China has tested a next-generation missile that could be used to target satellites that are much higher in orbit than previously possible. While the test did not target any satellites, it did reach an altitude above 10000 km.
Officially, the test involved a sounding rocket for scientific purposes. However, the manner in which the test was conducted strongly suggested it was connected to the Chinese military.
In some ways, the latest test was not that much of a surprise, but a logical evolution of previous capabilities. In 2007, a weather satellite was intercepted by a direct-ascend interceptor using hit-to-kill technology.
With hit-to-kill, the payload will destroy the target using the force from kinetic impact. It is much more technically challenging than previous warheads that relied on proximity fuses.
The satellite intercepted was at an orbit of around 865 km meaning that China has the ability to intercept most reconnaissance satellites that are at lower altitudes.
China also successfully tested its ability to intercept long-range ballistic missiles outside the atmosphere. Such a test came as recently as January of 2013 again using the same hit-to-kill technology used earlier.
However, the latest missile was able to reach much higher than before. It could possibly bring into range all satellites, not just those in low earth orbit but also those in medium earth orbit and geostationary earth orbit.
In medium earth orbit are the GPS satellites and in geostationary earth orbit are military communications satellites. These are high-value assets with significant ramifications if they were to be disabled.