The U. S. relationship with China and the global war on terrorism are the two most significant strategic challenges faced by the Bush administration. Both are vital and complex; the way the administration manages them will shape American security for many years. While there is a growing literature on both key strategic issues, little analysis has been done on the intersection of the two. In this monograph, Dr. Mohan Malik of the Asia-Pacific Center for Security Studies fills this gap as he assesses how the war on terrorism has affected China. He concludes that the war on terrorism radically altered the Asian strategic environment in ways that negated China's foreign policy gains of the last decade and undermined its image as Asia's only great power. Dr. Malik then offers a range of recommendations for a more stable relationship with China. The Strategic Studies Institute is pleased to offer this report to help U. S. defense leaders and strategic planners refine their understanding of security in Asia and the crucial U.S.-China relationship. Douglas C. Lovelace, Jr. Director, Strategic Studies Institute