In this week's featured commentary, SIIA Chairman Simon Tay looks into the economical, political and social issues looming over China's future as the year comes to an end. China must now look into the exertion of a soft power influence so that perceptions of its growing power in other areas can be contained.
This commentary appeared in Today newspaper on 15 December and South China Morning Post on 17 December, 2011.
The coming winter looks difficult for China. Beyond the seasonal cold and even the thick air pollution in Beijing, there are concerns about the economy, society and regional politics.
As Western markets stall, the clear priority is to keep the economy going. Chinese exports and manufacturing output have fallen and growth rates have slowed. Housing prices are in decline and, if unchecked, can ripple through the credit system.
When the crisis began at the end of 2008, Beijing pumped in a massive stimulus package and loosened credit policies. Its economy is still grappling with the consequent distortions and that formula cannot now be repeated easily and without cost.
But inflation slowed in this last quarter and, with some room to manoeuvre, the reserve ratio for banks has been lowered. This signals the intention to ease monetary policy, after a period of tightening. The Chinese will do all they can to avoid a crash.
Others should welcome that effort. It is now so integrated into the world economy that China's struggles are no longer a domestic issue.
Yet even if disaster is avoided, the coming year will likely see slower growth. At the same time, social and political pressures grow across the country.
The local authorities are prompted to stem unrest. But how exactly to respond seems undecided. Old, hardline methods to police street demonstrations and netizens continue. Yet Beijing has legitimised other complaints - like when workers demand higher wages from Foxconn and other companies.
With preparation for their change of leadership, domestic concerns will preoccupy Chinese policymakers. Beijing must, however, also look at the regional picture.
Its leaders must mull the recent flurry of activities by the United States. The Obama administration has declared its "return" to the region and this affects a range of interests - from the South China Sea disputes to ties with Asian neighbours like Myanmar.
Fears exist that China will push back and that a new "great game" of rivalry will ensue. The recently concluded US-China dialogue held in Beijing among defence officials tried to avoid stirring things up further. But turbulence must be expected.
With US presidential elections coming, China is an easy target. Some American thinkers, like Mr Aaron Friedberg - a former official in the Bush administration - see that the US must contest China for supremacy in Asia or risk losing leadership.
How Beijing responds will be keenly watched. Its leaders cannot cave in to American criticism, given nationalist sentiment at home. But bellicose, tit-for-tat exchanges in trade or other areas will hurt both sides and can estrange other Asians.
Given anxieties over growing Chinese military strength, Beijing needs to consider what many call "soft power" - characteristics that appeal and gain acceptance so others want to follow its lead. Mr Yan Xuetong of Tsinghua University and author of Ancient Chinese Thought, Modern Chinese Power is one proponent of this view, even if he has been known for hardline views.
So far, Beijing's soft power strategy has focused on ramping up the Chinese media overseas, with steps like state news agency Xinhua taking out advertisements at New York's Times Square. The spread of Confucius Institutes across Asia and the world is another high-profile effort.
There are, however, mixed results. In this past year, doubts have grown that China will become a democracy, continue to be a benevolent neighbour and support the existing global system. Even as Beijing projects itself more, perceptions of a hardline, arrogant autocracy have grown.
This seems unintended and may be unfair. But perceptions need to be addressed, especially among fellow Asians. Not so long ago, China charmed fellow Asians and many others with assurance about its "peaceful rise", mixed with economic incentives. Even if these past ideas need updating, they can be a useful foundation for further thinking about China's image and soft power.
As many struggle, China would do well to ride things out economically and maintain its present trajectory. Yet China must do even better. In tandem with its continuing rise, Beijing must also manage perceptions so that less anxiety is triggered.
Facing a hard winter, another idea of China is now needed and soft power must be part of it. Otherwise, Beijing will find that rising to power is one thing but winning greater acceptance is even more challenging.