(FORTUNE Magazine) – Less than a week after the world's highest-tech air force bombed the elusive Chinese embassy in Belgrade, street life in China's main cities had returned to normal. But it was easier to clean up the debris from the anti-American, anti-British, and even anti-Albanian riots than it will be to untangle the complicated emotions that fed China's explosion of nationalist rage.

There is no doubt that while some of the protests were orchestrated, the anger behind them is both genuine and widespread. One manager at a U.S. joint venture who traveled to the embassy district just to pitch a few stones said, "I love the U.S. dollar, but I hate America." To be sure, many of those who stoned the U.S. embassy will no doubt someday join the line in front of it for a visa. And there remains immense admiration for American accomplishments, which is why 200,000 Chinese are studying in the U.S. But even among those Chinese educated abroad, there is a depth of Chinese nationalism, and a suspicion of American motives, that most Westerners would find incomprehensible.

In this sense, the bombing was a propaganda gift to the leadership. China immediately demanded contrition as well as policy concessions from the U.S. The former, at least, it got: American flags on Chinese soil were lowered to half-staff for a day, out of respect for the three Chinese who were killed. And in a quasi-communist bit of self-criticism, Gary Tooker, Motorola's CEO, made a pilgrimage to the city leaders of Tianjin, where Motorola has its biggest Chinese plant, to apologize for the bombing. (He did not explain why Motorola shared the blame.) China will probably have less luck using the bombing as leverage to gain a role in Kosovo, to prevent Taiwan from getting American missile defenses, or to coax America to give way in negotiations about the World Trade Organization.

The protests served another political purpose as well. These are nerve-racking times: A recent religious demonstration in the heart of Beijing took the leadership by surprise; and there are concerns that the tenth anniversary of the Beijing massacre on June 4 and the 50th anniversary of the founding of the People's Republic in October could stir additional unrest. How useful that an occasion arose allowing mass frustration to be vented on an outsider.

But on another level, any instability carries dangers here, which is why the authorities reined in even the anti-American protests rather sharply. China has managed to sit out the worst of Asia's economic woes, but its economy is still on a knife's edge. Deflation is entrenched; private-sector investment is falling; exports are stagnant; real interest rates remain high. People are therefore feeling cautious and have stopped shopping. And state-enterprise reforms, slow as they may be, are pushing more people out of their jobs, fueling further uncertainty.

Against this unsettled background, there are surely some serious power games being played at the top. Zhu Rongji's commitment to reform has won him more than a few enemies. President Jiang Zemin has supported Zhu; but Jiang has lost status in the wake of the bombing because he put so much emphasis on good relations with America. If economic and social uncertainties are splitting the government, the likeliest (and most ominous) anti-reform campaigner to come out ahead would be Li Peng, a former Prime Minister best known for his role in putting down the Tiananmen Square protests, in 1989.

For America, and particularly for American business, all these threads come together in a single acronym: WTO. American businessmen were flabbergasted when President Clinton spurned as inadequate the dramatic market-opening concessions Zhu made on his visit to the U.S. in April. And while the WTO talks are far from dead, it will be considerably tougher to close a deal with suspicions of the U.S. running so high.

Had a deal been struck in April, the shock from those Belgrade bombs would have been far more muffled in China. Chinese suspicions about America would have been weaker and Zhu's position stronger. Now the crucial issue is whether China's push to open markets and integrate itself into global institutions will slow down. If it does, the old question, "Who lost China?" may yet become part of Clinton's legacy too.

--Jim Rohwer