The sorry tale of Stern Hu and his three Rio Tinto colleagues, all detained in China, has forever altered the relationship that could have been between Australia and China. Despite the ideological differences, Australia was one of the first developed nations to embrace the sleeping giant to our north.

It was Gough Whitlam who led an Australian Labor Party delegation to China in 1971, a year before becoming prime minister, and then argued for China's acceptance into the international community. Under John Howard, trade links between the two countries went into overdrive, and our current leader, Kevin Rudd, must be about the only Western leader fluent in Mandarin.

The past decade, however, has seen a power shift from West to East, as America squandered its dominant position in the world economy, to be replaced by a resurgent China that has grown rich on cheap exports to the West.

It was China that kept global inflation low, as manufacturing migrated en masse from the US and Europe to take advantage of lower costs. And all the while, Australia provided the raw materials to build the factories, the goods they produced and the cities that sprang up around them.

Perhaps we were all lulled into a sense of euphoria and ignored reality. For while China fervently embraced capitalism, it was still run by a cabal of ageing Cold War idealogues who repeatedly demonstrated a determination to maintain power at all cost.

There are always inflection points - key events - that change the course of history. The global financial crisis was just that. China was called on to use its financial muscle - initially to bail out Wall Street - and then later to provide enough economic stimulus to wrest the world from the grip of recession.

Having been thrust into the role of rescuer, Beijing rightly assumed that it should be given greater liberty when it came to conducting business with the West. Its old policy of treading lightly and not making too much noise was replaced with a more assertive manner.

And then along came Rio Tinto. It would be too kind to describe the actions of its chief executive, Tom Albanese, and the board under the chairman, Paul Skinner, as naive. There is no doubt they were desperate.

Overloaded with debt, hemorrhaging cash from its ill-fated aluminium expansion, its share price in free fall after BHP had withdrawn its merger proposal and with their own reputations at stake, they looked around for a saviour.

And there stood Chinalco, the Chinese Government-owned entity hand-picked by Beijing to be the vehicle for its biggest ever foreign investment. What a deal. Struck at an economic nadir, it would deliver China a share of one of the world's best iron-ore deposits, and a host of other valuable commodities.

Albanese and the Rio Tinto board know China. They have conducted business there for years. They have seen the ruthless determination with which Beijing conducts its political affairs internally and its business affairs in Third World countries.

They denied the existence of a ''China Inc'', arguing that all those state-owned corporations competed, that there was no overriding central plan and that Rio Tinto would not be at the mercy of a resource-hungry Beijing.

They even produced a 600-page document detailing just how Rio Tinto would avoid any possible conflicts of interest. Unfortunately, no one could see the humour when it was pointed out that, if you needed a document that size, then you had one almighty conflict.

The deal Rio struck with Chinalco was bad for two reasons. It favoured one shareholder over all others. And it was struck far too cheaply with a company wholly owned by a government that owned all the major steel mills - Rio's very own customers.

Critics of the proposed $23 billion Chinalco investment in Rio Tinto variously were described as xenophobic and racist.

Despite all the assurances, this was to be more than just a passive equity stake. Rio sweetened the offer, giving Chinalco part ownership of its rich Hamersley iron operations, a share in the iron ore marketing company and much more.

To promise so much, and then walk away would leave a bitter taste in anyone's mouth, so retribution in some form was expected. But the hamfisted reaction from Beijing has sent shockwaves through Canberra and boardrooms around the globe.

A portent of things to come was evident even before the deal collapsed.

When a Herald reporter, Jamie Freed, asked several months ago why she was being filmed at a Chinalco press conference in Sydney by a stocky Chinalco employee in an ill-fitting suit, she was accused of being a ''conspiracy theorist''.

''They were recording it for posterity,'' Chinalco's local public relations firm proffered.

No one, however, could have foreseen the events of the past few weeks and no amount of diplomacy could have prevented it.

The ludicrous nature of the charges against Hu and his colleagues was highlighted this week when Beijing released details of the arrest warrants, with accusations that completely contradicted earlier messages being funnelled through its propaganda channels.

Hu now stands accused of ''improperly obtaining secrets'' about China's steel industry and receiving bribes from industry executives.

How does that work? How do you obtain the secrets and the bribes?

The conventional method is to hand over the cash in exchange for the information. Clearly, we have entered a brave new world.