This article aims to analyze the diplomatic challenges currently facing China as well as the foreign policy the Xi Jinping administration is adopting to address them. With these purposes in mind, it will look into three areas: first, diplomatic tasks confronting the Xi leadership; second, foreign policy that the Xi administration has implemented since the 18th Party Congress in 2012; and third, the prospects for China's foreign policy under the Xi leadership. As the Xi Jinping administration entered into office, it has encountered two major diplomatic challenges. One is the searching for a new foreign policy, and the other the restructuring of the existing foreign affairs and national security systems. The Xi administration, during its first year in office, has responded actively to tackle these issues. To begin with, it has attempted to make some adjustments on foreign policy while maintaining the Deng Xiaoping line of foreign policy. One of these modifications is placing emphasis on national "core interest," as illustrated by changes in guideline for maritime conflicts, pushing for building maritime power, and proclamation of Air Defense Identification Zone in the East China Sea. Second is the decision on the new guideline for peripheral diplomacy. That is, the administration regarded creating peaceful and stable environments to realize "Chinese Dream" as an important goal of foreign policy, and proposed such new guiding ideology as "familiarity, integrity, benefit, and accommodation." In additoin, the Xi administration restructured the existing foreign affairs and national security systems. Establishing the Central State Security Committee and the Internet Leading Small Group (LSG) are cases in point. As comprehensive organizations for policy coordination that encompass party, government, and military, the two LSGs are in charge of enacting related policies and fine-tuning policy implementation, based upon leadership consisting of chiefs of each relevant organs. Moreover, since Xi himself became the chief of these two newly-found organs, the conditions under which these LSGs could demonstrate unified leadership and adjusting role in its implementation of military, diplomatic, and security policies were developed. The future Chinese diplomacy will be characterized with three main trends. First, peripheral diplomacy will be reinforced. The peripheral diplomacy has become far more important since the Work Conference on Peripheral Diplomacy in October 2013. Second, economic diplomacy will be strengthened with an eye on reducing the "China Threat Theory," which still exists in Asia. Third, the policies to isolate the Philippines and Japan will continue in regard to maritime disputes. All in all, Chinese diplomacy in the Xi Jinping era is likely to feature practical diplomacy which combines both hard and soft approaches to best realize Chinese national interest.