The collapse of East-West competition for global preeminence is unleashing powerful forces for strategic change in the Asia-Pacific region. A reconfiguration of the regional security balance is taking place, especially a resurging naval rivalry, aspiring hegemons--notably China, Japan and India-- jostle for leadership roles. This report examines the central role being played by China in the unfolding security changes in Asia. Chinese naval modernization is analyzed within the context of China's Southeast Asian maritime interests, its new maritime strategy, and its evolving naval capabilities. The report recommends: maintaining a significant U.S. naval presence in Asia to protect American economic and political interests in the region; creating a loose yet textured and inclusive multilateral set of security relations in the Asia- Pacific region; initiating a Sino-American naval rapprochement as a prelude to enhanced regional naval cooperation; and, reassuring America's friends in the region through a continuing American naval deterrence.