* Biden arrives at Nato after G7 summit
* Communique says China presents "systemic challenges"
* China says West should not meddle in its affairs
* Baltics push for more US forces to deter Russia
Nato will confront China's military ambitions for the first time and designate Beijing as presenting "systemic challenges", according to a copy of a summit communique seen by Reuters and set for release later on Monday.
In a diplomatic victory for US President Joe Biden, who has urged his fellow Nato leaders to stand up to China's authoritarianism and growing military might, the final statement brands China a security risk to the Western alliance.
The language, which will now set the path for alliance policy, comes a day after the Group of Seven 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 will say in a 79-point communique to be published after the summit ends.
Biden also told European allies their defence was a "sacred obligation" for the United States -- a marked shift in tone from his predecessor Donald Trump, who had threatened to withdraw from the military alliance.
"Article Five is a sacred obligation," Biden said, referring to the transatlantic alliance's collective defence pledge. "I want all Europe to know that the United States is there."
"Nato is critically important to us," said Biden, who is seeking to mend ties after Trump's denigration of the alliance and what the ex-president called its "delinquent" members over the past four years.
Biden said both Russia and China were not acting "in a way that is consistent with what we had hoped", referring to Western efforts since the mid-1990s to bring both countries into the fold of liberal democracies.
In a sign of a common position emerging on China, no longer seen as a benign trading partner, the European Union has already designated Beijing a "systemic rival".
Although Moscow denies any wrongdoing, allied leaders are concerned about Russia's military build-up near Ukraine, as well as its covert and cyber attacks to undermine Western states.
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."
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.
Since Russia's 2014 annexation of Crimea, Nato has modernised its defences but has only recently begun to look more seriously at any potential threat from Chinese ambitions.
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 over 212 billion euros ($256.82 billion), according to German government data, making Beijing the top trade partner in goods.
Total Chinese holdings of US Treasuries as of March 2021 stood at $1.1 trillion, according to US data, and total US trade with China in 2020 was $559 billion.
Biden will meet Russian President Vladimir Putin on Tuesday 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 US forces in their region to deter Russia.
Leaders are also set to commit to reducing Nato militaries' climate impact, according to the final communique and to lowering the bar for any retaliation to cyber attacks. Space, Afghanistan and political reforms to make Nato more responsive in a multipolar world are also set to be agreed.
