RISING CHINA Its Power, Its Threat and Its Leadership in Asia Muhadi Sugiono Department of International Relations/ Center for Southeast Asian Social Studies Universitas Gadjah Mada, Yogyakarta, Indonesia Our understanding of contemporary global politics is still very much dominated by the logic of realist's power politics. Global politics is understood as a sphere of zero-sum interaction with a serious consequence that we tend to be allergic to change. Any change in the existing balance of power is seen as a step toward conflict or instability. This dominant view is clearly reflected in the way in which many politicians and academic respond to the rise of China. For them, the rise of China constitutes a serious threat to peace and stability in the region. Arguing against dominant realist's understanding, this paper will examine what many characterise as 'China's threat': what exactly the threat that China is posing. For that purpose, this paper departs from the argument that China's threat comes not so much from China's actual power as from its aggresive posture. As such, the change in the way in which China presents itself to the world will not only help reducing the fear of China's threat, but will also help China to transform its power into leadership. China's Rising Power The rising power of China owes undoubtedly to its economic power. China is now the world's second largest economy after the US (Davis 2011). It's GDP has formally surpassed that of Japan since 2010. China's economic power increased with its spectacular economic growth of 9.7 percent annually following the opening up of its economy in the late 1970s. This economic growth has enabled China to improve the lives of hundreds of millions of its population as indicated by significant increase in its per capita income from US$ 205 in 1980 to US$ 1,100 in the mid 2000s. Beyond its national borders, the power of China's economy is reflected in its investment and international trade figures. In terms of investment, China has not only attracted a large number of foreign direct investment especially since the end of the 1990s, but has also become the largest recipient of foreign direct investment in the global economy. With US$ 60 billion investment in 2004, China has overtaken the US as the main destination of foreign direct investment since 2002. In terms of its trade relations, being simultaneously one of the biggest producers and consumers of goods, China is an important trading country after the US and the EU, if the latter is treated collectively as an integrated economy. China is one of the biggest producers and exporters of many manufactured goods ranging from mobile phones, digital cameras and other electronic goods as well as pharmaceutical goods. At the same time, China also imports manufactured goods and raw materials from other countries. Such massive amount of capital inflows as well as consistent surplus in trade have made China the world's largest foreign exchance holder, with its foreign exchange reserves reached US$ 853.7 billion (in comparison Japan with US$ 850.1 billion) in 2006 (Bradsher 2006). It is based on this China's incredible economic performance and size that many believe that China increasingly serves as an