But Fallows does get it (though I admit I usually find Fallow's work banal):
To spell it out: countries can support powerful and threatening military establishments even if their overall economy is faltering (the old Soviet Union). They can create problems for the world even if they are extremely poor (North Korea).
Yet:
What are we thinking, in considering China an overall threat? Yes, its factories are formidable, and its weight in the world is huge. But this is still a big, poor, developing nation trying to solve the emergency of the moment. Susan Shirk, of the University of California at San Diego, recently published a very insightful book that calls China a “fragile superpower.” “When I discuss it in America,” she told me, “people always ask, ‘What do you mean, fragile?’” When she discusses it here in China, “they always ask, ‘What do you mean, superpower?’”
It is true that China is not an "overall" threat. But China is gaining the ability to threaten targets nearby China. And we value free and allied countries near China like Japan, South Korea, and Taiwan. It would be nice to keep Australia on our side too as well as Thailand, the Philippines, and India. All those countries are close to China and China doesn't need to be a peer competitor to pose a military threat to them or to dominate them absent our power.
Japan in 1941 was never a budding rival superpower. Yet it took until 1945 to knock them down. So keep perspective both on China's power and the geography where that power can be used. That's how you mesh the two views.