For many Cold War warriors, the Fulda Gap evokes memories of the potential clash between the former Soviet Union and United States military forces. On the eastern side of the strategically important German lowland stood the Soviet 8th Guards Army, to its west, the American V Corps.

Thankfully the battle never eventuated, with the 1991 demise of the Soviet Union leaving the United States with global hegemony.

Now, some 20 years later and half a world away, the stage is set for another Great Power competition, a new cold war.

A more subtle rivalry is looming and the mid-point of confrontation is centred on the warm tropical waters in the Fijian capital, Suva - at Walu Bay.

To the north of Walu Bay is the new American embassy, to the south the new Chinese embassy.

President Barack Obama's announcement in January that the US would shift its strategic focus to Asia-Pacific left little doubt as to a new foreign policy to contain China's rise in the region.

China has been very active in the Pacific, while the US has been somewhat absent, focused on the Middle East, Central Asia and Europe.

China has engaged soft power to co-opt rather than coerce, or use military might, to foster new relationships with the small Pacific island countries.

An example is the Fijian "look north policy".

Frustrated with traditional alliances, Fijian leaders have built economic and cultural bridges towards China. The benefits through Chinese development assistance and soft financial loans have forged a close friendship.

Little wonder the US chose Suva as the playing field to counterbalance Chinese influence.

Fiji is not alone in its desire for Chinese help. Chinese development funds have been accepted to build Parliament House in Vanuatu, a new court house and Ministry of Justice in the Cook Islands, sports stadiums in Papua New Guinea and Samoa and many more non-traditional development projects.

For Beijing, it has been more effective to use smart dollars to achieve influence, rather than buying an armada of warships.

But the US rise in the Pacific could shake up the region's geopolitical environment. With its vast military capabilities, a US strategy of coercion to contain China is a possibility.

But is that appropriate today? Is that a symmetrical response, especially against the Chinese strategy?

Harvard Professor Joseph Nye's concept of "smart power", a combination of hard and soft power, will undoubtedly drive US policy for the Asia-Pacific. The region may see a sharp and sustained increase in US diplomatic engagement and economic initiatives, to drive home the point that it is not all about China.

Ironically, while an arms race in the Pacific would be dangerous, a development aid race would not be without hazards.

A Pacific awash with money might sound great to some but it could easily destroy already delicate economies and financial systems.

Co-operation between the great powers is needed. A regional political structure, such as the Pacific Islands Forum, could be the appropriate organisation to encourage such co-operation.

Brokering constructive and meaningful dialogue between the US and China through the forum would surely be beneficial to all parties.

The US has certainly recognised the role of this third player. Last November, Deputy Secretary of State Thomas Nides led the largest and highest-level US delegation ever, to participate in the annual forum meeting held in Auckland which has the largest Polynesian population of any city in the world.

What both China and the US need to be assured of is that they are indispensable in the Pacific. The region has adapted, with many of the small countries comfortable with an economic arrangement with one great power, while at the same time having a security arrangement with the other.

This was never the case during the US-Soviet Cold War era. Countries either committed to Washington or Moscow. In this context, the willing accommodation and acceptance of the US and China by the Pacific Island nations suggests that a cold war in the warm Pacific is avoidable.

Regionally, the forum could become a conduit for power sharing between the US and China, and while the notion of shared power may be inconceivable to some, to the people of the Pacific it is much preferred than one that becomes a flash-point for confrontation.

Josh Wineera is a teaching fellow at Massey University's centre for defence and security studies.