Regardless of equipment, what has always set our military apart from any others, is our training and strategies. We didn't always have the best equipment in ww2 but our soldiers still did what had to be done and did it well.
The screw ups in Iraq are not our military's fault and IMO don't show a good example of our military power. "Shock and Awe" was a prime example of our military might. Meaning the opening of the Iraq war, I don't think anyone can really compete with that. However we aren't a police force as our military is being used for today in Iraq.
China might be getting a lot of new stuff, but I still think ours is up to par, and our soldiers training will over come theirs. China also lacks the experience in any modern combat, so in essence their army and strategies are untested in a real combat environment.
It will also likely never be a fight directly with China. We will fight them, just like we did the Soviets via proxy wars. Iran might be the first, but I'm sure it wont be the last. We will at some point end up in Africa because of it's oil reserves.
Eventually Africa will gain the focus of our attention, just like the middle east is today. The difference there is China is already heavily involved in Africa, in countries like The Sudan and so on.