Chinese president Hu Jintao's visit to Washington is coming at an increasingly tense moment in Sino-American relations. Indeed, mesmerised by China's vast military buildup, a new constellation of strategic partnerships among its neighbours, and America's revitalised commitment to Asian security, many shrewd observers suggest that 2010 saw the first sparks of a new cold war in Asia. But is "cold war II" really inevitable?

Although appeasing China's drive for hegemony in Asia is unthinkable, every realistic effort must be made to avoid militarisation of the region's diplomacy. After all, there was nothing very cold about the cold war in Asia. First in the Chinese civil war, and then in Korea, Indonesia, Malaysia, and Indochina – particularly Vietnam – the cold war raged not as an ideological/propaganda battle between rival superpowers, but in dogged, often fratricidal combat that cost millions of lives and retarded economic development and political democratisation.

It is this grim history that makes China's current disregard for Deng Xiaoping's maxim that China "disguise its ambition and hide its claws" so worrying for Asian leaders from New Delhi to Seoul and from Tokyo to Jakarta. From its refusal to condemn North Korea's unprovoked sinking of the South Korean warship Cheonan and shelling of South Korean islands, to its claims of sovereignty over various Japanese, Vietnamese, Malay, and Filipino archipelagos and newly conjured claims on India's province of Arunachal Pradesh, China has revealed a neo-imperial swagger. So it should surprise no one that "containment" is coming to dominate Asian diplomatic discourse.

But it is wrong – at least for now – to think that a formal structure of alliances to contain China is needed in the way that one was required to contain the Soviet Union. Containment, it should be recalled, was organised against a Soviet totalitarian regime that was not only ideologically aggressive and in the process of consolidating its colonisation of eastern Europe (as well as Japan's northern territories), but also deliberately sealed off from the wider world economy.

Today's China is vastly different. Overt military imperialism of the Soviet sort has, at least historically, rarely been the Chinese way. Sun Tzu, the great Chinese theorist of warfare, focused on the weakening of an adversary psychologically, not in battle. Until recently, much of China's bid for regional hegemony reflected Sun's concepts.

More importantly, China abandoned economic autarchy three decades ago. Today, its economic links in Asia are deep, and – it is to be hoped – permanent. China's export machine sucks in vast quantities of parts and components for final assembly from across Asia – Thailand, Malaysia, the Philippines, and Indonesia, as well as richer Singapore, Taiwan, South Korea, and Japan. Membership of the World Trade Organisation has helped to bind China to highly sophisticated pan-Asian production networks. Everybody has benefited from these ties.

Throughout China's three-decade rise from poverty to economic juggernaut, trade within east Asia has grown even faster than the region's trade with the rest of the world, suggesting deeper specialisation and integration. Indeed, China's rise has profoundly altered the course of Asia's trade flows. Japan no longer focuses on exporting finished goods to Europe and North America, but on exporting parts and components for assembly in China. In turn, Japan now imports from China finished goods (such as office machines and computers) that once came from America and Europe.

Given that as many as half of China's 1.3 billion people remain mired in abject poverty, it is in China's interest to ensure that these economic relationships continue to flourish. In the past, China has recognised the vital need for good neighbourly relations. During the Asian financial crisis of 1997-1998, Chinese officials did not engage in competitive devaluation of the renminbi. Unfortunately, such clear-sighted and responsible policymaking is a far cry from what we are seeing today.

China's dizzying increase in its military capacity is another obvious source of concern in Asia. But, even according to the highest estimates, China's military budget is only now about equal to that of Japan and, of course, much less than the combined military budgets of Japan, India, and Russia, all of which border China – not to mention Indonesia, South Korea, and a militarily modernising Taiwan. Moreover, Russia and India possess nuclear weapons, and Japan has the technological wherewithal to reconfigure its defence posture to meet any regional nuclear threat.

So the challenge that China poses today remains predominantly political and economic, not military. The test of China's intentions is whether its growing economic and, yes, military capacities will be used to seek to establish Asian hegemony by working to exclude America from the region and preventing regional partnerships from flourishing. The alternative is a China that becomes part of a co-operative effort to bind Asia in a rules-based system similar to that which has underpinned longterm peace in Europe.

In this sense, Asia's rise is also a test of US competitiveness and commitment in Asia. America's historical opposition to hegemony in Asia – included as a joint aim with China in the Shanghai Communiqué of 1972 – remains valid. It will have to be pursued, however, primarily by political and economic means, albeit backed by US power.

Before 2010, most Asian countries would have preferred not to choose between China and the US. But China's assertiveness has provided enormous incentives to embrace an Asian multilateral system backed by America, rather than accept the exclusionary system that China seeks to lead. In 2011 we may begin to see whether those incentives lead China's rulers to re-appraise their diplomatic conduct, which has left them with only the corrupt, basket-case economies of Burma and North Korea as reliable friends in Asia.

Copyright: Project Syndicate, 2010.