I believe Bhutan and China relation will be purely diplomatically and economically. China doesn't need any military alliance with Bhutan for two reasons, one Bhutan has nothing to offer and secondly why ruin the relationship with India that took painful care to build up.
China and Russia are now in the process of building a 'vote block' in the UN against the western alliance, every extra vote on their side doesn't hurt.
Here is another view on this from The Hindu. (sorry - I had to repost again from a separate thread I opened yesterday). The Chinese state run think tank seem to think it had the tacit support of India. It is too early to predict this is a change in Bhutan's foreign policy.
Bhutan’s move reflects maturing Sino-Indian ties
Bhutan’s willingness to establish diplomatic ties with China, expressed by Prime Minister Jigmi Y. Thinley last week during the first ever meeting with his Chinese counterpart, has been seen here as reflecting maturing Sino-Indian ties. Analysts perceive New Delhi’s assumed tacit support for the move as heralding a new approach to regional diplomacy.
The heads of government of Bhutan and China held their first ever meeting on Thursday on the sidelines of the United Nations Rio+20 Conference on Sustainable Development in Brazil. During the meeting with Prime Minister Wen Jiabao, Mr. Thinley said Bhutan “wishes to forge formal diplomatic ties with China as soon as possible”.
Bhutan, which enjoys close historical, political and military relations with India, has had a strained relationship with China, sourced in a boundary dispute over which the two countries have held 19 rounds of talks. Following a package offer from China in the last round, Mr. Wen last week said China was “willing to complete border demarcation with Bhutan at an early date”, telling his counterpart that Beijing pursued “a foreign policy of good-neighbourliness”.
In Beijing, where Bhutan is widely seen as a close Indian ally, the moves have been seen by some analysts as being backed by New Delhi, suggesting for them a new approach in India’s diplomacy in a region where it has been wary of any Chinese influence.
“Without Indian permission, Bhutan would not take this step,” said Li Li, a South Asia scholar at the China Institutes of Contemporary International Relations (CICIR), a state-run Beijing think-tank. “My personal feeling,” she told The Hindu in an interview, “is that the move must have the approval or agreement of India, as Bhutan has a very special relationship with India.”
Ms. Li said the move was “a very good sign for the China-India relationship”, suggesting a new “confidence” in New Delhi with Bhutan and China “normalising their relationship”.
“This means that at the Indian government, at the Ministry of External Affairs, the people in charge of China relations have a very clear idea,” she said. “This is very good for the China-India relationship, that India does not think [China’s] ties will Bhutan will be a threat.”
Yang Xiaoping, another South Asia scholar at the Chinese Academy of Social Sciences (CASS), added that any concerns India might have would be “understandable, but unnecessary”. Speaking to the Communist Party-run Global Times , a paper known for its nationalist views, she “urged China to understand India’s concern, saying that the two sides have complementary strengths, and they can help ensure regional stability.”
The Hindu : Today's Paper / INTERNATIONAL : Bhutan