* China must avoid giving up security presence, paper says
* China more assertive, concern over military capabilities
* New U.S. strategy increases presence in Asia (Adds comment from analysts, detail)
By Sui-Lee Wee and Sabrina Mao
BEIJING, Jan 6 (Reuters) - China must not give up on its security presence in Asia in the face of a major U.S. strategic shift into the region, a Chinese newspaper said on Friday, although U.S. allies and analysts said China had nothing to fear from the new policy.
The U.S. defence strategy, which will expand its military presence in Asia but shrink the overall size of its forces in order to slash defence spending, was flagged late last year and is a clear sign of U.S. commitment to the region.
China, however, is concerned Washington's new defence posture, as it turns away from wars in Iraq and Afghanistan, is aimed at encircling it and could hobble its growing power.
In the first Chinese reaction to the U.S. policy shift, announced by President Barack Obama on Thursday, the Global Times tabloid newspaper said China would "pay the price" if it retreated in order to appease the United States.
"Of course we want to prevent a new Cold War with the United States, but at the same time, we must avoid giving up China's security presence in the neighbouring region," said the paper, owned by the Communist Party mouthpiece, the People's Daily.
The Global Times has a nationalist bent and its commentaries do not amount to government policy positions. China's Foreign Ministry and Defence Ministry did not respond to faxed inquiries about the U.S. policy shift.
Obama, in unveiling the strategy, said the "tide of war is receding". U.S. Defense Secretary Leon Panetta said the military would be "smaller and leaner".
U.S. administration officials say they expect the Army and Marine Corp to be cut by 10 percent to 15 percent over the next decade.
The United States has said it would seek to work with China to ensure prosperity and security in the region but would continue to raise security issues like the South China Sea, through which $5 trillion dollars in trade sails annually.
The disputed ownership of oil-rich reefs and islands in the South China Sea is one of the biggest security threats in Asia. The sea is claimed wholly or in part by China, Taiwan, the Philippines, Malaysia, Vietnam and Brunei.
China is seen as increasingly assertive on the high seas, with several incidents in the South China Sea in the past year.
A retired Chinese military officer, who declined to be identified because of the sensitivity of the matter, said China would not be threatened by the U.S. strategy.
"We all know that the change in the U.S. strategy is not a sudden development," he said. "The Chinese side will not regard this as an overt challenge."
China would not change its strategy in response, he said.
"Our posture is always defensive. If there's no outright attack on us, we will not change our strategy," he said. "We've never interfered in any country's strategy shift. China doesn't look to make new enemies."
"MORE ABILITIES TO THREATEN"
There is, however, growing concern in the United States and Asia about China's military developments in recent years, both in the size of its force and its capabilities, said security analyst Ross Babbage at Australia's Kokoda Foundation.
China has been expanding its naval might, with submarines and a maiden aircraft carrier, and has also increased its missile and surveillance capabilities, extending its offensive reach in the region and unnerving its neighbours.
"In the last three to four years there has been the deployment of very large numbers of missiles, ballistic and cruise, and also the refining of surveillance capabilities," Babbage said.
The Global Times said that policy should continue.
"The United States has made containing China's interventionist abilities at sea an important point of its change in strategy," the newspaper said.
The U.S. strategy should make China "more alert", it said.
"It's not necessary for China to develop a new strategy in response ... Apart from that, China should strengthen its long-range military striking capabilities and develop more abilities to threaten U.S. domestic military targets," it said.
"NOT A CONTAINMENT STRATEGY"
Australia, a close U.S. military ally and already engaged in a A$65 billion defence buildup, said the rebalancing of U.S. forces to Asia should not threaten China, or Australia's A$113 billion two-way trade relationship with Beijing.
"The American position is very sophisticated and it's sophisticated in directions we'd encourage. It's not a containment strategy," Australia's ambassador to the United States, former defence minister Kim Beazley, told Australian radio.
Under the strategy, the United States will maintain its large bases in northern Asia, in Japan and South Korea.
Lim Kwan-bin, deputy minister for national defence policy at the South Korean Defence Ministry, told a news conference in Seoul U.S. officials had assured him the strategy "will have no impact" on U.S. forces in South Korea.
Tension has risen considerably on the Korean peninsula, the most militarised area in the world, after the death of North Korean leader Kim Jong-il on Dec. 17 ushered in uncertainty about the leadership of the unpredictable authoritarian state.
Japan also saw little impact from the U.S. shift, the Kyodo news agency quoted Japanese Defence Minister Yasuo Ichikawa as saying. The United States is under pressure from Japanese activists to close its main Marine base on Okinawa island.
Australia will likely see the most direct impact, at least in the short term. U.S. Marines, navy ships and aircraft will be deployed to northern Australia from 2012, using Darwin as a de facto base.
The deployment to Australia, which will reach a taskforce of 2,500 U.S. troops by 2016, is small compared with the 28,000 troops stationed in South Korea and 50,000 in Japan.
The U.S. Navy has also said it will station several new coastal combat ships in Singapore and perhaps the Philippines.
"The Chinese are watching. I think they are concerned. I don't think they are alarmed," said Scott Harold, an associate political scientist with the RAND Corporation. "I would reserve the term 'alarm' for something that is a higher-level perceived challenge." (Additonal reporting by Michael Perry in SYDNEY, Rob Taylor in CANBERRA, Jeremy Laurence in SEOUL and Rie Ishiguro in TOKYO; Writing by Paul Tait; Editing by Robert Birsel)