How serious is the Chinese challenge?

Is China the benign emerging market with limited regional aspirations that Beijing is so anxious to portray? Or is it an increasingly powerful, assertive economic and strategic force that will increasingly challenge Europe, America and Asian neighbours?

The West has a long history of crying wolf about China, beginning with the 19th century Yellow Peril scare. More recently fears of China reflect European and US self-doubt about their ability to maintain the current standard of living in the face of Chinese competition. Anxiety is also driven by neoconservative need to have an enemy to mobilise public support for US defence spending and continuation of American global hegemonic influence. Moreover, such fears ignore China’s daunting development needs, including hundreds of millions of people still living in harsh poverty.

Nevertheless, evidence in recent months suggests growing Chinese self-confidence, with a capacity and an unprecedented willingness to exert leverage in the world. This should come as no surprise. History teaches that rising powers flex their muscle and test influence. Europeans, Americans and China’s neighbours do not necessarily need to be afraid. But they do need to be wary.

Beijing’s new assertiveness is fueled by its unprecedented economic success. The Chinese economy has doubled in size during the last seven years and per-capita income has doubled in six years.

This economic performance has led the Chinese to be the most self-satisfied people in the world, according to the recent Pew Global Attitudes survey. Nine in 10 Chinese are happy with their country’s direction, feel good about the current state of their economy and are optimistic about China’s economic future.

And the rest of the world increasingly sees China as the emerging economic superpower. In that same Pew survey of populations in 22 nations, majorities or pluralities in eight countries picked China as the world’s leading economic power, compared with people in only two nations who felt that way in 2009. Half the Germans, Jordanians, Japanese, French and Americans now assign the top spot to China.

Since 2009, in 13 of the 21 countries for which trends are available, the portion of the public that views China as the world’s leading economic power has grown sharply, including increases of 29 percentage points in Japan, 23 in Germany and 21 in Jordan.

And China seems increasingly willing to use its rising stature to exercise leverage over diplomatic, security and economic issues.

There is no more kowtowing to the United States. When US President Barack Obama visited China in November 2009, his principal public event in Shanghai, a town-hall meeting with students, was broadcast only on local TV, not nationwide - unlike a famous town-hall meeting that Bill Clinton held in China during his first visit as president. Moreover, press reports at the time censored the content, as did Chinese newspaper editors with an Obama “Southern Weekend” interview.

At the Copenhagen Climate Summit in December, Chinese Premier Wen Jiabao failed to attend an initial meeting with Obama, sending a lower-level official in his place. At one point, Obama was subjected to a finger-wagging lecture by a high-ranking Chinese official, which would have provoked an international incident had an American treated the Chinese leader in such a manner.

Beijing has turned aggressive on trade and investment matters, demanding that foreign companies patent technologies in China and adopt Chinese standards if they want to sell in the Chinese market. It has also brought trade cases against Western producers who sell in China.

On the political front, Chinese officials have begun an expansive assertion of China’s national sovereignty. Beijing has long claimed that Tibet and Taiwan are “core national interests” and foreigners should keep out of these “internal affairs”. Now Chinese have begun to apply this diplomatic term to the South China Sea, a 1.2 million square mile area through which flows at least a third of global maritime commerce and more than half of Northeast Asia’s imported energy supplies. Beijing’s assertion threatens fishing and oil-exploration interests of Vietnam, Taiwan, the Philippines, Indonesia and Malaysia, and naval transit interests of the US, Japan and South Korea.

At the same time Beijing has reasserted old territorial claims over the Indian state of Arunachal Pradesh and backed up that stance with stationing new troops on India’s northeastern border.

China also seeks a larger role in South Asia. Beijing provided the Sri Lankan government with the arms it used to quell its long-running civil war with the Tamil Tigers. It has expanded naval operations in the Indian Ocean, while building civilian port facilities in a number of countries in the region - from Burma to Pakistan. It has deepened economic ties with Burma and Afghanistan, while ramping up its close strategic relationship with Pakistan by offering civilian nuclear assistance. It has excluded India from the East Asian diplomatic structures that Beijing champions.

China’s neighbours will be excused if they begin to worry about linkage of core national interest, national sovereignty and territorial integrity when coupled with growing Chinese defense spending. Beijing now spends 4.3 per cent of its GDP on defence, much more than its neighbours India, Japan, South Korea, Taiwan or Vietnam.

But China also exercises newfound leverage through inaction. Beijing long resisted pressure to appreciate the renminbi. A June decision to stop pegging its currency to the US dollar has not yet led to meaningful increase in the renminbi’s value. China has also been notably unwilling to exert pressure on North Korea over its recent alleged sinking of a South Korean naval vessel. And Beijing insisted on watering down UN economic sanctions against the Iranian nuclear-weapons program before it would vote for them, suggesting China’s economic interests in Iran trump European and US strategic concerns about the program.

Beijing is clearly signaling that the international status quo is not permanently acceptable to China. It has laid down a set of markers, and its relations with other countries have changed forever.

Yet many times in the past the Chinese have tested the boundaries of their influence and the patience of the West and its Asian neighbours, only to pull back. If all the posturing that has happened to date proves to be the extent of China’s acting out, the situation is manageable.

The danger of increased international tension and miscalculation will come only if Chinese assertiveness grows in the months ahead.

Are there other regions or issues that China will define as its “core national interest” and thus off limits to foreign criticism? Its domestic human-rights policy? Its carbon-emissions record? Territorial claims in central Asia?

Will Chinese companies attempt to circumvent Iranian economic sanctions, tempting Germans, Koreans or the Japanese to follow suit?

Will Beijing use its massive holdings of US treasury notes to leverage more directly American behaviour?

It’s unrealistic to expect an economically successful, increasingly self-confident China not to play a more expansive role in the world. But that reality does not give Beijing license to throw its weight around with impunity, even if other nations have done so in the past.

Europe, America and the rest of Asia must be vigilant. China is rising. And rising powers have a history of upsetting the status quo.