How the West should cope with the rise of China in the world's fierce economic and political competition is a million-dollar question. For centuries, China was known as a complex, contradictory and confusing nation. But today, the vast nation with 1.3 billion people has gone through a major transformation as it enters the 21st century. But underneath, the centuries-old traditions, culture and civilization probably have not changed, a fact in life that contributes to the confusion for those trying to understand and do business with China. This book aims at presenting a balance sheet to help the US, which has tried to maintain its superpower's monopoly, to understand an emerging superpower. Written by researchers at the Center for Strategic and International Studies and the Institute for International Economics, the balance sheet is very informative for policy makers and might help them make decisions. The authors say a rising China will undoubtedly has an important impact on American prosperity and security, which demand "clear-eyed thinking and tough economic, political, and security choices."

Questions have to be raised, but the authors say American and business leaders will also have to ask the right questions. The basic questions suggested are: Will China's economic growth continue or collapse? Will that growth lead to democratization or disorder? Will China present an economic opportunity or a threat? And will that country become a security partner or a rival? The authors attempt to answer those questions. The explanations to the rapid and stunning growth in China rest on some key factors. The economic reform that began more than two decades ago in China introduced market forces that gradually displaced institutional arrangements, or the state-owned enterprises and market prices set by the government to meet demands as best as it could. China has increased openness to the global economy, which in turn has led to change in market structure and more competition. The high saving and investment rates in China contribute greatly to economic growth, while the labor force is moving from primarily agriculture to manufacturing or services. China's educational system, starting with compulsory primary education, also plays an important role in moving the population into the global economy. To cite a few examples, by the mid-1990s, the adult literacy rates in China stood at 80 percent of the population, compared with 50 percent in India, which is gaining status as a world power to be reckoned with. There are still major obstacles to the rapid expansion of China's economy, though, including obstacles to the reform program and other ambitious goals to put the country on a par with the developed world. One of the biggest difficulties for the government is the population of 1.3 billion, which the authors say is a "burden" for political, social and economic development. Such a huge population demands enormous resources to be clothed, fed, sheltered and satisfied. The number of people moving from rural to urban areas has increased from 54 million in 1995 to over 140 million in 2004. The internal migration is a double-edged sword for China because those seeking city jobs may have larger incomes and are thus saving more. But, on the other hand, they also bring challenges like higher crime rates, burdens on municipal health-care systems, social unrest and environmental damage. The authors consider the rise of China to be one major event in world history, which parallels in importance to the rise of the US in the 19th century, and which is more significant than the rise of Japan in the second half of the 20th century. They say the US and China will soon be the world's two most important countries. But they say China presents both an opportunity and a threat to the US. The US has a role to play, through its foreign policy, to make the rise of China into an opportunity or a threat.

"Our balance sheet suggests that the areas of mutual interest between the US and China are more prevalent, and more significant, than their spheres of potential conflict," the authors say. They say only an informed, sustained and open debate between the two sides will lead to a future relationship that is mutually beneficial.