Last year, when China broke off military-to-military talks after the Obama administration’s long-expected sale of defensive arms to Taiwan, a high American official asked his Chinese counterpart why China reacted so strongly to something it had accepted in the past. The answer: “Because we were weak then and now we are strong.”

Despite no-expenses-spared efforts to boost its soft power, such as the Shanghai Expo and plans to open a Xinhua news agency office atop a skyscraper in New York's Times Square, China's image has taken a beating in recent months, what with its tough talk to the United States and Japan, its defence of North Korea and, now, its attacks on the Norwegian Nobel Committee for honouring imprisoned dissident Liu Xiaobo.

In July last year, President Hu Jintao said public diplomacy would be a key focus of China's foreign affairs policy; his administration elevated the new form of diplomacy to a national strategic level. Soon after that, the country launched a "Made in China" advertising campaign in several international media outlets to boost the image of Chinese-made products.

US public diplomacy has morphed the Liu case out of the soft power human rights community into the hard power arena of economic warfare designed to pressure Beijing to devalue the Yuan and give Democrats badly needed credibility, votes and dollars in the run up to US midterm elections.