Most of China's neighbors are looking to the United States for help in resisting increasing Chinese aggressiveness. Even Japan, where residents of Okinawa want U.S. forces gone, and are becoming increasingly loud about it, is telling its citizens that the American troops are increasingly vital to Japanese defense, and must stay. Japan is seeking other allies against China, and this now includes India, which recently sent some senior officers to Japan, to seek ways to cooperate in blocking threatening Chinese military strategies. China isn't looking for a fight, it's looking for more privilege and economic advantage. China wants neighbors to back off in disputes over uninhabited islands (often tiny rock outcroppings) that confer the right to control fishing and oil drilling in surrounding waters. China also seeks to interpret coastal waters, where foreign military ships (even unarmed reconnaissance vessels) are forbidden, much farther from shore than does current international law. Chinese military tradition stresses threats and economic pressure (or rewards) rather than the more aggressive Western forms of saber rattling. East Asian nations recognize the Chinese form of bullying better than Western nations, and knows that it is a serious attempt at regional domination.
China still considers itself a developing economy, and eagerly solicits foreign aid (and receives over $2 billion a year.) Despite now having the second largest economy on the planet, only a quarter of the population is enjoying most of this prosperity, while the rest of the population simmers in rural poverty. There is growing risk of rural revolution against the wealthy, modern, urban minority. Chinese leaders are asking the West to cut back on their consumption and, in effect, share their prosperity with China. It's a request now, but may become a demand later. Failing that unlikely development, China is happy to receive donations in the meantime.
Members of the Norway based Nobel Peace Prize Committee revealed that Chinese diplomats have threatened the committee with retaliation if imprisoned Chinese reformer Liu Xiaobo is awarded the Nobel Peace Prize this year. The committee head pointed out that the Peace Prize operation had nothing to do with the Norwegian government. The Chinese just repeated the warning.
September 30, 2010: China has freed three of four Japanese it had arrested on the 21st for "illegally photographing military facilities." These arrests were part of a Chinese effort to free a Chinese fishing trawler captain who was arrested on the 7th for threatening (with ramming) two Japanese patrol boats near a disputed bit of ocean that apparently contains large quantities of natural gas and oil under the seabed. Japan had freed the Chinese trawler captain a few days after the four Japanese were arrested, but refused to apologize to China for the arrest. China has increasingly used commercial ships to "intimidate" foreign warships entering waters that the Chinese consider their own (even though international law does not agree with them.) Japan has stood up to the Chinese pressure, and is now planning to put small garrisons on some of the disputed islands. One of the four arrested Japanese is still being held. All four of those arrested were employees of a Japanese firm in China. There are a large number of such Japanese in China, and they, like many Chinese, use their vidcams to capture images of just about everything. The Chinese government rarely enforces the many laws against photographing "sensitive areas" (which in communist police states means just about everything). But if you need to round up some foreign hostages because of a diplomatic dispute, these laws can be enforced.
This particular dispute goes back a long way. China and Japan have been squabbling over ownership of the uninhabited Senkaku Islands in the East China Sea with increasing fervor. Five years ago, Japanese officials took control of a privately owned lighthouse built on one of the eight small islands, and warned China to stay away. The Senkakus are actually islets, which are 167 kilometers northeast of Taiwan and 426 kilometers southeast of Japan's Okinawa and have a total area of 6.3 square kilometers. Taiwan also claims the Senkakus, which were discovered by Chinese fishermen in the 16th century, and taken over by Japan in 1879. They are valuable now because of the 380 kilometer economic zone nations can claim in their coastal waters. This includes fishing and possible underwater oil and gas fields. A conservative Japanese political group built the lighthouse in 1986, to further claims of Japanese ownership. Currently, the Japanese have the most powerful naval forces in the region, and are backed up by a mutual defense treaty with the United States. China was long dissuaded by that, but no more.
China tried to use its near-monopoly on the production of "rare earth" metals to jack up prices. The reaction from the rest of the world has been vigorous and hostile. "Rare earths" are ores that are found in tiny quantities all over the world. Because that they are expensive to mine, many mining companies don't bother. But in the last century, more and more rare earths have been found to have useful applications in metallurgy, electronics and other areas. In the last few decades, China has extracted rare earths more cheaply than anyone else, and driven nearly all foreign rare earth mining operations out of business. But because of the new Chinese threat, other countries are reviving their rare earth mining operations, even if it requires government subsidies.
The growing use of force against peaceful, and legal (according to Chinese law) protestors is getting out of hand, even for the government. Provincial and local government have been found to be maintaining private jails, where people threatening to expose local corrupting among government officials, are kept. The government has to play a balancing act between local officials (who are essential in maintaining communist control of the government) and the growing unrest of increasingly wealthy and better educated Chinese who abhor the corruption and use of force against anyone who protests.
China believes it has finally convinced North Korea to accept Chinese style economic reforms. This was accomplished by approving North Korea leader Kim Jong Il's plan to pass on power to his son. Another factor is the collapse of the North Korean economy under communist central planning (which never worked, anywhere). Chinese companies are lining up to open manufacturing and mining operations in North Korea.