Australian Prime Minister Julia Gillard recently completed her second visit to China since assuming office. Her six-day trip may prove a pivotal moment in bilateral relations.

Last year Gillard initiated a wide-ranging study of Australia's relations with Asia. The findings were encapsulated in a white paper entitled Australia in the Asian Century, which stated that "Australia will have more comprehensive diplomatic ties with countries across the region, especially with key regional nations - China, India, Indonesia, Japan and South Korea."

The tone of Gillard's visit was set on April 7 when she met President Xi Jinping. Xi stated he wished to take bilateral relations "to a new level."

As a result of discussions held on April 9 between Gillard and Premier Li Keqiang, bilateral relations were raised to a strategic partnership that will develop, to use the words of Australian officialdom, through a "new bilateral architecture."

This new architecture will include annual meetings between China's premier and Australia's prime minister. This will not be an alternating exchange between their respective capitals, but a meeting held in conjunction with a multilateral gathering such as the G20, APEC or East Asia Summit. China first proposed a strategic partnership in 2007 and Australia demurred out of concern for the reactions by Japan and the US. Now Australia joins an elite circle of states that have negotiated similar high-level meetings.

Also on the agenda are an annual foreign and strategic dialogue between foreign ministers, an annual strategic and economic dialogue, and working-level discussions between the Australian Defence Force and the People's Liberation Army of China. Australia would like to build on existing military cooperation with China, an area where Australia is ahead of most Western countries, including the US. 

Working-level discussions that are scheduled for later this year are likely to focus on regional security interests. If they occur prior to the release of the Australian government's 2013 defense white paper, they could serve as an opportunity for China to present its views. Australia would also like to promote trilateral military cooperation by adding the US to the mix.

China and Australia also reached agreements on a number of other important issues. For example, the People's Bank of China approved direct trading of the Australian dollar and the yuan. Only Japan and the US have this status. This agreement will lower transaction costs and potentially facilitate the use of Chinese and Australian currencies in bilateral trade and investment. To have a major impact, however, China will have to allow its currency to float on the market, deregulate its financial markets, and permit its private companies to decide where to invest.

In the meantime, Australia will have to work to remove obstacles to Chinese investment that has given rise in China to the perception that its foreign investment is being treated differently from other foreign investors. Australian Trade Minister Craig Emerson argues that no Chinese applications for investment have been rejected.

China is Australia's third largest source of major investment proposals following the US and the UK. But it is clear that Australia's national interest test and ownership caps set conditions that some Chinese investors object to. It is now up to both sides to kick start negotiations on a free trade agreement that have languished for nine years.

The timing of Gillard's visit could not have been better coming immediately after the leadership transition in China. Australia-China political relations clearly have overcome the torpor of the last four years. Both parties wish to expand and deepen the relationship beyond its transactional or commercial base.

It is wrong to view the new strategic partnership, as an article entitled "Sino-Australian partnership shows path forward" in this paper on April 11 argued, as a big step in luring Australia away from the US and Japan. All four countries are economically interdependent and all require a stable regional environment to prosper.

The China-Australia strategic partnership is not a "strategic victory" for China, but a "win-win" situation for both.

The author is an emeritus professor of the University of New South Wales at the Australian Defence Force Academy, Canberra. opinion@globaltimes.com.cn