It has never been an easy task to handle relations with neighboring countries.If the neighbor is also a big power,competition will be fierce;if it is a small country,then instinctively that country will fear the more powerful neighbor.Relations with China's neighbors are even more complex because of the differences in political systems and China's own conflict with the U.S..A key and long-term challenge for China's periphery diplomacy is to ease its neighbors' concerns over China's rise,especially from those smaller nations.The author of this paper believes that to achieve this China must focus on mutually beneficial and win-win economic and trade cooperation.For example,the newly-established China-ASEAN Free Trade Agreement,and other regional cooperation drives have helped to make economic development an important bond between China and its neighbors and has helped to maintain a stable situation for bilateral ties.But,economic cooperation alone is not enough to eliminate all fears.Security cooperation must also be vigorously improved.