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Living in the neighborhood of Asia’s giants has always been a challenge for westernoriented Australia. The rise of China, however, which is not only likely to lead to tremendous power shifts between the U.S. and China but most probably will also lead to a full-fledged power transition, is a formidable challenge for Australia. On the positive side, Beijing has become Australia’s number one trading partner over the last few years, when it comes to both exports as well as imports. Thanks to China’s ever growing demand for Australia’s raw materials and resources, Australia got off lightly during the economic crisis which hit many Western countries severely in 2008 and 2009. On the negative side, however, China’s economic rise is mirrored by a significant increase in the country’s military might. Beijing is investing heavily in military capabilities and has changed spending priorities from land-based forces to the air force and navy, a clear indication of power-projection ambitions. Many foreign policy experts – not only Australian ones – share the strong feeling that a naval clash between China and America in the South-East Pacific is the most likely scenario involving open military conflict between the two powers. At least, and here even more agree, the pronounced Chinese armament program will severely limit America’s freedom of movement in Pacific waters. From an Australian perspective, this might mean that in the not too distant future America could be unable to project enough power into the region to defend her ally Australia against potential harm, or that Australia might become involved in a conflict the Australian Defence Forces are not keen to be part of. When Kevin Rudd won the Australian national elections in 2007, however, many observers expected a rather soft course on China. Rudd, being fluent in Mandarin and having spent some years in Beijing, was seen as a China lover with a heightened interest in harmonious relations with mainland China. However, Rudd surprised the Australian public with two seemingly inconsistent policies towards China: On the one hand he proposed what he called an “Asia Pacific Community” (APC), where he tried to integrate China – as well as the U.S. – into a more formal regional institution, while naming China’s military programs a potential cause of concern for its neighbors in the 2009 Defence White Book and advocating a huge military procurement program. Both initiatives aroused rather controversial reactions individually and were hardly seen as a monolithic policy. This report examines the concept of so-called “Power Transition Theory” to show that the APC proposal and the Defence White Paper do not contradict but complement each other. The lack of a keen feel for presentation, diplomatic tone and – to some extent at least – political feasibility cast a shadow over Rudd’s approach to China. It is interesting to see, however, that a self-proclaimed “middle power” like Australia is not being paralyzed by the tremendous changes taking place but is instead trying to influence significantly “bigger” players in its own interest.

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