen leadership is checking out why earlier plans to build up a strategic oil reserve failed to materialize last year, when prices were much lower," said a Beijing-based party source.

"It is possible that bucking the overall trend of market reforms, Beijing may bring back more government fiats to sectors deemed to have strategic and national-security implications."

It is instructive that in his 90-minute long interview with the international media last week, Wen was quite reticent about boosting economic reform such as the liberalization of state-owned enterprises.

In accordance with the theory of "the synthesis of [the needs of] war and peace," civilian economic projects in areas including infrastructure may be planned will the requirements of the defense forces in mind.

On the military front, the Iraqi conflict will kick start another season of accelerated modernization of weaponry.

Diplomatic analysts in Beijing said PLA officers and strategists had been scrutinizing the latest hardware used by American and British forces.

They pointed out the PLA's astonishment at the wizardry of American firearms used in the 1991 Gulf War was a major factor behind the Chinese army's aggressive modernization drive through the 1990s.

Academy of Military Sciences (AMS) expert Peng Guanqian pointed out that the Iraqi war would provide the Pentagon with "a testing ground for new military equipment and strategies."

The Liberation Army Daily last Friday quoted unnamed officers from the Army and the People's Armed Police as saying the PLA must "quicken the pace of military modernization."

Such developments could in turn hasten a possible showdown between the two countries that harbor deep-seated mistrust of each other even in relatively tranquil times.

Also see:

The Pentagon is preparing for the first visit to the United States by a high-ranking Chinese military officer in years.

http://www.washtimes.com/national/inring.htm

http://www.cnn.com/2003/WORLD/asiapcf/east/03/24/willy.column/