... China, with a population of 1.3 billion people, is the world's most populous country. It also has the world's biggest, if far from the best, armed forces, with over 2.2 million personnel in its active-duty ranks (800,000 more than the United States), as well as the world's second-largest--and fastest-growing--defense budget. Its underlying economic power is rapidly expanding, too. Although most Chinese people remain poor (average per capita income, at $5,600, is lower than in the Dominican Republic), China is already the world's second biggest economy. Its GDP of $7.3 trillion, as measured in purchasing power parity, trails only the United States (at $11.7 trillion), and it is growing much faster. Last year China's economic growth rate was 9.1 percent, more than twice the U.S. rate of 4.4 percent. At this pace, China will overtake the U.S. economy in a little over a decade. There are good reasons to think that China's breakneck economic growth will not last forever: Lawlessness, lack of secure property rights, endemic corruption, social unrest, resource shortages, and other problems may well sabotage its long-term prospects. But even now China is a formidable competitor to the United States--indeed, it is the only Great Power threat on the horizon.

History, alas, teaches that it is difficult if not impossible to integrate peacefully a major illiberal challenger into an international system it did not design and does not control. Just ask the British, who 100 years ago occupied the strategic niche that America fills today--a global hegemon threatened by powerful upstarts. In America's case the rival is China; in Britain's it was Germany and Japan. The British tried confrontation with Germany (symbolized by the 1904 Anglo-French Entente Cordiale and an Anglo-German naval arms race) and appeasement with Japan (the 1902 Anglo-Japanese Alliance and considerable aid for the Imperial Japanese Navy until the late 1920s). Neither policy worked, and the result was two of the most horrific wars in history. The United States did a little better in managing the rise of the Soviet Union, but the Cold War still resulted in the deaths of some 100,000 Americans in Korea and Vietnam.

Chinese apologists will huffily reply that their country has nothing in common with Germany, Japan, or the Soviet Union. In the current issue of Foreign Affairs, Zheng Bijian, a veteran Communist party apparatchik with close ties to President Hu Jintao, assures us: "China will not follow the path of Germany leading up to World War I or those of Germany and Japan leading up to World War II, when these countries violently plundered resources and pursued hegemony. Neither will China follow the path of the great powers vying for global domination in the Cold War. Instead China will transcend ideological differences to strive for peace, development, and cooperation with all countries in the world."

It's true that China is not actively acquiring colonies (at least not since the occupation of Tibet in 1951) or fighting other countries (at least not since the invasion of Vietnam in 1979). But neither are its actions as benign as Zheng would have it. Certainly it would come as news to Japan--whose territorial waters were violated last fall by a Chinese submarine and some of whose businesses were attacked this spring by Chinese mobs--that China strives for peace and "cooperation with all countries." It will come as even greater news to Taiwan, which has been on the receiving end of blood-curdling threats of "annihilation" should it ever dare to declare its independence--threats backed up by the presence of 500-550 short-range ballistic missiles deployed across the Taiwan Strait, with 75 new ones added every year. And, finally, it will come as news to the military and political architects of Chinese strategy who consider the United States to be the "main enemy," according to a Chinese diplomat who recently defected in Australia.

China may not be seeking global domination--at least not yet--but it is definitely seeking regional domination. And the region it is trying to dominate will be as important, politically, militarily, and economically, to the rest of the world in this century as Europe was in the last one.

THAT DOES NOT MEAN that war is inevitable by any stretch of the imagination, but it does mean that we need to make a greater effort to nudge China off its long-term collision course with the United States. As the failure of British policy toward Germany and Japan indicates, there is no guarantee that any U.S. policy will succeed in making this awakening dragon mind its manners. But we have to try. Since we can't be sure any particular policy will work, the safest course would seem to be to try a bit of everything--economic integration, diplomatic containment, military deterrence, and internal subversion. Unfortunately, we're not doing a very good job on any of these fronts right now.

The West has been most successful in fostering China's economic integration through membership in the World Trade Organization and increasing levels of trade and investment. But protectionist lobbies seem intent on sabotaging these gains through shrill harping on such purported Chinese sins as having a strong currency and selling too many bras to American women. The Bush administration first bludgeoned Beijing into devaluing the yuan and now (along with the European Union) has restricted Chinese textile imports.

It may make sense to use economic leverage to influence Chinese behavior, but it should be done in pursuit of such vital aims as ending the North Korean nuclear program--not in aid of the hopeless American textile industry. Chinese imports (that is, goods that American consumers want to buy) are no threat to the United States, any more than Japanese imports were in the 1980s. Harping on our current trade deficit with China will prove no more productive than harping on Japan's huge trade surpluses did back then.

The same is true of Chinese direct investment. In the 1980s Americans were alarmed about the Japanese purchase of Rockefeller Center and Columbia studios. It turned out to be much ado about nothing. Likewise today, purchases made by Chinese firms are, in general, no big deal. Investments by state-owned firms--such as China National Offshore Oil Corporation's aborted bid for Unocal or Lenovo's successful bid for IBM's PC division--are slightly more troubling but should not be forbidden unless they risk handing over control of vital assets such as stealth technology. Neither ThinkPads nor, in all likelihood, Unocal's oil holdings fall into the high-value category.

While the Chinese quest for petroleum has gotten a lot of attention, and rightly so, this does not have to lead to a zero-sum mercantilist competition. True, China is now the world's second-biggest oil importer, behind the United States. But oil, far from sparking a conflict akin to the Anglo-Dutch trade wars of the 17th century, could actually be grounds for cooperation, since both the United States and China would like to lessen their dependence on imports. They could cooperate on alternative technologies such as electric hybrid engines and hydrogen fuel cells. This could have the added benefit of reducing greenhouse gas emissions in line with Kyoto goals, as proposed under the Asia-Pacific Partnership on Clean Development and Climate announced in July between the United States, Australia, China, India, Japan, and South Korea.

BUT EVEN IF WE AVOID a trade war and actually find new areas of cooperation, there is no guarantee that China's growing lucre will translate into peace in our time. In 1914 Germany was the second-richest nation in the world--and the most militaristic. Optimists think that China will eventually go the way of South Korea and Taiwan, both onetime autocracies that liberalized after getting rich. That may well happen, and for that reason, if no other, we need to keep trading with China. But it's just as plausible that China will follow the path of autocratic states like Germany and Japan, which in the early 20th century combined capitalism with expansionism. Indeed, there are more than faint echoes of Kaiser Wilhelm II and General Tojo in the fervor with which the Communist party oligarchy has adopted xenophobic nationalism as the justification for its continued rule.

Even as we do business with China, therefore, we need to strengthen our ability to dissuade it from aggression. Despite the shrill reaction he provoked from Beijing, Secretary of Defense Donald Rumsfeld was right to publicly warn in June that China's defense buildup was an "area of concern" for its neighbors. That warning needs to be repeated--and backed up with action. Asian democracies need to increase their military spending while extending explicit defense commitments to block potential Chinese aggression.

The studied ambiguity cultivated by the United States over the fate of Taiwan since the opening to the mainland in the 1970s was potentially dangerous. It might have risked a repeat of Secretary of State Dean Acheson's blunder in January 1950 when he did not include South Korea in the U.S. "defensive perimeter," thereby inviting Communist aggression six months later. President Bush has, therefore, been right to bluntly declare that "our nation will help Taiwan defend itself," and Japan has been right to make slightly more explicit its own commitment to Taiwan's defense. It would be useful if China's other neighbors--states like South Korea, Australia, Singapore, Indonesia, Malaysia, India, the Philippines, perhaps even Vietnam--were to make similar commitments. That would do much to keep the peace in East Asia, and it should be an aim of U.S. diplomacy.

More broadly, the United States should strive to create, if possible, an Asian analogue to NATO. The Bush administration is right to deepen U.S. links with old allies like Japan and Australia and to establish closer ties to newer allies like India and Singapore. That process needs to continue, especially in firming up the nascent U.S.-India entente. But it would be good, if possible, to move from bilateral relations to a regional defense framework so that states in the region would work closely not only with the United States but also with one another. That won't be an easy goal to accomplish. China has been skillful in trying to wean Asian states away from the United States by a combination of military, diplomatic, and economic pressure. Most neighbors don't want to do anything to offend the 800-pound panda. (In this connection it is worth noting that Japan, South Korea, and Australia now trade more with China than with the United States.) But it is just possible that the United States, if it makes this a top priority, may be able to take advantage of growing unease about China's rise to knit together a coalition for its containment. To lessen Beijing's fear factor, such an organization could establish ties with the Chinese military, too, and make clear that regional stability is in everyone's interests--including China's.

Alliances are highly desirable, but to be credible they need to be backed up by force--an area where most of America's Asian allies are not terribly credible. While China spends 4 percent or more of its GDP on defense (probably a lot more), according to the International Institute for Strategic Studies, its neighbors trail far behind. The figures are: Japan 1 percent, the Philippines 1 percent, Thailand 1.3 percent, Australia 2.3 percent, Taiwan 2.4 percent, India 2.6 percent, and South Korea 2.8 percent. (The one exception is tiny Singapore, which spends a whopping 5.2 percent.) The United States should strive to reduce free-riding by its allies--one hopes with more success than we've had with our European friends. In the case of Japan, that means supporting a move to amend the MacArthur-era constitution which makes it difficult to send the Self-Defense Forces abroad (including for the defense of Taiwan or South Korea) and a more recent political decree that caps military spending at 1 percent of GDP.

In the case of Taiwan--the state most directly threatened by rising Chinese power--that means continued pressure to get it to do more for its own defense. Although the United States agreed four years ago to sell Taipei $18 billion worth of vital weaponry, minority KMT legislators in thrall to the mainland have blocked the necessary legislation in parliament. The failure to modernize its armed forces is creating a dangerous vulnerability. The United States is not entirely blameless here; it needs to lift restrictions on high-level military-to-military contacts to make Taiwanese-American defense planning more robust and credible. But, in the end, Taiwan needs to do more to defend itself; given its strategic vulnerability, its defense spending ought to approach the Israeli level, 9.5 percent of GDP.

The ultimate question in deterring China is whether other Asian states will acquire nuclear arsenals of their own. Australia, Taiwan, South Korea, and Japan could go nuclear practically overnight. Until now they have refrained from doing so, preferring to rely on the U.S. nuclear umbrella for fear of sparking an arms race and greater regional instability. There is no urgent need to change this policy, but it would be useful to hold up regional nuclear proliferation as a threat to get China to do more to stop the North Korean nuclear program. Surely Beijing does not want to be surrounded by nuclear-armed competitors--yet that is precisely where its failure to crack down on North Korea is leading.

BEYOND CONTAINMENT, deterrence, and economic integration lies a strategy that the British never employed against either Germany or Japan--internal subversion. Sorry, the polite euphemisms are "democracy promotion" and "human rights protection," but these amount to the same thing: The freer China becomes, the less power the Communist oligarchy will enjoy....