There is no doubt that, India's missile launched has increased the perception of arm race in south and east asia. What China knows is, India's ICBM (well, it can reach some part of europe according to themselves) is nothing but upgraded version of existing AGNIs. Existing Agnis have put Pakistan on its range already so, I dont think its all about Pakistan. India seems to have overestimated its military might by putting China within its range but forgeting weapon alone can not win the war. Choosing 'militarism'  over 'gandhism', (India has displaced china on military spending) will have a grave consequences. Although, newly found wealth has brought some changes on China's foreign policy. Naval activities is on the rise in south china sea in particular and building a naval base in seychelles which is against the China's ' no stationary troops abroad' policy. 

On the other hand, war mongering america is trying whatever it can do to contain China. From Japan to Philippines, Australia to India, Afghanistan to central asia, it is massing up troops and selling arms like it has never done before. America is fully aware of its defeats from where China has involved, Korean war and Vietnam war ( its called 'American war' in Vietnam). China knows who is throwing an object into peaceful waters of the lake. Hence, peace would continue to prevail in our door step if China maintain its gentleness.

And finally, "it doesnt matter whether the cat is black or white, its a good cat while it catches mice". It doesnt matter whether communism or capitalism, what matter most is people's happiness.