PIVOTAL MOMENTS in history are seldom anticipated. And when change is systemic, this rule is even truer. There are unmistakable signs in East Asia, however, that the old, U.S.-dominated order can no longer be sustained in the face of China’s emerging challenge and the relative weakness of both the United States and Japan. A failure of American diplomacy to adjust to these new power realities, or of China to accommodate long-standing U.S. and Japanese interests, could jeopardize the promise of the much-heralded Asian century and return East Asia to its bloody and fractious past. What emerges in this critical region will have global consequences. As the locus of economic and military power shifts decisively from the Atlantic to the Pacific, it is clear that East Asia has never been so centrally important to the international order. Never before have the world’s three preeminent states—the United States, Japan and China—all been Asia-Pacific powers. This raises the stakes for everyone should the Old Order fail precipitously.

For nearly seven decades, this order has been underpinned by U.S. economic and military strength, dating back to the defeat of Japan at the end of World War II and reinforced forty-five years later by the collapse of the Soviet Union. During the Cold War, American preeminence in East Asia was vitiated by both the illusion and reality of Soviet military power. Thereafter, for a brief “unipolar moment,” the United States seemed able to do as it pleased without worrying about peer competitors or balancing coalitions. In retrospect, President George W. Bush’s first term may be seen as the apogee of Pax Americana. Since then, it has been mostly downhill for a United States weakened by ten years of war, a gridlocked political system and the lingering contagion from the 2008 global financial crisis. President Obama’s pivot to Asia, and his attempt to quarantine the region from defense-budget cuts, cannot disguise the sober reality that the U.S. capacity to shape East Asia is no longer what it was.

Once seen as the reliable northern anchor of the U.S. alliance system in East Asia and lauded for its dependability and dynamism, Japan’s two-decade political and economic malaise is a significant cause of the weakening of the Old Order. The near meltdown of the tsunami-crippled Fukushima nuclear-power plant in 2011 can be seen as a metaphor for the corrosion of Japan’s increasingly inward-looking body politic. The country lacks confidence and is beset by a host of domestic problems. Leadership stasis has made it difficult for the United States to reinvigorate the strategic partnership with Japan or to be sure where the country is heading. This is reflected in the failure to reach agreement on the relocation of the important Marine base on Okinawa. While Japan remains a major economy, its gross domestic product has not grown for twenty years, and the country suffered the indignity of being overtaken by China as the world’s second-largest economy in 2011. Aging and shrinking demographically, Japan faces the prospect of being consigned to the second rank of East Asia’s middle powers unless it can recapture its lost élan and purpose.

But China’s rise is the main reason for the loss of Washington’s once-unrivaled ability to influence the region’s affairs. With a population of 1.4 billion, more than the rest of East Asia and the United States combined, China is a megastate that for millennia was the dominant polity in Asia and now makes little secret of its desire to reclaim its former status. These dreams are no longer illusory, for modern China has the strategic clout to realize them. Its population and economy dwarf those of Fascist Germany, Imperial Japan and the Soviet Union—previous and ultimately vanquished challengers of U.S. power. China’s reemergence poses strategic challenges of a complexity and magnitude not previously experienced by the United States, or the rest of East Asia, for that matter. The principal unknown is the path China’s leaders will follow, often posed in overly stark and simplistic terms as a choice between responsible stakeholder or revisionist state. In fact, China is likely to be both, conforming to the norms of the international system except when its core interests conflict with those norms.

While long anticipated—indeed, U.S. policy planners were warning of these strategic implications as far back as the mid-1990s—the Middle Kingdom’s new prominence in East Asia has been boosted by two seminal recent events, one financial and the other geopolitical. The 2008 global financial crisis led many in China to believe that the United States was in decline, suffering from imperial overreach and living beyond its means. This belief is perhaps overstated, but owing more than a trillion dollars to China has clearly placed the United States in the distinctly uncomfortable position of being seen as a financial supplicant to its principal competitor. Perceptions of U.S. financial weakness have clearly emboldened Chinese leaders to seek geopolitical advantage over the United States in contested spaces, especially in East Asia. Of greatest concern is Beijing’s evident determination to aggressively defend its claims to disputed islands, waters and resources in the East China and South China seas. Relations with the other major Asian powers, Japan and India, have become increasingly testy, and many Southeast Asian nations are fearful that China will pay only lip service to regional egalitarianism as it becomes more powerful, both economically and militarily. In the past two years, China has declared the eponymous South China Sea to be a “core interest” and made abundantly clear that it will continue to support the bellicose North Korean regime despite that maverick state’s repeated provocations and violations of international norms.

AT THE heart of U.S. and regional anxieties about China’s future military intentions is the ambitious “far-sea defense” strategy, designed to push the U.S. Navy as far from Chinese shores as possible. China is bent on turning its three coastal fleets into a genuine blue-water navy capable of controlling the western Pacific and eventually projecting significant maritime power into the central Pacific and the Indian Ocean. Beijing’s strategic aim seems to be a Monroe Doctrine with Chinese characteristics, and it is rapidly acquiring the capabilities to realize this ambitious goal. From a Chinese perspective, this makes perfect strategic sense. After all, if a rising America could construct a Monroe Doctrine in the nineteenth century as a blunt but effective instrument for keeping other powers out of the Western Hemisphere, why should an ascendant, twenty-first-century China not seek a comparable outcome in the western Pacific? The problem is that Beijing’s determination to push back the U.S. Navy threatens to destabilize the regional balance of power and escalate tensions not only with America but also with Japan.

Relations between China and Japan are already fraught with tensions. Neither side seems capable of moving beyond the historical enmities infecting its contemporary behavior and precluding any genuine rapprochement, despite Japan’s booming trade with China and increasing level of economic interdependence. These underlying tensions periodically erupt, exposing the deep fault lines between the two nations and underlining the potential for miscalculation. The most serious recent example occurred on September 7, 2010, when simmering tensions over ownership of the disputed Diaoyu or Senkaku Islands in the East China Sea boiled over into a serious confrontation after a Chinese fishing trawler appeared to deliberately ram a pursuing Japanese Coast Guard vessel. This brought Sino-Japanese relations to a post–World War II low. Opinion polls showed extremely high levels of mutual disaffection, with 87 percent of Japanese and 79 percent of Chinese surveyed regarding the other country as “untrustworthy.” Fully 79 percent of Japanese considered China a military threat.

It would be wrong to infer from these actions that China is intent on military confrontation with the United States and Japan or that it is yet in a position to supplant America as the region’s most influential power. But China’s new assertiveness illustrates the structural tensions that inevitably occur when a rising power challenges the existing order and, by definition, the place of the previously dominant state. As Harvard’s Richard Rosecrance and Peking University’s Jia Qingguo have documented, over the past five hundred years, six of the seven hegemonic challenges to the existing order have led to serious conflict. We also know that strong economic and trade links between aspiring and incumbent hegemons do not, by themselves, reduce the risk of conflict, as Britain and Germany demonstrated a century ago when their deepening economic interdependence couldn’t prevent their going to war in 1914. Thus, it would be an egregious mistake to conclude that strengthening ties between China and the United States make military conflict between them unthinkable.

Some liberals argue that the unique character, cultural identity and historical experience of China make it intrinsically less aggressive than other nations. According to this view, the Middle Kingdom is an exceptional state and marches to a different foreign-policy tune. However, the proposition that China has historically been less aggressive or less expansionist than its Western or Eastern counterparts does not withstand scrutiny. Like many powerful nations, and the United States in particular, China has a long tradition of territorial expansionism and subduing or coercing neighboring peoples and states. Although different in character from European colonialism, the endgame of China’s tributary-state system has been the imposition of a Chinese suzerain over neighboring peoples and polities, a point not lost today on fellow Asians. While Beijing regards reunification with Taiwan and pacification of Tibet as a restoration of Chinese authority over ancestral lands lost through the perfidious interference of foreigners, it is possible to draw an altogether different conclusion: Beijing’s policies toward Taiwan and Tibet reflect China’s likely behavior toward the wider region. Certainly, China’s revanchism has done little to build confidence that a Pax Sinica would be demonstrably fairer, more stable and peaceful than Pax Americana.

BUT IF Pax Sinica lacks appeal and Pax Americana cannot endure in its current form, what kind of new order might emerge in East Asia that could maintain peace and accommodate the aspirations of all the region’s states? One possibility is a “Concert of Asia.” Drawing their inspiration from the post-Napoleonic accord of powers that controlled Europe for much of the nineteenth century, supporters of a Concert of Asia maintain that in the absence of a dominant state, a contemporary Asian version of the European concert holds out the best prospect for regional peace and stability. To be credible and enduring, however, only the strongest powers would be entitled to a seat at the table. The five obvious candidates are the United States, China, Japan, India and Indonesia.

One clear problem with this formulation is the dubious assumption that East Asia’s smaller nations would readily agree to have their individual or collective interests adjudicated by the large powers. This runs counter to the whole thrust of East Asian regionalism over the past two decades, with its emphasis on the empowerment of smaller states and the collective management of the region’s security problems. It also ignores the global diffusion of power that has accompanied what Fareed Zakaria calls the “rise of the rest.” Robust, medium-sized states are demanding a greater say in regional and international affairs, and they are not going to accept readily any return to a past of great-power dominance. It is also difficult to see the major powers agreeing to accept a stewardship role of the kind envisaged in a Concert of Asia. Japan is too weak; China is unwilling, and its political values are too different; India is preoccupied with its own problems; Indonesia’s geopolitical ambitions are confined to Southeast Asia; and the United States has neither the inclination nor the resources to take on an enhanced leadership role in Asia.

What of the argument that America should accept the inevitable and share power with China as an equal? Paralleling the G-2 would be an Asia-2, allowing Beijing and Washington to divide the region into spheres of influence in much the same way as the United States and the Soviet Union managed a politically bifurcated Europe during the early part of the Cold War. While superficially appealing because it holds out the prospect of a peaceful transition to a new international order, power sharing between the United States and China is unlikely to work for two reasons. First, no U.S. administration, regardless of its political complexion, would voluntarily relinquish power to China, just as China wouldn’t if the roles were reversed. Second, China’s new great-power status is hardly untrammeled. Nor is it guaranteed to last, for the country faces formidable environmental, resource, economic and demographic challenges, not to mention a rival United States that shows no sign of lapsing into terminal decline despite its current economic travails. Sooner than it thinks, Beijing may have to confront the prospect of a resurgent Washington determined to reassert its strategic interests.

The question, then, is: How can China and the United States ensure that healthy competition does not give way to an entrenched bloody-mindedness that aggravates existing insecurities and results in serious conflict? That may be difficult, if not impossible, should Beijing maintain its current political and military strategy in the western Pacific. Like any other state, China is entitled to modernize its armed forces and protect its legitimate security interests. But Beijing’s assertion of its territorial claims in the East and South China seas has been counterproductive—alienating neighbors, raising international concerns about China’s strategic ambitions and provoking hedging behavior in the region. China’s challenge to U.S. maritime power in East Asia strikes at a deeply held American conviction that continued naval dominance of the Pacific is not only critical to U.S. security but also to the nation’s standing as the preeminent global power, something that all but guarantees a countervailing military and political response.

At issue here is Beijing’s often harsh and uncompromising official rhetoric when dealing with sensitive political and sovereignty issues as well as the government’s willingness to accept and even sometimes foster nationalist sentiment at home, which is aggravating and complicating disputes with the United States and Japan. A more pluralistic, globally connected China would mean that foreign policy is no longer the exclusive preserve of the Standing Committee of the Politburo and the small policy elite that supports it in the Foreign Ministry and State Council. Nationalist sentiment expressed through chat rooms, blogging and Internet sites is complicating, and making less predictable, the management of Sino-U.S. and Sino-Japanese relations. Of course, no country is immune from the demonization of competitors, as attested by “Japan bashing” in the United States during the 1980s. But the incubus of extreme nationalism is having a particularly destabilizing effect in China, where sensationalist and emotive reporting, more often associated with Western tabloids, is making it difficult for Chinese leaders to avoid caricaturing rather than making nuanced assessments of U.S. intentions and capabilities. If Beijing is not yet ready for a free press, it must accept the responsibility for the outbursts of a controlled press.

America’s challenge, meanwhile, is to develop a more coherent China strategy that explicitly recognizes Beijing’s resource anxieties and corollary need to take on greater responsibility for the protection of sea-lanes in the western Pacific. What has been missing from many Western explanations of China’s more assertive recent behavior is recognition of the economic importance that Beijing attaches to this vital waterway, which is a major conduit for international trade and a rich repository for minerals and valuable marine life. By 2030, up to 80 percent of China’s oil and 50 percent of its gas will be imported by sea, through the Malacca Strait—a classic maritime choke point due to the narrowness and shallowness of its approaches, the number of ships that pass through it daily, and the Strait’s vulnerability to interdiction or environmental blockage.

The rate of growth in China’s energy imports has few historical parallels, if any. In less than twenty years, the country has moved from a net exporter to importing more than 55 percent of its oil, with crude-oil imports increasing by a staggering 17.5 percent in 2010 alone. This resource vulnerability weighs heavily on the minds of Chinese decision makers who, in addition to worrying about terrorism, piracy and environmental disruptions to their energy supplies, are acutely aware that their major competitor exercises effective naval control over the Malacca Strait and most of the western Pacific. Invoking the so-called Malacca dilemma, President Hu Jintao first gave voice to these anxieties in 2005, and his officials have made it clear since that China is no longer prepared to outsource sea-lane security in the western Pacific to the U.S. Navy. Thus, whether the United States and Japan like it or not, Chinese naval pennants will be sighted far more frequently in the western Pacific and as far south as the Malacca Strait. This is a natural consequence of China’s growing economic and strategic weight, just as the emergence of the U.S. Navy heralded the rise of the United States as a major power at the dawn of the twentieth century.

Another danger point lies in various inconsistencies in U.S. behavior and approaches to China. Over the past two decades, U.S. China policy has been a confusing mix of engagement, partnership, competition, hedging and lectures on China’s internal political structure. With resentment and hostility toward Beijing on the rise, American administrations face the challenge of ensuring that China does not become a whipping boy for U.S. domestic-policy failings or replace the Soviet Union as the new strategic bogeyman. Any attempt to demonize China would be counterproductive to U.S. strategic interests in East Asia. It would undercut moderates in the Chinese leadership and encourage a reciprocal response that would aggravate existing tensions.

HOW THE United States and China manage their relationship will have strategic implications extending well beyond East Asia. As competition increases, preventing conflicts from escalating will not be easy. This isn’t necessarily because Beijing seeks territorial expansion, has become a revisionist power or has serious differences with Washington over values. Presumably, these can be managed. The real danger is that China’s resource vulnerabilities, sense of entitlement and determination to restore its historically dominant position in East Asia will deepen regional anxieties about Chinese behavior and trigger a countervailing response from the United States and Japan. This could pose a contemporary expression of the classic security dilemma articulated a half century ago by the eminent American international-relations theorist Kenneth Waltz: in seeking to enhance their own security by building a strong military, large states often increase everyone else’s insecurity because this military force is frequently regarded as a potential threat rather than as a reasonable, defensive measure.

Already, China’s attempt to test Washington’s resolve in the western Pacific by “periphery probing” has resulted in a predictably vigorous U.S. response. The U.S. Navy and Air Force are working on plans to suppress and blind China’s potent missile capabilities by means of an emerging “air-sea battle” strategy, which is rapidly gaining political traction in Washington. It would not take much for this to turn into a full-blown arms race, drawing in other nations concerned by China’s rising military might. Avoiding worst-case outcomes will require a sustained, long-term commitment to building trust and preventive diplomacy as well as the establishment of an effective system of risk management that can prevent localized disputes and incidents from escalating into major region-wide conflicts.

In short, the dissolution of the Old Order in East Asia has created a delicate power balance there, rendered intrinsically unstable by China’s regional ambitions, understandable though they may be, and America’s equally understandable resolve to preserve as much of its old regional dominance as possible. Whether the two nations can successfully manage this fragile transition and thus stabilize the regional power balance remains a central question facing Asia—and the world beyond—in these times of global flux.

Alan Dupont is professor of international security and director of the Institute for International Security and Development at the University of New South Wales in Sydney, Australia.

Part of TNI's special issue on the Crisis of the Old Order.