The diplomatic situation now is tricky for all parties, but it poses far bigger and more complex challenges for the Chinese government than it does for America's. This piece, by Yiyi Lu, on the WSJ site, does a good job of explaining why. Jonathan Watts, of the Guardian, has a complementary analysis. (Guardian photo of Chen.)
I recommend reading last night's post from the Atlantic's Max Fisher, about the reasons the situation is tricky for the United States as well. But I disagree with its headline -- that what to do about Chen is the "toughest foreign policy choice" Obama has faced. For my money, the two contenders for that honor are what to do about Afghanistan, and what to do about Iran-Israel nexus and all is ramification. In the next tier of tough decisions would be North Korea, the Germany-induced European meltdown, Egypt and the Arab spring, Libya and Syria. Oh, and climate change.
I very much agree with the post's emphasis on how carefully the United States -- and other Western powers -- need to move, given the reaction in China. But by contrast with, say, choices about Afghanistan, for America the Chen situation presents what seems to be a classic "bright line" case. Chen Guangcheng has obvious and well-founded reasons to fear persecution in his own country for his political views. His request for political asylum would seem to fit exactly the standards for which such asylum was designed.* So the U.S. needs to be shrewd, diplomatic, mindful of its whole strategic relationship with China, and so on in considering its next steps. But on the question of whether to grant asylum, if indeed asylum is what Chen turns out to want, based on everything we know now the only choice is to say Yes.
* This is very different from the case of Wang Lijun, the police chief who had been Bo Xilai's ally in Chongqing before their falling-out, apparently over the murder case involving Bo's wife. When Wang presented himself at the U.S. Consulate in Chengdu, he would have had a much harder time making a case for asylum, since until very recently he had been the one using the power of the law against his enemies.