Two guys with a common foe?                                                                 Photographer: Alan Porritt/AFP/Getty Images
Two guys with a common foe?                                                                 Photographer: Alan Porritt/AFP/Getty Images

Julie Bishop, Australia's foreign minister, is beginning to understand what former Secretary of State Hillary Clinton meant in 2009 when she posed this question about China: “How do you deal toughly with your banker?”

Clinton was conferring with then-Australian Prime Minister Kevin Rudd about China's rapid rise and, according to cables released by WikiLeaks.org, the leverage Beijing's massive store of U.S. Treasuries ($1.3 trillion at last count) gives it over Washington. Australia finds itself in a similar bind as its resource-based economy begins to look like a ward of China.

Not happy with this state of affairs, Bishop's boss, Prime Minister Tony Abbott, is grasping for a harder line on China and not doing it very well. Abbott used last week's visit to Australia by Japanese Prime Minister Shinzo Abe to preview his China policy. Abbott had previously declared Japan, China's sworn enemy, Australia's "best friend in Asia." Last week, though, he went off the diplomatic rails when he said, bizarrely, of the Japanese submariners who fired missiles at Sydney harbor during World War II: "We admired the skill and the sense of honor that they brought to their task."

Huh? Try telling that to the families of Australian and British prisoners during World War II, many of whom the Japanese tortured during the death marches of Sandakan and starved while working at gunpoint on the Burma railway. China’s foreign ministry, which clearly hasn't forgotten the war, hit back arguing that "anyone with a conscience will disagree with the remarks made by the Australian leader." Beijing mouthpiece the Global Times challenged Bishop's comments about a more assertive stance toward China, deriding her as a "complete fool" who was helping to turn Australia into an outpost of “rascals and outlaws” who don't understand Asian geopolitics.

What are we to make of all this? The obvious point is Clinton was right. Why would China fear a nation it could traumatize tomorrow by dumping its debt or shifting its iron ore, coal and copper orders elsewhere?

There are two cautionary messages embedded in this Beijing-Canberra imbroglio -- one for Abbott, one for Abe.

For Abbott, the issue is how China is forcing democratic nations to choose between obedience to the Communist Party or economic pain. The U.K. is clearly going the former route as Prime Minister David Cameron turns his back on Hong Kong. Why is Cameron silent as China clamps down on civil liberties in a former British colony that the Communist Party promised Margaret Thatcher it would leave alone?

Among conservatives, Abbott and his chief diplomat Bishop may score points by pushing back against China. It may also be his way of reminding the U.S. it still has a friend Down Under. But Abbott's bromace with Abe comes as former Prime Minister Malcolm Fraser hawks a new book, "Dangerous Allies," critical of Canberra's closeness to Washington at the expense of China. Time will tell if Australia pays a price for cozying up to a nationalist like Abe who leads a waning economic power as China extends its reach around the globe. China, after all, is Australia's No. 1 trading partner and a rising military superpower. And, let's face it, the Communist Party really knows how to hold a grudge.

Abe, meanwhile, should consider how badly his foreign policies are traveling. Just this week, he complained that Chinese President Xi Jinping continues to rebuff requests for a summit meeting. How about looking in the mirror? His unapologetic visit last December to Tokyo's Yasukuni Shrine, where 14 Class-A war criminals are interred, enraged China and South Korea. So has Abe's silence as people in his political orbit deny that the Nanjing Massacre happened or that the Imperial Army rounded up women and forced them to work in brothels. More recently, Abe's move to "reinterpret" Japan pacifist constitution has shaken Asia's security status quo.

As the Sydney Morning Herald asked in a July 11 headline: "Are We Really Comfortable With Abe?" When other democratic leaders are getting flack for being your friend, it's time to assess how your domestic politics are undermining external relations. After all, a key pillar of Abenomics should be closer relations with Asia's biggest economies, not alienating them.

Australia may now have a similar problem on its hands as China stews about Abbott's affection for Japan. As a sovereign nation, it's Australia's right to forge relationships as it sees fit. But as recent events attest, balancing China's economic might with its diplomatic idiosyncrasies is something few governments have achieved -- including the one Clinton may run come 2016.

To contact the writer of this article: William Pesek at wpesek@bloomberg.net

To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net.