Mandelson charms the Middle Kingdom

The EU Trade Commissioner and former spin-doctor is using all his skills to schmooze the Chinese

The scene is a shiny new government conference room in central Beijing; the event, a meeting earlier this month between two of the least likely political friends on the planet.

The man on the right in the cavernous negotiating hall of the Chinese Ministry of Commerce needs little introduction. He is Peter Mandelson, ally of Tony Blair and Europe's Trade Commissioner.

The tall, smiling figure on the left is Bo Xilai, China's Trade Minister, and son of Bo Yibo, one of Chairman Mao's comrades on the Long March. His story says much about the changes that have taken place in China: Mr Bo's son is being educated at Harrow.

The past year has brought Mr Mandelson into almost constant conflict with China. The so-called "bra wars" led to Chinese textiles piling up in European ports, but the EU's Trade Commissioner has cultivated Mr Bo, whom he considers a friend. Mr Mandelson says publicly that he "is probably the counterpart with whom I have the warmest personal relationship in the international trading community".

Aware the Chinese minister is proud of his new office, Mr Mandelson begins this formal meeting with straightforward flattery. This is, he enthuses, "a gleaming, white, progressive, open building which, I hope, represents all you want to communicate about China's attitude to the rest of the world".

It seems to work. Delighted with the compliment, Mr Bo interrupts. "I am so glad to hear that," he says, before ploughing into the agenda.

China is the EU's second-largest trading partner after the US. But to many it is a symbol of the threat posed by globalisation. In 2005, the EU's trade deficit with China was a huge €106bn (£73bn). Sino-European trade disputes are an everyday fact of life. The EU and US have lodged a case at the World Trade Organisation claiming that Beijing obstructs imports of car parts. Brussels has also imposed special duties on leather shoes from China and Vietnam, arguing that they are unfairly subsidised.

Mr Bo promises to send a negotiator to Brussels to discuss a solution whereby duties would kick in only if shoe exports exceeded specified levels. He also backs limited moves to crack down on counterfeiters who rip off European designs.

A successful meeting accomplished, Mr Mandelson dines with the French advertising guru Serge Dumont, the head of Omnicom in China, who has arranged for the meal in his luxurious home to be accompanied by a chorus from a traditional Chinese opera.

This is Mr Mandelson's fifth visit as Commissioner to China in his quest for the answer to one important question: how does one deal with an economy whose exports to Europe have grown a staggering 4,300 per cent since the early 1980s?

While the US often prefers open confrontation, the EU's approach is more softly-softly. It wants to convince the Chinese that cracking down on theft of intellectual property will help their companies because they cannot develop successful products in a lawless commercial environment. It argues that letting European banks into China will give Beijing the investment and know-how it needs.

If China can produce an affluent middle class, the imbalance in its trade relationship with the West ought to decline as its consumption of expensive Western goods increases.

And commercial opportunities for European firms in China will help assuage European alarm at the country's reawakening. As Mr Mandelson puts it: "I remain a champion of Europe's openness to China but it has to be two-way. There has to be reciprocal openness."

Nevertheless, the Mandelson strategy of forging closer ties, and avoiding confrontation where possible doesn't always run smoothly. Power structures in China are complex and opaque. For example, while the Trade Commissioner was welcomed by Mr Bo, he had no meeting with the powerful National Development and Reform Commission, an industrial policy ministry. Nor can China's lamentable human rights record - touched on only elliptically in this visit - be ignored.

Beijing has also made demands that the EU will find hard to deliver, including the lifting of the arms embargo imposed after the Tiananmen Square massacre. In addition, China wants to be granted the status of a full market economy, making it less vulnerable to the special tariffs imposed on nations deemed to dump goods on the market.

The path ahead is thorny but, for the time being, the two sides are trying hard to coexist. In a brief appearance at the Beijing Hotel, overlooking Tiananmen Square, the Chinese Trade Minister showed that - for now, at least - he considers himself one of Peter's friends.

"Mr Mandelson has a tough position when he negotiates but he can also be reasonable," Mr Bo said. Labour's former spin-doctor couldn't have scripted it better himself.