Austrian Knights: China's Influence in the Western Hemisphere

Last night two Mason students, one a philo/econ major and the other a global affairs major discussed China's influence in the Western Hemisphere. They had found their sources mainly from the Woodrow Wilson International Center for Scholars in an article title Enter the Dragon; they had also had recorded a lecture series upon the topic which you can find here. The discussion relied upon the actions of China and its effects with Latin America. The state department has assembled their own study of the program here, and the Heritage Foundation has also had some work published here. It should be noted that the State Department's and the Heritage Foundation's work is from 2005 and therefore will not have some things brought to light by the Wilson Center.

For a brief summary of the paper, China wishes to bully Taiwan by taking their customers and intends on making its presence known as a world power by spreading its market network across the globe. China has thus increased its market activity within Latin America relying on the Latin American nations for food, oil, and other necessary resources for the growing economy within China.
The main fear is that the United States will then be surrounded by 21st century socialism and a rise of another cold war as China ties itself to national leaders such as Chavez, Morales, Castro, etc.
What answer are we searching for? The best conclusion has been given without this research, Free trade. If the U.S. would open its borders the ideas of liberty would spread out through out the foreign nations. Is there a policy such a Free Trade Policy needed in order to promote this system? Only if that policy is one sentence "There will be Free Trade"; anything else is unjustified and will deny the spread of liberty.
How then do we spread liberty? Is it the best to trade, to teach and spread the ideas, or is it to have a government involvement?
Note: I do not agree with the government involvement as by reading the conclusion of the State Department's statement, their solution is the Millennium Challenge promoted by Jeffrey Sachs, which most of us know is an insane policy which would not help the foreign nations.
The best answer therefore is to promote trade and the spread of the ideas. We need to get the actors, the artists, the musicians, and the writers to help spread the our views.
What do you think?
Should we fear China or is it just another ploy for the government to involve itself in affairs it has no need to meddle with?