This is the key to understanding last week's events in Beijing. Why did the Chinese agree to annual leaders' meetings and a ''strategic partnership''? We can read the answer in China's press, which praised the new ''strategic partnership'' as showing that Australia was moving away from America's orbit and closer to China's. A clear win for Beijing. Last weeks ''strategic partnership'' deal is Beijing's counter-move to America's deployment of marines to Darwin. When it was announced in 2011, Prime Minister Julia Gillard was sure China wouldn't mind. She saw it as something between the US and Australia. She was wrong. Beijing saw the decision as part of America's strategy to contain China. And so did Washington. Getting Australia to agree to the Darwin deployment was not about training marines. It was about sending a clear signal that Australia was on America's side. When Beijing quietly made its displeasure known, Gillard quickly lost her zeal for ever-closer defence ties with the US. Australia has now become very wary about any further US initiatives, while the Asian Century white paper was full of phrases Beijing likes to hear. China's leaders have been pleased, and last week in Beijing they gave Gillard her reward. They also took a hostage. Last week's promises of a closer relationship will be easy to take back next time Canberra displeases Beijing. This will make Gillard all the more sensitive to China's interests, knowing Beijing can easily turn her diplomatic triumph into a political disaster. It is unlikely, for example, that the new defence white paper will say anything to upset Beijing.

None of this is going unnoticed in Washington. They are disappointed Canberra has distanced itself from America's strategic moves against China, and they will be dismayed by Gillard's eagerness for ''strategic partnership'' with their rival. Australia's warming relations with Beijing will worry Washington in exactly the same way that US marines in Darwin worried Beijing. Whatever they say publicly, the Obama administration will be alarmed at Australia so obviously succumbing to China's pressure, and slipping further into China's orbit. In Asia's zero sum game, this win for China is a loss for them. Gillard can expect a call from Washington. What then should Gillard or her successors do? The first essential step is to recognise and accept that Australia now faces a quite new diplomatic and strategic situation. It used to be true that Australia did not have any choices to make between the US and China. Today it isn't, because their relationship with one another has changed. The Obama administration will be alarmed at Australia so obviously succumbing to China's pressure, and slipping further into China's orbit. And in the past, if we did ever face such choices it would have been easy to choose America. Now that is not so easy, because of what China has become. In our entire history no country has ever been as powerful in itself, or as important to Australia, as China is now, except for Britain and America. We have never before faced a situation where our ally's biggest strategic competitor is also our biggest trading partner and our region's strongest power.

The idea that we can keep these two relationships in separate boxes is an illusion. That doesn't mean we will inevitably be forced to choose one or the other. It does mean that our diplomacy must carefully weigh how each move we make with one will be viewed by the other. We will avoid the disaster of having to make a final choice between them only by continually choosing carefully how far to go in either direction. In striking this balance between Washington and Beijing, Australia faces an unprecedented diplomatic challenge. Nothing in the experience of our political leaders or their official advisers has prepared them to meet it, and they respond by denial. That puts Australia at risk. It leaves us as a powerless shuttlecock between our most important partners. As Paul Kelly wrote last week in a slightly different context, it makes us seem ''a weak and confused nation, easily intimidated, hopeless at realpolitik and deserving the contempt of great powers''. Loading Hugh White is professor of strategic studies at the Strategic and Defence Studies Centre, ANU. Follow the National Times on Twitter