The fear haunting the world right now is that history might repeat itself. People see a globally- dominant liberal democracy challenged by an authoritarian rising power; and they ponder the parallel between Britain and Germany a century ago and America and China now.

Economic self-interest, political convergence and the obvious downside of conflict eventually drew the oceanic and the continental power together – as it is supposed to now – but only after two cataclysmic world wars.

Of course, China’s “inexorable” rise assumes continued strong economic growth and internal stability. But the frantic quest of rich Chinese to buy foreign assets and secure Western passports suggests that those who know China best don’t take either for granted.

And the “declinists” are oblivious to the global appeal of Anglo-American culture and values and the wealth fermentation that only a large measure of freedom can create.

Still, it’s likely that China’s relative economic and military heft will increase. It’s likely that points of friction will multiply and it’s likely that tub-thumpers in both countries will call for stronger action against the other.

It’s much less likely that a somewhat stronger China will take on a still-immensely-strong America because war between great powers in the nuclear age threatens absolutely catastrophic consequences.

The more capacity that China gains to challenge the United States, unavoidably, the more it has to lose in any conflict. The Chinese leadership knows this but that doesn’t mean failing to exploit any circumstances that it can.

If mishandled – as in 1914 – the escalation of local incidents or miscalculation about crossing red lines could lead to disaster. The good news is that war with China is certainly not inevitable but the bad news is that it’s far from impossible.

Between proud and powerful rivals, tension is unavoidable yet conflict is not. China and America, after all, are partners as well as competitors.

Without the Pax Americana – and the opportunities for trade, investment and technological transfer that it fostered – China would not have been able to grow.

But for the growth of China, countries like Australia would lack export markets, even America would have had far less access to consumer goods, and the wider world would not have enjoyed the greatest prosperity in human history. This is a lot to lose.

In their own ways, both countries are exceptional. America takes pride in bringing peace, prosperity and freedom to much of the world. China takes pride in its restoration as the Middle Kingdom around which smaller countries are expected to revolve.

And herein lies the tension: the modern world’s structures and rules are the product of America’s strength and values, not China’s; and China wants them changed as its reaction to the South China Sea dispute shows.

If territorial disputes over hitherto uninhabited reefs and cays can unsettle the region, imagine the potential for trouble over Taiwan, the world’s 23rd biggest economy with 24 million people, legally part of China but practically independent.

An over-confident Taiwan could make a formal declaration of independence. An insecure Chinese leadership could seek domestic support through adventurism abroad.

China would claim a “right” to control what was historically its territory. America would assert a “duty” to help a small country bullied by a large one. The first antagonist to blink would suffer a massive loss of face.

At the very least, an attack on Taiwan would prompt a new cold war in East Asia. Trade would slump, military spending would sky-rocket. The walls would go up as the lights went out right around our region.

At any particular moment, it’s an improbable prospect. But great powers need only miscalculate once in the several decades it will take for a new regional pecking order to evolve and everyone is in deep trouble.

Luckily, an alternative scenario also fits the facts.

There is an internal debate in China too. As more and more Chinese travel, study and work abroad, its taste for freedom grows. Having pragmatically conceded market freedom – in fits and in starts – the Chinese government concedes social freedom, academic freedom and finally a measure of political freedom.

It might be “democracy with Chinese characteristics”, choosing between different factions within the Communist Party. Still, the more people can choose, the more likely their government is to focus on a better life than a stronger military, and improvements at home than expansion abroad.


Along with managing political Islam and restraining Russia, keeping China’s rise peaceful is the big geo-strategic challenge of our time.

Constant dialogue between the countries of our region, at venues like the East Asia Summit, is the best short-term antidote to strategic mistrust. The more communication, the less misunderstanding; the more people talk, the less likely they are to fight.

The inevitable focus on what’s keeping countries apart shouldn’t obscure what’s bringing them together. As vice-president, China’s President Xi spent a week in the US with Vice-President Biden. Biden returned the compliment by spending a week with Xi in China.

As well as regular leader-level summits, twice a year, the American policy and business establishment meets with its Chinese counterpart, while many millions of Chinese now spend time in the US every year.

Similar networks and comparable arrangements now operate between Australia and China too.

Leaders meet at least once a year as do our respective defence and foreign ministers. Our business, academic and cultural elites routinely gather. There are now more than a million Chinese Australians and, in most years, our largest tourist influx and student intake is from China.

The FTA that my government finalised was the first between China and a big advanced economy. Australia joined the Chinese-led Asia Infrastructure Investment Bank – once its governance had been adjusted to resemble that of established international bodies – because you shouldn’t insist that China play by the rules only to reject it when it does.

The pity is that America and Japan have so far declined to do likewise.

From agreeing a “comprehensive strategic partnership” (China’s eleventh) to leading the search for MH370 and the 150 plus Chinese lost in this mystery, my government sought an ever-closer friendship with China – but without prejudicing our intimacy with the United States.

As prime minister, John Howard often said that Australia doesn’t have to choose between its history and its geography. My way of putting it was that you don’t make new friends by losing old ones.

If China’s economy continues to grow, its military strength and its political influence will expand. Despite these complications, a strong China is better for the world than a weak one that exports and imports less.

Even so, America won’t be shouldered out of Asia and it shouldn’t opt out – because the countries of the region want a counter-weight to the region’s strongest local power.

In coming years, America shouldn’t expect predominance in East Asia any more than it did throughout Europe during the Cold War. America’s role – its indispensable role – is to preserve freedom of navigation and to honour the commitments that it’s made to other countries provided they don’t act unreasonably.

This should be something that the Chinese can understand and respect.

Economics and geography should make China the biggest power in East Asia. But strength and benevolence will keep America the power to which all others turn when they’re being pushed around.

We need to work for the best while ready for the worst and hope for wise statesmanship over decades, not just years.

I’m an optimist – because you always have to be; but a cautious one because much could go wrong.