Challenges with China extend beyond just trade. China's claims of a "peaceful rise" ring hollow after its militarising of the South China Sea, expansion of cyberwarfare, trampling of human rights, and threats to Taiwan. Its rhetoric of non-interference stands in stark contrast to its political donations across Asia, support for anti-democratic movements in Myanmar, and possessive language about the Chinese diaspora. Its claims of respecting global rules seem empty after its actions in Hong Kong, weaponising of trade, and disregard for international legal rulings in the South China Sea.

What's more amazing than this rapid escalation of tensions is that many in the Chinese government believe such actions will change policies in Australia - a spectacular misunderstanding of Australian society and politics. The numbers from the Lowy Institute speak for themselves. Back in 2011, almost 60 per cent of Australians trusted China to act responsibly in the world. A decade later, the attitude has reversed: more than three-quarters of Australians have little to no trust in China to act responsibly in the world.

Australian attitudes about the US-China divide have similarly flipped. In 2016, Australians viewed the United States and China as being equally important to Australia, with China rising and the United States falling in favour. Today, the trend has reversed sharply. Australians see the United States as being far more important, even after four years of a chaotic Trump presidency. The damage done to the Australia-China relationship is profound.

To be sure, the Chinese political system is far more complex than most commentators make out. Sweeping generalisations about the Chinese government's strategy are often so simplistic that they add no value. Nor is the problem one-sided. Australia has unnecessarily provoked China on countless occasions, sending confusing and mixed messages to Beijing. Australian politicians on both sides have shown a callous disregard for the relationship, preferring to score cheap political wins at home than foster sensible, long-term foreign policy.

The sad reality is that it will take a generation to repair the trust between China and the Australian people. And yet the current situation cannot go on. The notion that Australia could continue to have such a negative relationship with China into the future is unrealistic.

The importance of the commercial links between Australia and China are well known. In normal times, more than 8 per cent of Australia's economy came from merchandise exports to China alone. Some of those exports will find markets elsewhere. But the sheer scale of China means its withdrawal will cost Australian jobs, requiring the government to scale up spending, tax cuts and structural reforms to offset the loss and ease the adjustment.

And China's significance stretches far beyond commerce. Australia is home to more than 1.2 million people with Chinese ancestry. As the Australia-China relationship deteriorates, so does our social cohesion at home. We are already seeing how a toxic relationship with China is hurting Chinese Australians, with reports of rising anti-China sentiment and racial abuse.

China is also vital to the countries that are vital to us. China's investments in Asia - gas pipelines and deepwater ports in Myanmar, high-speed rail through Laos, to name just a few - strongly align with East Asia's desire for regional connectivity and infrastructure investment. A toxic relationship between Australia and China will make our other relationships in Asia considerably more difficult.

So what can Australia do to repair such a damaged relationship? First, the Australian government needs to accept that its attempts to manage the China relationship bilaterally - one-on-one - have failed. A multilateral solution is required. Australia's challenge in balancing a strategic relationship with the United States and an economic relationship with China is difficult, but not unique. The same challenge faces countless countries around Asia. Working with China alongside like-minded countries in multilateral forums - such as the G20, APEC and ASEAN+6 - is the best way to iron out problems in the Australia-China relationship.

Second, the Australian government should stop trying to deal with issues on a case-by-case basis. Instead, it should work with countries in the region to revise the global rules and institutions that govern interactions between countries. Reforming the World Trade Organization and updating the global trading rules (which are currently silent on many of the tensions, including subsidies, data flows, forced technology transfer and the digital economy) are the first priority. President Joe Biden is eager to build coalitions to manage China. Making sure those coalitions achieve productive outcomes will be critical.

Finally, the Australian government should identify practical issues that we can address alongside China, looking for solutions that are mutually beneficial to both countries, that bring in countries from around Asia, and that use multilateral bodies. Climate change and the reform of global institutions tick all boxes.

Climate change is a massive priority in China and around Asia. Even though successive Australian governments have struggled to develop coherent policies on the issue, there is plenty we can do outside the UN Framework Convention on Climate Change, such as reforming global financial rules that prevent more private sector financing of green projects.

Similarly, the World Trade Organization, the International Monetary Fund, the World Bank, the World Health Organization, the International Energy Agency and countless other institutions are in desperate need of governance reform. Reforming these institutions is a common priority across countries and is an opportunity to wrap China up in strong, up-to-date rules, reduce tensions and bring China further into a rules-based global system.

Australia is struggling to live with China, but it can't live without it. The damage to the relationship will take a long time to fix, but the longer the relationship deteriorates, the harder it will be to repair. It's time for the government to change its strategy.