1) China has bigger worries than the United States. It is easy to look at China's military modernization and interpret it as a dagger placed against the throat of the U.S. and its allies. It's worth remembering, however, that China currently spends more money on internal security than defense. Their actual capabilities in the anti-access/anti-denial area are... let's say a bit exaggerated (though growing). Sure, Beijing wants to expand its sphere of influence -- its a rising great power -- but it sees its greatest threats as internal rather than external.
2) If you want to worry about something, worry about China's civil-military relations. The U.S. defense establishment is quite keen on ramped-up military-to-military connections. It's the People's Liberation Army (PLA) that is not keen on this at all. The civilian leadership has... let's say limited control over numerous aspects of the PLA. Plus, the Chinese military has a corruption problem that makes the Bo Xilai scandal look like minor kerfuffle. Relations with the United States are difficult because of clashing interests... but also clashing styles. The PLA is quite transparent about intentions, but opaque about their capabilities. The United States is the reverse -- transparent about capabilities but ambiguous about intentions. This is not a recipe for comity.
3) The Chen case didn't really affect the Strategic and Economic Dialogue. This is not to say that the S & ED solved anything, but it did appear to be a productive meeting -- which is, after all, the point of a dialogue.
4) You know what would be super? The United States ratifying the U.N. Convention on the Law of the Sea (UNCLOS). There was unanimous consent the United States could do far more damage to itself than China ever could. Exhibit A on this front was the continued failure of the U.S. Senate to ratify UNCLOS. This is, in theory, the treaty that can provide the framework for resolving disputes in the South China Sea and East China Sea. It's a treaty backed by every president and secretary of state in the post-Cold War era. It's a treaty that the U.S. Navy desperately wants to see ratified. But because it hasn't happened yet, the U.S. always finds itself wrong-footed on these issues in negotiations. Well, I'm sure that in the current political climate, the Senate will eventually get around to it. Oh, wait...