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US President Barack Obama unveiled his administration’s plan Thursday for a leaner, cheaper military, a reflection of Washington’s fiscal belt-tightening and slower national economic growth, according to CNN.

The president insisted the new strategy—which eliminates the military’s ability to actively fight two major wars at once—will allow US armed forces to effectively combat terrorism while confronting any new threats from countries like China and Iran, said the story.

The new strategy calls for greater US military presence in Asia, based on a US Defense Department document which identifies China as a security threat. Obama also pledged to keep strategically critical sea lanes open and successfully combat missile, electronic, cyber and other threats.

Relevant excerpt from Sustaining US Global Leadership: Priorities for 21st Century Defense:

US economic and security interests are inextricably linked to developments in the arc extending from the Western Pacific and East Asia into the Indian Ocean region and South Asia, creating a mix of evolving challenges and opportunities.

Accordingly, while the US military will continue to contribute to security globally, we will of necessity rebalance toward the Asia-Pacific region. Our relationships with Asian allies and key partners are critical to the future stability and growth of the region. We will emphasize our existing alliances, which provide a vital foundation for Asia-Pacific security. We will also expand our networks of cooperation with emerging partners throughout the Asia-Pacific to ensure collective capability and capacity for securing common interests. The United States is also investing in a long-term strategic partnership with India to support its ability to serve as a regional economic anchor and provider of security in the broader Indian Ocean region.

The maintenance of peace, stability, the free flow of commerce, and of US influence in this dynamic region will depend in part on an underlying balance of military capability and presence. Over the long term, China’s emergence as a regional power will have the potential to affect the US economy and our security in a variety of ways. Our two countries have a strong stake in peace and stability in East Asia and an interest in building a cooperative bilateral relationship. However, the growth of China’s military power must be accompanied by greater clarity of its strategic intentions in order to avoid causing friction in the region.

The reaction from China was to be expected, with the country warning the US against “flexing its muscles” in the Asia-Pacific region, saying it would harm US-Chinese relations.

“If the United States indiscreetly applies militarism in the region, it will be like a bull in a china shop, and endanger peace instead of enhancing regional stability,” said a Xinhua editorial.

Wingnuts on both sides of the Pacific also chimed in, according to a CNN op-ed.

James Clapper, retired lieutenant general and current director of national intelligence, characterized China, “growing in its military capabilities,” as a “mortal threat” to the United States.

Ileana Ros-Lehtinen, chairman of the House Committee on Foreign Affairs, said, “The Chinese military openly regards the United States as an enemy. We should not undermine our own security by thinking we can make friends with self-proclaimed adversaries with hospitality and open arms.”

China’s leaders tend to stress that they do not seek a confrontation. Foreign Ministry spokesman Hong Lei stated that “China from beginning to end pursues a defensive national defense policy, and sticks to the path of peaceful development.”

Still, one can readily find belligerent voices from China. Gen. Zhu Chenghu expressed willingness to abandon China’s “no first use” nuclear weapons policy, to defend its claim over Taiwan and argued that China should use nuclear weapons against the United States should its military interfere. A 2011 editorial in the Global Times (an English edition of the Communist Party of China’s official newspaper) warned that countries involved in sea disputes with China “need to prepare for the sounds of cannons.”

To be sure, the South China Sea is one of the hottest military flashpoints in the world, with China laying claim to every inch that matters.

At odds with China are Vietnam, the Philippines, Malaysia, Brunei and Taiwan, each with competing territorial claims.

If cooler heads prevail, the longstanding dispute could be resolved through multilateral talks, compromise and agreements, but with Beijing’s changing of the guard next year comes questions, among them, what if the hawks take over? Militarily, China is the dominant regional power by far.

All said, the South China Sea is a geopolitical, economic and military powder keg. If China’s new leadership tries to take what it says is historically China’s, the country will inevitably butt heads against the US And if push comes to shove, it isn’t going to be pretty.

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Ray Kwong is senior advisor to the USC US-China Institute, a charter member of the Asian International Business Advisory Group, a Forbes contributing writer and columnist for the Hong Kong Economic Journal. He is currently facilitating talks between China and U.S. interests on such matters as clean energy economics, nanotechnology and commercial aerospace. While it sounds way cooler than it really is, he is also a member of the Bloomberg BusinessWeek Market Advisory Board and the McKinsey Quarterly Executive Panel. You can follow him on Twitter @raykwong. Eyeball Ray's posts from Forbes ChinaTalk.
Ray Kwong has 17 post(s) on Asia Security Watch