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: ‘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:

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:

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 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, 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.

Brian Ross wrote on Oct 2^nd, 2013 at 1:40pm:


Correct me when i'm wrong, but isn't China going out of its way creating new and safer trades routes through Russia and Pakistan for example.

Already China is investing large amounts in Africa creating a strong raw materials pool which could replace Australia, and yes although the movement of these raw materials from Africa would cost more then if you would ship them from AUS i don't think their economy would suffer much.