US President Barack Obama met with Tibet’s exiled Dalai Lama last Thursday, despite repeated warnings by China that the encounter would further damage US-China relations. While Beijing and Washington both made conciliatory gestures to ease diplomatic strains over the issue, tensions between the two major powers have undoubtedly sharpened since the beginning of the year.

Last year, as the US was wrestling with the global financial crisis, Obama pointedly declined to meet the Dalai Lama. Washington was desperate to maintain China’s huge purchases of US bonds and other securities that helped prop up its growing debts and its ability to bail out Wall Street. This year Obama has met the Dalai Lama as well as approving a $6.4 billion arms package for Taiwan and taking a far tougher stance on trade issues.

Beijing has responded to US trade penalties by imposing tariffs on US chicken imports and threatening sanctions against US corporations selling arms to Taiwan. However, in an attempt to avoid further straining relations over the Dalai Lama’s visit, China gave permission for the US aircraft carrier USS Nimitz and four other warships to stop over in Hong Kong last week. In November 2007, Beijing denied access to the USS Kitty Hawk to protest against former US President Bush’s meeting with the Dalai Lama.

Obama attempted to play down the significance of the meeting, describing it as a “private” event. The president spoke with the Dalai Lama in the Map Room of the White House, rather than in the Oval Office. Compared to Bush’s highly provocative action in awarding the Congressional Gold Medal to the Tibetan figure in 2007, Obama was restrained. Nevertheless, he did not call off the meeting which can only add to tensions between the two countries.

In a joint statement after the meeting, Obama indicated his “strong support” for protecting religious, cultural and human rights in Tibet—an implicit criticism of Beijing’s oppressive rule in the region. At the same time, he reiterated the importance of a “positive and cooperative” US-China relationship.

The statement reflected the complex relations between the two countries. On the one hand, Washington has adopted a more hard line stance towards Beijing as China has refused to simply accede to US demands on a range of global issues, including tougher UN sanctions on Iran and the US blueprint at the Copenhagen climate change summit. Obama is also determined to reduce economic “imbalances”—particularly on trade—and is demanding China revalue its currency, the yuan, against the dollar.

On the other hand, both Beijing and Washington are worried about the impact of rising political tensions on the economic relationship—China is heavily dependent on the US market for its exports, the US needs China to recycle its trade surpluses as purchases of US bonds. Washington is undoubtedly concerned at US Treasury Department’s figures showing that China cut its holding of US bonds in November and December by $43.5 billion.

As for the Dalai Lama’s visit, his uncritical promotion by the US political and media establishment as some sort of freedom fighter for Tibetans is utterly hypocritical. Washington’s posturing on human rights is always determined by strategic and economic interests, in this case as a means for upping the pressuring on Beijing on a range of issues. Obama is silent on the democratic rights of hundreds of millions of Chinese workers as US corporate giants from Wal-Mart to GM are dependent on the police-state regime to discipline China’s supplies of cheap labour.

US presidential meetings with the Dalai Lama always pose an implicit threat to Beijing by encouraging separatist sentiment among Tibetans and other national minorities, which have suffered discrimination and growing social inequality as a result of Beijing’s pro-market reforms. The Dalai Lama’s secretary Chhime Chhoekyapa told reporters that Tibetans “will feel encouraged that the president of the US, a global superpower, is meeting with His Holiness.” Hundreds of demonstrators waving Tibetan flags gathered outside the White House during the meeting.

For its part, Beijing is fearful of a repetition of the extensive protests in Tibet in March 2008, which were brutally suppressed by Chinese paramilitary police. President Hu Jintao and Premier Wen Jiabao held a Tibet Work Conference in January, for the first time since 2001, to discuss the promotion of “ethnic unity” in Tibet through a $60 billion economic package and promises to lift the rural incomes of Tibetans to the national average by 2020. The local economy has already grown by 170 percent since 2001, but far from benefiting working people—Tibetan and Han—it has been Han Chinese businessmen and the local Tibetan elites who have profited.

The prospect of social unrest in Tibet only adds to Beijing concerns about global and regional rivalry in its sensitive border areas. Tibet borders India and Nepal and is close to Pakistan and Afghanistan. The Obama administration is escalating its neo-colonial war in Afghanistan, and pressing the Pakistani government to intensify its military crackdown against Islamist insurgents in its border areas. At the same time, Washington has strengthened its strategic ties with India, a major rival of China in Asia.

China and India fought a border war in 1962 and tensions along their disputed frontier have escalated in recent months. Chinese influence in Nepal, which India regards as part of its sphere of influence, has also been growing. Nepal’s home minister visited Beijing earlier this month to discuss security measures against “anti-China” activities by Tibetans in the country. China’s trade with Nepal has quadrupled since 2003 and the New York Times reported that Nepalese officials have asked China to extend its Tibetan railway to the Nepal border.

Closer ties with Washington are only encouraging India to assert its interests more aggressively. Last week, India announced the deployment of two more mountain divisions of 30,000 troops to its northeastern border area with China, near the disputed state of Arunachal Pradesh, known as South Tibet in China. Last year China attempted to veto Asian Development Bank projects in Arunachal Pradesh to demonstrate its opposition to India’s claim over the territory.

Although the Dalai Lama has formally abandoned calls in recent years for an independent Tibet, he has continued to push for greater regional autonomy. Moreover, Beijing is well aware of the Dalai Lama’s history of collaboration with the CIA in fomenting unrest in Tibet during the Cold War in the 1950s and is concerned that Washington might encourage radical Tibetan separatism again. As a result, while China and the US appear to have played down the latest meeting in the White House, it can only compound suspicion and friction between the two countries.