China is increasingly becoming an influential part of the world economy and one that is especially linked to the Australian economy. In turn, the Australian legal industry is progressively exposed to both risks and opportunities emerging from or in China. Against this backdrop it is surprising that, at both diplomatic and commercial levels, the recent Australia-China relationship has significantly diminished.

I'd like to offer my personal interpretations on some of the underlying issues causing the recent tension between the two countries in the hope that this may present readers with a confrontational - but fresh - viewpoint. Essentially, I believe Australia needs to address its own insecurity and improve its understanding of its counterpart, China. There is no universally valid approach as to how to deal with the Chinese in bilateral affairs, but it is always helpful to start with the right disposition.

Because this article represents my personal views of some recent events, my possible "prejudice" is, therefore, also addressed (see over page).

Was anyone really surprised by the arrest of Rio Tinto executive, Stern Hu, in Shanghai? I was - predominantly with the choices made by the Chinese Government rather than the actual incident. The choice of arresting Mr Hu, instead of a white Australian, is a sign that the Chinese Government is gently cautioning Western business communities. Maybe the right question is: "Did anyone really think that China would accept the consequences of recent Australian commercial and political decisions in silence?"

Political and commercial insecurities

As the world's largest manufacturing factory, China lacks the necessary natural resources to cover its needs and, hence, suffers from insecurity over its dependence on foreign suppliers. The Chinese Government is frustrated that its foreign acquisitions in energy and resource sectors are consistently being blocked by Western governments and/or business communities.

It is important to realise that the Australian side of the tension is suffering from the same problem - but for different reasons.

Fundamentally, what is preventing optimal Australia-China relations, I believe, is the sense of insecurity among the Australian communities that China is a risk. I am not referring to business risks or commercial uncertainty, but some kind of psychological factor that appears to exist in a deep-seated refusal to acknowledge or accept China's international influence in recent years.

At a very basic social level, such insecurity arises from China's perceived threat to the job securities of many Australians. To expand this to a higher level: by "China" I mean, the political system of China. While the former is more easily understood as "no job security means no financial security", the latter, by itself, may be more offensive to, for example, the laissez-faire economic philosophy.

Disagreement with the Chinese choice of political system often, in one way or the other, attributes to some excuse-finding exercises to refuse Chinese investments. Of course, in the case of Rio Tinto and Chinalco's failed negotiations earlier this year - and in addition to the voices of some shareholders - Rio Tinto had alternative choices for funding.

The next issue for Australia to overcome when dealing with China is to avoid arrogance. Traditionally, Western countries have been politically and economically patronising the Chinese on ideological and racial grounds. This must change for two primary reasons.

Firstly, I respectfully submit that "democracy" and related concepts are relative in nature and volatile; they are intellectually stimulating but hardly maintainable over time and in practice, considering the world we live in, are never constant. For example, after 9/11 the entitlement to exercise democratic and related rights has been - in addition to being taken away by governments around the world - somewhat voluntarily surrendered by the general public.

Secondly - and pessimistically - arrogance fuelled by the need to feel in control is something that requires more community-based efforts and this is where the Australian educational system proves to be less effective. In this context, the insecurity is justified and manifested in the form of a competition for supremacy or control: similar to the kind between Sydney and Melbourne but focusing on racial or "white" supremacy.

Everything being equal, this racial supremacy may eventually be replaced by "Chinese supremacy" at some stage down the track. Doesn't this racial supremacy seem to be a bad idea now? So was the unnecessary persistence of Western political ideology by US administrations pre-dating Obama era. It is intriguing to see the Federal Government's recent attempts to assume the old American role as the "democracy defender" - or, more specifically, "China criticiser" - which is financially, socially and politically costly.

To this end, Chinese seek economic gains while Western countries are focusing on ideological debates.

A related issue is the "resistance" to understanding the Chinese social evolution or, at the very least, be familiar with Chinese modern history. When the Chinese Government approached the organisers of the Melbourne International Film Festival in relation to the documentary on the Uighur representative Rebiya Kadeer in June 2009, the news was sensationalised and made a "feel good" moment in some sections of the Australian community.

It should be noted that - unlike Western history which promoted artistic expressions as an avenue to demand social changes - the Chinese Cultural Revolution affirmed that arts are a controlled form of expression mainly used for permitted propaganda. These are two totally different approaches. By the same token, and in fairness to the Australian media, the Chinese diplomats did not appreciate this issue either. However, I still see the blame for sensationalising this issue as falling squarely on the media, the Federal Opposition and the Melbourne film-maker of the aforesaid documentary.

The attitude

From time-to-time we hear the Western public - along with their governments - cheer or receive applause over "wins" over China. Such temporary overpowering is rather shortsighted and should be correctly characterised as thrill-seeking by jumping on an old and politicised bandwagon against China.

Recent articles in some Chinese newspapers went beyond hinting to Australia that it is losing faith in Australia as an investment destination, tourism destination and, probably and - more importantly - a major foreign educational provider. If the above is not sufficient enough information for some of us to change our attitude, you are probably right in realising that China will not withdraw from Australia in the short run; but no-one and nothing is indispensable in the long run.

It is impossible to summarise how to approach the Chinese communities but, as a starter, I have to note a couple of pitfalls in our current approach. A pitfall which must be avoided is the acceptance of the term "culture" as an answer. I believe "culture" is the most abused term since the onset of globalisation and has become the default answer when the person using it cannot, or refuses to, answer a request for explanation.

A starting point for understanding Chinese business culture is to be commonsensical: accept the fact that Chinese people are no different from Australians - simply take people as they are with humane generosity and social courtesy. Armed with the right attitude, finding the common ground to break the ice would be easy - Australia should focus on the need to generate wealth to and for the Australian communities. Every country has some kind of dark history and why risk embarrassment by coming to the table for a discussion without clean hands?

Australian companies should realise that underneath the glamour of modern Chinese economic reform, the Chinese are yet to become accustomed (if ever) to accepting a "loss of face" on an international scale. An honest, open and flexible approach will be the best means of dealing with China in the future.

Edward Liu is a commercial litigation and workplace relations lawyer at Anderson Rice Lawyers in Melbourne