KEY POINTS:
When official figures are released on Australia's global trade in 2007, they are expected to show that China has emerged for the first time as the country's leading economic partner.
It is already way ahead of the United States in trade with Australia and is rapidly overhauling Japan.
Statistics released in Canberra in August showed that Australia's goods and services trade with China last year reached A$50.3 billion ($57.6 billion), barely A$5 billion less than the value of Australia's two-way trade with Japan.
Fuelled by ravenous demand in China for Australian iron ore, copper, coal and other resources, and the appetite in Australia for Chinese manufactured goods these raw materials help to produce, Australia-China commerce increased 21 per cent in 2006, making the solid 8 per cent rise in trade with Japan look somewhat pedestrian.
Australia is now bonded to East Asia by exchanges of goods and services. They accounted for 50 per cent of Australian trade with the world last year and this ratio is set to rise further, especially if China continues to grow fast. But the Chinese ascendancy is not only an historic turning point for Australia in trade terms.
Since it was a British colony, Australia's top trading partners have shared a similar security outlook and threat perception with Canberra, as well as commercial interests. These have been the foundation for alliances, in the case of Britain and later the US, and an increasingly wide-ranging strategic partnership, in the case of Japan.
This is not the case with China, at least not yet. Will it be the outcome of Kevin Rudd's term in office as Prime Minister of the newly elected Labor Government in Australia? The Australian leader, who spent much of the 1980s in China as a diplomat and consultant and is the first Western head of Government fluent in Mandarin, certainly appears to have the inclination, knowledge and diplomatic skills to forge a closer partnership with China.
The basis for doing so was laid by the outgoing centre-right coalition Government of John Howard during its 11 years in office. It was Mr Howard who encouraged the expansion of Australia's economic links with China and agreed in September to open a strategic dialogue with Beijing.
Mr Rudd is likely to intensify these efforts to build a more comprehensive relationship with China, one that includes climate change, energy, security and governance issues, as well as trade and investment. He recognises that Australia's continued prosperity, and his party's electoral fortunes, are tied to China's continued economic progress.
But Mr Rudd is not starry-eyed about China. He told a meeting of defence specialists in Canberra in August that China's programme to modernise its nuclear and conventional forces would present new challenges to Australia and that the US remained central to Australian strategic interests and an overwhelming force for strategic stability in the region.
China is ambivalent about a continued US military presence in Asia, based mainly in Japan and South Korea. This presence serves as a reminder to Beijing that any attempt to retake Taiwan by force may lead to conflict with America. Clearly, the new Labor Government in Canberra will try hard to sustain its vital economic ties to China while maintaining its broader relationships with the US and Japan, including security commitments.
New Zealand is not as close to the US as Australia is and this may be an advantage for Wellington as each races to finalise separate bilateral free-trade deals with China. But Singapore and many other regional states are engaged in a similar juggling act to Australia, even though most are not US allies.
One thing they all fear is a crisis over Taiwan that would disrupt stability and economic growth, and force them to choose between China and the US, and probably its ally Japan, on the other.
This pressure to choose sides could come as early as March when Taiwan holds a referendum on joining the United Nations, despite strong opposition from Beijing. Still, China has been showing restraint and the Bush administration is trying to defuse the crisis.
Meanwhile, Australia has a strong interest in working with like-minded Asian nations and the US to ensure that such a crisis does not happen.
