China and Japan have shared a troubled, mutually hostile relationship since antiquity, marked by struggles over Korea, pirate raids, and two wars in 1894 and 1937, with Japanese atrocities in World War II leaving deep wounds. China's economic rise since Deng Xiaoping's reforms has reversed the postwar balance, making it the world's second largest economy while Japan has dropped to third, and Japanese politicians and citizens now see China's economic, demographic, and military power as an existential threat. Only 6% of Chinese and 5% of Japanese view the other favorably. Yet the two are bound economically, since 23,000 Japanese companies employ ten million Chinese workers, even as Japan hedges by shifting investment to Southeast Asia, where growing rivalry raises the risk of maritime clashes. Tensions are at a high: China declared an expanded Air Defense Identification Zone over the East China Sea, Prime Minister Abe visited Yasukuni Shrine and likened China to pre-World War I Germany, and no diplomatic channel exists to prevent a misjudgment between scrambling jets. Both sides know war is against their interests but benefit politically from appearing strong. A tit-for-tat standoff is likely to continue, military conflict is a longshot but possible, and prolonged tension will likely push Abe to circumvent or revise Japan's constitutional limits on the use of force.

China remains a real threat, with a booming economy, ongoing military buildup, diplomatic expansion, and leverage over the U.S. through trade, monetary policy, North Korea, and Taiwan. Yet it is nowhere near superpower stature, and Vice Premier Wu Yi herself claimed that China's internal problems make it no threat to anyone. Cracks in the foundation support her claim. China is aging and will grow old before it grows rich, which leaves a pension burden that is probably unsolvable. The One-Child Policy has left a surplus of unmarried males, and 800 million resentful rural peasants have watched urban coastal areas prosper at their expense. Ethnic minorities, exempt from the One-Child Policy, are growing about seven times faster than the Han, and Tibetans, Uyghur, and perhaps Manchurians may try to break away. Geography boxes China in. Its borders limit expansion without fully protecting it, so it is likely to be insular and defensive. Its economy depends on suppliers of resources and buyers of goods, so a fight with the wrong opponent could ruin it and bring social unrest and a harsh crackdown. If pushed, China would likely back down quickly before American resolve, especially if the Seventh Fleet showed force in the South China Sea. However, should China join a military bloc with regional neighbors, the threat would reach an alarming level.

China appears only as one of seven Asian nations among the world's ten most populous, alongside India, Indonesia, Russia, Pakistan, Bangladesh, and Japan. Asia as a whole holds over 3.6 billion people, about three-fifths of the globe. Its population multiplied by 2.5 between 1950 and 2000, a surge driven by falling mortality rather than rising births. That growth has since given way to steep fertility declines. Sub-replacement fertility is now thought to characterize every country and locale in East Asia except tiny Mongolia, so China is included in this region-wide shift. The popular Western press once feared Asian dominance based on numbers alone, but unprecedented population growth no longer describes the region.

China appears only as a point of comparison in Nicholas Eberstadt's demographic analysis of Asia, which the source cites while questioning its optimistic view of America. By 2025, the American population is projected to be more youthful and to age more slowly than China's, with median age rising only from 35.6 to 37.6, aided by continued immigration of young workers and higher fertility (about 2.0 births per woman, against 1.3 in Japan). Unlike Asian nations, including China, America also faces no significant gender-ratio imbalance from sex-selective abortion. The source treats this rosy outlook for a secular, iniquitous America with skepticism, likening it to Israel asking its prophets for "smooth things" and "deceits" (Isaiah 30:10).

China's announcement of an Air Defense Identification Zone over the disputed Diaoyu/Senkaku islands in the East China Sea has escalated regional tensions, since the zone covers territory claimed by China, Japan, and Taiwan and overlaps the zones of Japan, Taiwan, and South Korea. Beyond expanding military oversight, the zone covers the potentially lucrative Chunxiao natural gas field, which both China and Japan want exclusively, despite a 2008 cooperation pact they have been unable to implement. China has so far not strictly enforced the zone, and its ability to do so is doubtful. It can likely monitor traffic, though stealth technology would reduce that ability, but its modernized forces have not shown the cohesion needed to field a rapid-reaction force against a serious violation. China is in effect playing a multi-level game of chicken, daring weaker neighbors to blink first and tacitly cede control of a strategic maritime area. Taiwan has backed down, as it must. Japan and South Korea have called the bluff, relying on U.S. naval power, and the U.S. has refused to recognize the zone while quietly urging commercial carriers to comply. China is likened to a dragon that nearby nations cannot leave out of their calculations.

China's economy appears close to a dose of fiscal reality, and it is one of three areas where a market correction seems imminent. Its state-owned banking system holds hundreds of billions of dollars in non-performing loans, made for political or social reasons rather than economic ones, that will never be repaid. Fitch, Standard & Poor's, McKinsey Global Institute, and Ernst & Young all released analyses highlighting this enormous bad-loan bubble, and the markets are taking notice. Lombard Street Research likewise warned that China faces a hard landing. Conventional wisdom should not deceive: size and growth are only two measures of an economy and do not show how well it is actually doing. China's vast, overheated economy is headed for a correction, and many nations will suffer from its contraction.

China appears as a bold, fast-growing contender, with double-digit economic growth, rising oil demand, a modernizing military, lunar ambitions, and a vast manufacturing base. Beneath this image, however, it faces serious instability. Its fertility rate is below replacement, so by 2025 there will be only one worker per senior citizen, and no national pension system exists. The one-child policy has produced about 120 boys for every 100 girls, leaving 10-15% of men unable to marry and likely fueling social tension. Unrest is already visible. In December 2005, police killed protesters in Shanwei over farmland confiscated for a power plant, the first such deaths since Tiananmen Square in 1989. Mass demonstrations have risen from 10,000 to 74,000 in a decade. The underlying cause is that compensation for seized land is siphoned off by officials at each level, leaving displaced farmers destitute. Citing George Friedman, this diversion is built into the system as a primary means of capital formation, and officials need growth and money flows to keep their positions. Industrialization is also financed by debt that will likely never be repaid, including at least $600 billion in bad bank debt moved into holding companies, creating a bubble that will not burst quietly. Economically, socially, and politically, China is under great tension. Though not on the verge of meltdown, it is increasingly volatile, and as its disorders converge it could affect many nations, businesses, and people.