Michael Sainsbury, China correspondent
From: The Australian
September 09, 2010 12:00AM

JULIA Gillard faces a raft of challenges with China, with Australia's biggest trade and export partner most concerned about her plans for the Asia-Pacific.

The Prime Minister, a foreign policy and trade neophyte, must solve the problems with China over Australia's foreign investment rules, try to finalise a free trade agreement, and appoint an ambassador to Beijing.

China has already signalled that Ms Gillard, or Tony Abbott, would be better for its relationship with Australia than Kevin Rudd, after there was palpable relief in the Beijing leadership and Chinese diplomatic circles following the removal of the micro-managing Mandarin speaker.

Mr Rudd's leadership was characterised by the worst period in Sino-Australian relations for a decade or longer as he lectured China on Tibet, named the country as a threat in a Defence white paper and gave a visa to exiled Uighur leader Rebiya Kadeer.

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Canberra was seen as complicit in the failure of Chinalco to gain a bigger stake in Rio Tinto, amid intense friction between the two nations over iron ore prices and the jailing of Australian Rio executive Stern Hu.

There had been some concern in Beijing about Ms Gillard's failure to call China's leaders when she came to power in June, despite getting in touch with Barack Obama. Ms Gillard's only trip to China was as a backbencher in 2001.

"Regardless of how the Australian federal election turns out on Saturday, one thing is very likely: the next government will likely be more friendly with China," the China Daily wrote last month.

China's biggest concern is whether Australia will join with what it sees as a more interventionist US in regional affairs.

"Australia has good relations with China and Asian countries, and as an alliance partner of the US, Australia could have more positive roles in relieving possible tensions in the region, as long as it stands neutral and does not take side with any party," said Shi Yinhong, director of the American Studies Centre of Renmin University of China. "But the wisest choice might be to stand alone.

"Issues in the region are complicated. Let the countries who are directly involved solve the issues on their own."

There has been widespread concern among diplomats and China-watchers that Australia has been let down by its politicians on the long-term implications of our increasingly intertwined relationship with the world's second-largest economy, with two-way trade expected to soar past $100 billion this year.

Ms Gillard faces the uphill task of getting a free trade deal signed with China. Tortuously slow progress on the pact has been made over the past five years, with the main stumbling block continuing to be agriculture.

The country's leaders still have deep concerns over Labor's proposed mineral resources rent tax, which is strongly opposed by the junior mining companies, in which Chinese companies are investing billions.

There are widespread concerns among Chinese investors over slow approval processes, particularly at state level.

Su Hao, director of the Centre for the Asia-Pacific Region at the China Foreign Affairs University, was quoted in the China Daily as saying Sino-Australian ties were now warming up and normalising. "Kevin Rudd's policy toward China was too harsh and not good for long-term development, but now both leading parties have realised the importance of the bilateral relationship and showed a willingness to improve it," Mr Su said yesterday.

The ambassadorship to China, one of Australia's top diplomatic posts, is up for grabs. Incumbent Geoff Raby is due to leave in February after four years in the post, and the job was recently advertised within the Department of Foreign Affairs and Trade.

Foreign Minister Stephen Smith's chief of staff, Frances Adamson, a former deputy high commissioner in London who did a stint in Taiwan, is seen as a strong chance for the job.

Veteran Asian diplomats and Chinese speakers Murray McLean, who is set to leave Tokyo, and South Korean ambassador Sam Gerovich could also be asked to fill the post.

Still, Dr Raby, who has widespread connections in China, could be left in the role for another year or two.

Education Minister Simon Crean was rumoured to be in line for the post when Mr Rudd was in power, but ruled out any such move on his last trip to Beijing.

"Never, ever," Mr Crean said.