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China’s the great question mark, but its power isn’t in question. Pose this central conundrum of the Asia Essentials in the succinct terms of the question that Hillary Clinton put to PM Rudd in 2009 ^[2]: ‘How do you deal toughly with your banker’?

The words of Secretary Clinton encapsulate the American dilemma, facing a China which is both principal rival and chief economic partner. This shapes the associated Asia Essential: the US military role in Asia is still vital, but shifting relativities mean the US may no longer be the definitive power.

Australia worries about growing confrontation between the two nations that should also function as the G2. The polite way to mention this is the spreading use of the term ‘competition’. Even the optimistic liberal internationalism of the Asian Century White Paper accepts the inevitability of US–China competition in both the strategic and trade policy spheres.

To see how quickly perspectives are shifting, turn to the 2003 memoirs of Bill Clinton’s second Secretary of State, Madeleine Albright ^[3]:

America’s most important relationship in Asia is with Japan… Our most complex relationship in Asia, however, and the one that demands the most constant tending, is with China.

This was the comfortable Washington perspective before China overtook Japan as the world’s second-biggest economy. Today China is the most important as well as most complex relationship.

Albright was reflecting the view of a US administration that in 1999 finally agreed to China’s entry into the World Trade Organisation. Albright called WTO membership ‘a leap of faith on Beijing’s part that China would be able to compete in the global marketplace while abiding by international rules’. The shift in US outlook inside a decade is instructive. In the words of two different Secretaries of State, China has gone from having to make a leap of faith to being both America’s banker and rival.

China is already bigger, relative to the US, than the Soviet Union ever was during the Cold War, and as Hugh White observes ^[4]:

A Chinese challenge to American power in Asia is no longer a future possibility but a current reality.

Australia and Asia share a related point of view on Clinton’s question: what happens if your banker starts playing tough and rough?

An Australia that passed through the Global Financial Crisis without dipping into recession has a deep understanding of the economic as well as the strategic consequences of China’s rise. Both sides of Australian politics share a tacit consensus on the significance of the China Essential. In 2000, the Howard government’s sole defence white paper acknowledged that China’s rise constituted a major change to Australia’s circumstances. Hugh White, lead author of that paper, later offered a blunt translation of what that language meant: ‘The possibility of war with China now influenced major force-planning decisions for the first time since the Vietnam War’.

PM Howard offered this 2005 judgement ^[5] on the chance of war between the US and China:

It would be a mistake to embrace an overly pessimistic view of this relationship, pointing to unavoidable conflict. Australia does not believe that there is anything inevitable about escalating strategic competition between China and the US.

The attentive listener gave as much attention to what he denied as what he affirmed, pondering phrases such as ‘unavoidable conflict’ and ‘escalating strategic competition’. The following year, Canberra told the US of its view that China’s military build-up and Beijing’s opacity were ‘already altering the balance of power in Asia and could be a destabilising influence’.

Courtesy of Wikileaks ^[6], this is the judgement offered by Australia’s Foreign Affairs and Defence departments, the Office of National Assessments and the Defence Intelligence Organisation:

We agree that the trend of China’s military modernisation is beyond the scope of what would be required for a conflict over Taiwan. Arguably China already poses a credible threat to modern militaries operating in the region and will present an even more formidable challenge as its modernisation continues.

In 2009’s defence white paper, the Rudd government judged that the most significant trend of the decade wasn’t jihadist terrorism, or wars in Iraq and Afghanistan. It was the rapidly altering relativities among the giants of the Asia–Pacific:

… the biggest changes to our outlook over the period have been the rise of China, the emergence of India and the beginning of the end of the so-called unipolar moment; the almost two-decade period in which the pre-eminence of our principal ally, the United States, was without question.

The Gillard 2013 defence white paper pointed to the same trends but didn’t beat the drum as loudly as its predecessor.

The questions about Beijing’s strategic intentions are echoed when Canberra ponders China’s economic instincts. The joy of the resources boom was tinged by dark scenarios even before the boom began to wind down. The China challenge could be summarised in three forms:

1. China as threat to the existing global order
2. China as direct competitor with the US for control of the international system
3. China as self-absorbed mercantilist bully.

The three views are drawn from a Rudd speech ^[7] on ‘Australia and China in the World’:

There is a hardline view that regards China’s rise as a threat to the existing global order no matter what. There is a contrary view, espoused by some particularly in the developing world and in some parts of academia, that a new ‘Beijing consensus’ should replace the ‘Washington consensus’ with China the model for developing countries to follow. There is the associated view of China as the economic saviour of the world, emerging from the global financial crisis. Or alternatively, there is the view that China increasingly behaves as a mercantilist power, insensitive to its emerging global economic responsibilities. The truth is there are as many conflicting views in the West about China and its future as there are within China itself.

The great China question mark now confronts the new Coalition government. Like its predecessors, the Abbott government will chant the mantra that Australia doesn’t have to choose between China and the US.

Reflecting on a trip he took to Washington and Beijing, then Opposition Leader Abbott wrote in July last year ^[8] that Australia would have to work much harder on the relationship with China because there was none of the ‘cultural interoperability’ that Australia has with the US:

There’s no doubt that the Americans are taking the Chinese seriously and that the Chinese are well and truly returning the compliment. In Washington, the issues were: Will China play by the rules in the South China Sea; has China ‘bought’ friends inside ASEAN; and what’s the purpose of Chinese cyberattacks on Western institutions and businesses? In Beijing, they were: why is there a new US Marine posting to Darwin and why is Australia choosing its history over its geography (even though we’re determined not to make such an invidious choice)?

Invidious indeed, to be torn between your banker and your ally.

Graeme Dobell is the ASPI journalist fellow. Image courtesy of Flickr user Eva the Weaver ^[9].