China's remarkable economic development has had profound domestic and international effects. Among the most important of these is China's growing impact on the region of which it is an increasingly important and influential part. For countries such as Australia, which has rapidly become deeply economically integrated with – even dependent on – China, this presents a major and much-discussed challenge as it tries to balance economic and strategic priorities. Australia provides an important and revealing illustration of how China's elites view key states in its region, which have assumed a growing economic and even strategic importance. This paper aims to develop a more comprehensive overview of the way the strategic, economic and political dimensions of the Sino–Australia relationship are understood in both countries. It also highlights the importance of realist thinking in both Australia and China.