By Robin Emmott, Steve Holland and Sabine Siebold

BRUSSELS (Reuters) -NATO leaders designated China as presenting “systemic challenges” in a summit communique on Monday, taking a forceful stance towards Beijing at Joe Biden’s first summit with an alliance that Donald Trump openly disparaged and ridiculed.

The new U.S. president has urged his fellow NATO leaders to stand up to China’s authoritarianism and growing military might, a change of focus for an alliance created to defend Europe from the Soviet Union during the Cold War.

The language in the summit’s final communique, which will now set the path for alliance policy, comes a day after the Group of Seven (G7) rich nations issued a statement on human rights in China and Taiwan that Beijing said slandered its reputation.

“China’s stated ambitions and assertive behaviour present systemic challenges to the rules-based international order and to areas relevant to alliance security,” NATO leaders said in a communique after their summit.

Biden also told European allies the alliance’s mutual defence pact was a “sacred obligation” for the United States – a marked shift in tone from his predecessor Trump, who had threatened to withdraw from the alliance and accused Europeans of contributing too little to their own defence.

“I want all Europe to know that the United States is there,” said Biden. “NATO is critically important to us.”

BALANCING THREAT

Germany’s Chancellor Angela Merkel, at her last summit of the alliance before she steps down in September, described Biden’s arrival as the opening of a new chapter. She also said it was important to deal with China as a potential threat, while keeping it in perspective.

“If you look at the cyber threats and the hybrid threats, if you look at the cooperation between Russia and China, you cannot simply ignore China,” Merkel told reporters. “But one must not overrate it, either – we need to find the right balance.”

Biden said both Russia and China were not acting “in a way that is consistent with what we had hoped”.

NATO Secretary-General Jens Stoltenberg said China’s growing military presence from the Baltics to Africa meant nuclear-armed NATO had to be prepared.

“China is coming closer to us. We see them in cyberspace, we see China in Africa, but we also see China investing heavily in our own critical infrastructure,” he said, a reference to ports and telecoms networks. “We need to respond together as an alliance.”

Stoltenberg also said the leaders had agreed to increase their contributions to the alliance’s small common budget. The vast bulk of military spending in NATO is handled separately by member countries.

G7 nations meeting in Britain over the weekend scolded China over human rights in its Xinjiang region, called for Hong Kong to keep a high degree of autonomy and demanded a full investigation of the origins of the coronavirus in China.

China’s embassy in London said it was resolutely opposed to mentions of Xinjiang, Hong Kong and Taiwan, which it said distorted the facts and exposed the “sinister intentions of a few countries such as the United States”.

“China’s reputation must not be slandered,” the embassy said on Monday.

British Prime Minister Boris Johnson, arriving at the summit, said there were both risks and rewards with Beijing.

“I don’t think anybody around the table wants to descend into a new Cold War with China,” he said.

DEEP ECONOMIC TIES

From China’s investments in European ports and plans to set up military bases in Africa to joint military exercises with Russia, NATO is now agreed that Beijing’s rise deserves a strong response, although envoys said that would be multi-faceted.

Allies are mindful of their economic links with China. Total German trade with China in 2020 was more than 212 billion euros ($257 billion), according to German government data. Total Chinese holdings of U.S. Treasuries as of March 2021 stood at $1.1 trillion, according to U.S. data, and total U.S. trade with China in 2020 was $559 billion.

Biden will meet Russian President Vladimir Putin on Wednesday in Geneva.

Lithuanian President Gitanas Nauseda said that Russia was trying to “swallow” Belarus and that NATO needed to be united in deterring Moscow. Nauseda also said the Baltic nations would push for more U.S. forces in their region to deter Russia.

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(Additional reporting by Mark John, Sarah Young and Elizabeth Piper in London, Andrius Sytas in Vilnius, and Kate Abnett, Gabriela Baczynska, Marine Strauss and John Chalmers in Brussels; Editing by Catherine Evans, Peter Graff, Bernadette Baum and Alex Richardson)