Joshua Kurlantzick

Headlines about China's economy have been uniformly alarming. Every time equity markets in the west plunge, Beijing's woes are cited as a factor with its plunging equity indices, rising debt ratios and exchange rate under pressure. Even with more sensible interventions, or perhaps none at all, increased volatility in the country's financial markets is becoming the norm as its economy becomes more globalised and subjected to the same market pressures as other nations.

China's relations with Southeast Asian nations, which had warmed significantly in the mid-2000s, have since settled somewhere between cool and downright icy. While 2015 saw a thawing of relations, coastal Southeast Asian nations, like Vietnam and the Philippines, continued upgrading their navies and coast guards, building relations with the United States to hedge against Chinese power, and searching for novel strategies to constrain China's ambitions. At the same time, some mainland Southeast Asian nations, such as Laos and Thailand, not directly affected by regional maritime disputes, seemed increasingly comfortable with China's ascendance into a major Southeast Asian power.

From the air, the Spratly Islands, a cluster of miniature rocks and sandbars 425,000 kilometres square in the middle of the South China Sea, are almost imperceptible. Even up close, the Spratlys do not look like much – a few islands have tiny rocky beaches or occasional makeshift buildings. A tiny contingent of Filipino marines camps on a rusty hulk of an American ship from the Second World War grounded in the Spratlys.

Over the past month, global financial markets have become terrified by the prospect of a Chinese economic slowdown. In recent weeks, China's money markets have slowed to a near halt, China's stock markets suffered roller-coaster whiplash, and many western fund managers have reduced their China exposure. Outside the country, pessimists returned to a familiar refrain: Chinese banks' debt loads signal the arrival of an event that doomsayers have been predicting for three decades - a meltdown of China's economy. A severe slowdown would be catastrophic for China's global power, which is dependent on its high levels of growth, since a fast-growing China serves as a model to other developing nations, allows Beijing to amass vast quantities of US debt, and gives Beijing a far greater say in global institutions.

Over the past month, global financial markets have become terrified by the prospect of a Chinese economic slowdown. Last week, the interbank lending rate in China jumped precipitously, suggesting that Chinese banks, which for years have been piling up debt lending to state-owned enterprises and building infrastructure, may now be facing a severe credit crunch. China's money markets slowed to a near halt, China's stock markets suffered whiplash, and many Western fund managers began lightening their China exposure. To some, Chinese banks' debt loads signal the arrival of an event doomsayers have been predicting for decades-not just a slowdown but a meltdown of China's economy. That, of course, would be catastrophic for the international economy, since nearly every other country in Asia is dependent on trade with China-as are most Western multinationals. But although international markets, the original kind of crowdsourcing, often deliver the right verdict, there's good reason to bet they'll be proven wrong this time. The Chinese economy, the second-largest on earth, is not going to melt down soon; in fact, it might still grow more strongly this year than most others in the world.

As the U.S. and China prepare to meet on Wednesday and Thursday for their annual Dialogue on Human Rights, Beijing and Washington have begun sniping at each other mercilessly. Beijing has blasted America's wars in Afghanistan and other countries as human-rights abuses and warned the White House not to "position itself as a preacher of human rights." The Obama administration, meanwhile, has emphasized the growing crackdown on rights activists across the People's Republic, publicly chastising Beijing even before the dialogue begins. Far from being a cause for concern, the sniping is a positive sign that the Obama administration has learned that its toothless approach to China over the past two years has failed. Its also an indication that the president has come to understand something that previous administrations knew very well-namely, that Washington can criticize the pragmatic Beijing regime on human rights while continuing to work with it on other important global issues.