Malcolm Turnbull has called for restraint by all countries involved in South China Sea tensions, as Beijing becomes increasingly strident and the US stations more warplanes in the Philippines in readiness for a potential military conflict.
An international tribunal will rule within weeks on China's use of artificial islands to claim territory and station military assets. There are growing concerns that Beijing could reject a negative ruling, pushing the dispute between the Philippines and China towards a conflict involving the US.
The dangerous situation has overshadowed Mr Turnbull's first prime ministerial visit to China, in which he has asserted that China is at its strongest when it is open rather than closed - a reference to increasing restrictions on the internet, which hamper e-commerce and freedom of expression.
But with the crisis in South China Sea set to worsen, state-owned media has published thinly veiled threats of economic consequences for Australia if Canberra continues to side with the US and its allies.
In an attempt at intimidation timed for Mr Turnbull's arrival, the China Daily warned Australia of financial consequences if it offered resistance to Beijing's territorial ambitions in the region.
Han Feng, the deputy head of the National Institute of International Strategy, at the Chinese Academy of Social Sciences, said the territorial dispute was not Australia's concern and Canberra's response would be "a test of Australian leaders' political wisdom".
Another academic, from the Institute of World Economics and Politics, said the disagreement would "cast a shadow on the promising [Australia-China] co-operation if such a tendency keeps developing".
Mr Turnbull declined to comment directly on the US deployment in the Philippines while brushing off reports of Australia's economic interests being harmed unless it softened its position on the South China Sea.
He believes Australia's consistency in insisting on peaceful dispute resolution, while offering an opinion on the merits of any country's territorial claim, leaves Beijing no scope for legitimate complaint, despite any publicly expressed friction.
Speaking in Beijing on Friday, after talks with Premier Li Keqiang, Mr Turnbull again reasserted Australia's belief in the effectiveness of international norms to manage and resolve conflicts.
The US will start stationing warplanes in the Philippines this week and conduct joint patrols, in the latest sign of Washington and its allies mounting a co-ordinated response to counter Beijing's territorial assertiveness.
It prompted a strenuous objection from China's Defence Ministry late on Thursday, which said the move "promotes the militarisation of the region" and reflected "the embodiment of Cold War thinking and [is] not conducive to peace and stability in the South China Sea".
The Prime Minister said that in his two-hour meeting with Mr Li he had reiterated that the remarkable economic gains enjoyed by the region had been based on a foundation of peace and stability, and anything that had the potential of disturbing that peace and stability would work against the interests of all nations.
In a nod to an imminent decision from arbitration before the international courts in The Hague, Mr Turnbull reiterated that the South China Sea territorial disputes should be settled in agreement with international law.
"My engagement with Chinese leaders, which has been quite extensive since I've become Prime Minister, reassures me that China understands our position; they understand our commitment to a peaceful and stable region," he told reporters in Beijing. "And that is why we continue to urge all claimants to settle any territorial disputes … peacefully and in accordance with international law."
Meanwhile, Opposition Leader Bill Shorten has seized on steel giant Arrium's move into voluntary administration to urge the Prime Minister to "speak up" for Australian steel while in China.
Mr Turnbull said he had raised the importance of ensuring that the issue of steel overcapacity was addressed.
The Prime Minister confirmed that he and Mr Li had spoken at length about the major economic challenges China faced in restructuring its steel and coal sectors, including the reduction of China's steel production by about 150 million tonnes a year.
"And you can imagine the complications and the problems that gives rise to in terms of hundreds of thousands of workers involved in that industry," Mr Turnbull said.
In their meeting on Thursday, Mr Li urged Australia to "synchronise" its economic development strategies with China, particularly in areas of technological co-operation and joint research on food, agriculture, mining and maritime science.
"Enhanced China-Australia co-operation will send a positive signal to the region and the world, especially at a time when the global economy is sluggish with increasing uncertainties," Mr Li said on Thursday, according to official Chinese state media reports of the meeting.
Speaking from the Beijing Ancient Observatory – built in 1442 to measure the co-ordinates and motion of stars and other celestial bodies – Mr Turnbull, alongside Nobel prize winner Brian Schmidt, announced six new joint research centres, including a collaboration between CSIRO and the Chinese Academy of Sciences to pursue the commercialisation of clean energy and biotechnology research.
The Australian government will also appoint a new intellectual property counsellor to be based in Beijing to support and advise Australian companies in China.
Before his scheduled meeting and banquet dinner with President Xin Jinping, Mr Turnbull helmed an investor roundtable with Vice-Premier Wang Yang, attended by chief executives of some of China's most influential corporations and state-owned enterprises, including China Development Bank, Bank of China, State Grid and Baosteel.
Also present was Ye Cheng, billionaire founder of Landbridge, whose lease of the Port of Darwin sparked protests that ran all the way up to President Barack Obama.
The story Malcolm Turnbull treads middle path as South China Sea tensions rise first appeared on The Sydney Morning Herald.