Balancing partnerships

In the paper, the Australian government urged "all claimants to refrain from actions that could increase tension, and ... called for a halt to land reclamation and construction activities."

"Australia is particularly concerned by the unprecedented pace and scale of China's activities. Australia opposes the use of disputed features and artificial structures in the South China Sea for military purposes. We support the resolution of differences through negotiation based on international law," the paper said.

At a monthly press conference on November 30, Chinese defense ministry spokesperson Wu Qian said Australia had no claim in the region and its comments were "irresponsible."

"It has been proven by facts that interference from countries outside the region can only complicate the South China Sea issue and will be of no help to regional peace and stability. We urge Australia to strictly abide by its commitment not to pick sides on territorial sovereignty disputes or to hold an old mentality while looking at the new Asia-Pacific region."

Australian war planes routinely conduct surveillance flights and the Australian Navy sails through the contested waters to ensure freedom of navigation.

Canberra's allies want it to do more. Japan's ambassador to Australia said Canberra's involvement in four-way talks that include Japan, Australia, the US and India were "critical" for freedom of navigation and trade in the South China Sea. China accused the nations involved in the Quadrilateral Security Dialogue as "politicizing or excluding relevant parties," since China was not included.

'Things are coming home to roost'

For years Australia has been one of Washington's most reliable military partners, deploying troops to fight alongside the United States forces since the 9/11 attacks, from Afghanistan to the war in Iraq, to the coalition fighting ISIS.

At the same time, Australia has been the beneficiary of significant Chinese investment, of the sort that allowed it to steer largely clear from the financial crisis and ensuing economic slowdown that swept the globe in 2008 and 2009.

It's been a delicate dance for Australia, entertaining two very different partners with two contrasting objectives. That deftness in keeping the two separate may not be so easy anymore.

"Things are coming home to roost in a much more direct sense now," said Euan Graham, director of the International Security Program at the Lowy Institute.

"Australia is much more risk averse about siding militarily and providing forces and being assertive in its own backyard for the obvious reason: there is a key strategic downside if China is going to make the bilateral relationship hostage to those kinds of calculations," he said.

A partnership decades strong

James Curran, a former government official who lectures at the University of Sydney on Australian political culture and foreign policy, says the US alliance brings enormous benefits to Australia in terms of intelligence sharing, defense technology and military training.

"I saw that relationship up close and I saw what it delivers and I also think that when you strip the alliance back to its bare essentials, it still provides a deterrent for Australia. That is to say, any hostile power in the region considering some kind of aggression against Australia would have to at least keep the existence of the US alliance in mind," said Curran.

It also, importantly, allows Australia to purchase US defense technology and hardware at discount prices.

"It's a guesstimate how much Australia would have to spend if it was purely self-reliant, but it would be at least double the amount and possibly a lot more than it spends at the moment," said Graham. "So it's in Australia's interest not just to act as the kind of deferential ally, but there's a hard-core strategic and economic interest in siding with the United States."

A mutually beneficial relationship

The benefits of this relationship swing both ways, says Graham.

"Geographically where we are, we're not too close, we're not too far away so if you're thinking from a purely strategic point of view, where would the United States want to position its forces from in case of an increase in tensions or conflict in the region?"

"Australia offers very significant advantages. It's outside of all but the longest range missiles and it offers unlimited land space, virtually unlimited air space from which US forces could operate," he said.

Graham says that while this is theoretical, it is something US strategists obviously take into account in the weight they put into the relationship.

China's long arm

The specter of Chinese influence and power, however, has never loomed larger in Australia than it does now, and the Australian government is responding with legislative action.

On December 5, Prime Minister Malcolm Turnbull announced new laws that would create a "transparency scheme" that would require political donors to declare if they were working for or on behalf of a foreign power.

"If you act covertly on behalf of a foreign actor, in a way that harms Australia's national security, to influence the political process, or a Government decision, that conduct will be criminalized," said Attorney-General George Brandis.

Former Defense Minister Dennis Richardson, speaking in Sydney in August, said the country is not in denial about China's maneuverings in Australia.

"China does conduct intelligence activities against us and I've said that's no reason for us to engage in panic-driven anti-Chinese decision-making over something we ought to be aware of and conscious of," he said. "Our relationship with China is always going to be more complex than our relationship with the United States."

While conceding that Australia will never have the depth of relationship with China that they currently have with the United States -- because there are "too many differences" -- Richardson said there is "national interest" in building the relationship with China and improving mutual trust.

'A rapidly changing multi-polar world"

Releasing the government's white paper in late November, Turnbull outlined Australia's precarious position in shifting global dynamics.

"We are navigating a rapidly changing multi-polar world in which each of the major players are testing their relationships with each other, while undergoing rapid change themselves," Turnbull said.

"We are experiencing unprecedented prosperity and opportunity, but the liberal rules-based order that underpins it all, is under greater stress than at any time since its creation in the 1940s. This is the first time in our history that our dominant trading partner is not also our dominant security partner. We must see this as an opportunity, not a risk."

China's economic ambitions helped Australia steer virtually clear of the global financial crisis in 2008 -- thanks to its exports of minerals and raw materials largely mined in the Australian outback.

But not every bit of Chinese investment has been welcomed.

The Australian government in 2016 blocked the sale of a 99-year lease of Ausgrid, a New South Wales electricity provider, to the Chinese government-owned State Grid Corp., with Federal Treasurer Scott Morrison citing "national security concerns."

But there are other ways China has won.

"The Chinese, unsurprisingly, saw it as a containment strategy, and the Indians are still very burnt by that experience, by Australia walking out, and hence are quite wary of any renewed Australian push for that quad to be revived," James Curran said.

"On the other hand, there's a few analysts who say this is precisely the moment where that type of quadrilateral arrangement should be revived because Trump's America is asking its allies to do more."

Maintaining the fine balance between the US and China is becoming increasingly difficult as agendas shift in those countries, creating conditions beyond Australia's control.

Australia is somewhere in the middle: Attempting to please a traditional ally while keeping a rising China onside.

The Lowy Institute's Graham says China will seize any opportunity to take an ally away from the United States.

"We're not talking about a direct military threat to Australia, it's really this new style of challenge in which China is behaving very much like an old 14th or 15th century China, it's asking for deference from the countries on its periphery," he said.

"That's why I think Australia does loom large in China's sights, because of the embarrassment value of drawing an ally away (from the US). I think that might explain some of the investment in that political influence campaign that we've seen."