China hopes this will help open up traditional strategic chokepoints such as the Strait of Mandab, the Strait of Malacca, the Strait of Hormuz and the Strait of Lombok through which 70 per cent of its trade passes.
China also looks set to launch its first aircraft carrier as early as this month, no doubt aimed at further projecting its military presence throughout the Indian Ocean region.
China's rapid military build-up has caused many to shift their focus to India as a potential counterweight or hedging strategy in the tussle for regional power.
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British Prime Minister David Cameron visited India last year with a big ministerial delegation.
His visit came after a speech which outlined the Government's program and included an "enhanced partnership" with India as one of the main foreign policy goals.
Last November, US President Barack Obama wound up a highly successful visit to India underscoring what he called "a natural and strategic alliance of democracies". He simultaneously lent support to New Delhi's campaign for a permanent seat on the United Nations Security Council.
And as recently as the end of last month, US Secretary of State Hillary Clinton wrapped up her second visit in office telling India "it is time to lead".
All this has left Australian diplomats scrambling to forge new security relationships with the biggest democracy and its one billion people before it is too late.
In 2007, then defence minister Brendan Nelson confirmed Australia would not upgrade its existing trilateral security alliance with Japan and the US to include India.
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The position, which was quickly endorsed by the incoming Rudd Government, was largely - and rightly - seen as kowtowing to Chinese concerns over their south-western neighbours.
But Mr Smith's speech last week sets the scene for a reversal of this decision when Australia is also vice-chair of the 18-member Indian Ocean Rim Association for Regional Co-operation ahead of its chairmanship in 2013.
Australia's proactive and consistent lobbying for a new broad, security-focused regional institution - borne through Mr Rudd's Asia Pacific community idea - resulted in the upgrading of the East Asian Summit to include the US and Russia.
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