The tenor of U.S.-China relations for much of the first year of the administration of President George W. Bush was set by a crisis that need not have occurred. How the situation was handled and eventually resolved is instructive. It tells us about a beleaguered communist leadership in the buildup to major generational transition (scheduled for late 2002 and early 2003) and the mettle of a democratically elected U.S. government tested early in its tenure by a series of foreign policy crises and a carefully coordinated set of devastating terrorist strikes against the continental United States. The way the April 2001 crisis on Hainan Island was resolved must be chalked up as a success for the United States. the key was Washington's ability to convince Beijing that holding the air crew was hurting, and not advancing, Chinese interests. That is something Beijing seems not to have grasped when, without warning, the EP-3 suddenly swept down onto the runway in Haikou, bringing a treasure trove of super secret electronics and 24 Americans, who looked at first to be valuable bargaining chips. With the plane and the crew, China seemed to hold the best cards and behaved accordingly. the top leaders who Ambassador Joseph Prueher had tried to cultivate did not return his calls, and Chinese President Jiang Zemin, after demanding an apology from Washington, left for a Latin American tour. Let the Americans stew in this for awhile, Jiang's message seemed to be. But Washington managed to reduce the value of those bargaining chips. This was done, first, by making clear that no substantive concessions would be made to secure their release; and, second, by persuading Beijing that continuing to hold the Americans would bring real damage to Chinese interests. As indignation mounted in the United States, economic dangers began to loom on China's horizon. The Beijing government, after all, counts on a rising standard of living to limit dissent, and even a brief loss of access to the American market could be damaging. Nor did Asian neighbors rally to support China. They worry, mostly in private, about Beijing's growing military strength and assertiveness. The State Department boycotted Chinese embassy functions and Secretary of State Colin Powell, while offering regrets and condolences-even eventually sorrow over the loss of the Chinese pilot-showed no inclination to consider the apology China demanded. The most sensitive nerve in Beijing, however, may have been the Olympics. Having the games in their capital is a cherished Chinese aspiration, and when members of Congress began organizing against it as the crisis developed, the Chinese embassy took the unusual step of sending rather snippy letters to the offenders. Only releasing the hostages could possibly remove the very real threat, and even then not with certainty. Hence Beijing's decision to send the crew home, which, once made, began the search for a linguistic formula to explain it. Washington had not, in fact, apologized, but we could not prevent Beijing from pulling some of what we had said out of context and presenting it through state-controlled media as being, in fact, the apology China's leaders sought. That, plus the usual "humanitarian considerations," provided sufficient cover to end the crisis.