China rocks the boat as Australia and the US watch on

China has shown itself to be an ugly bully. Contrary to all its fine rhetoric of cooperation, it is happy to use coercion to take territory that is also claimed by its smaller neighbours.

It is waging a creeping invasion, and nobody is stopping it.

A new report says that the US needs to stop China's encroachments, and Australia needs to be prepared to help.

So far, Australia's alliance with the US has been a mere bystander to China's great grab.

The power of this new report, released in Sydney on Monday, is the idea that the alliance should move from the sidelines and into the hot zone as a bulwark against China's advances.

Instead of a "bilateral tie", the ANZUS alliance should become a "regional hub" for US allies and US partners in marshalling forces against Beijing, it says.

In fact, Australia should go so far as to arm China's smaller neighbours, according to the report, a joint project of the ANU and an American policy group, the Centre for Strategic and International Studies.

This would strengthen countries like the Philippines and Vietnam to better fend off a voracious China.

But these ideas raise big questions. Very big questions. Here are three of the biggest.

First, isn't this a dangerous escalation? Unquestionably. And that's the whole idea. One of the American co-authors of the report, titled the ANZUS Alliance in an Ascending Asia, Mike Green, says:

"We underestimated China's willingness to take risks" in asserting itself over its neighbours.

 "We need to clearly demonstrate that we are prepared to take more risks," says Green, a former top Asia official in the George W. Bush White House. If a tougher stance against China deters future aggression by Beijing, then "a little more risk now saves us collectively a lot more risk later – risk is unavoidable."

Green draws on a baseball move – a "brushback pitch" thrown close to a batter's head, not to hit him but to intimidate him – to explain the effect that the alliance should aim for with China.

The second question is whether it's really necessary to intimidate China?

Its doctrine does not call for war. It has so far used coercion but not armed might. Its bullying tactics fall short of opening fire. It pushes but doesn't shove.

But two Asian leaders, the Philippines' Benigno Aquino and Japan's Shinzo Abe, have compared the situation to Europe's appeasement of Nazi Germany in the prelude to the Second World War.

Unless China is forcibly stopped, where will it stop?

Beijing has built eight ocean reefs into islands of reclaimed land in the South China Sea. It is now busy fitting them out as military bases. It has brushed aside the protests of other claimants and the demands of the US president.

Such bases could allow China militarily to dominate the world's busiest shipping route, a commercial and energy lifeline for all the countries of the region, including Australia.

On Friday, the Indonesian government was reported to be considering building a new military base of its own near the South China Sea. Why? It's anticipating a day when China might try to enforce its claim to the Natuna Islands, also claimed by Indonesia.

It's not just in the South China Sea but the East China Sea too. Also on Friday, Japan's government expressed renewed concerns about the seaborne platform that China is building at the midpoint of their territories.

China has, for a decade, claimed that it wants peaceful negotiations to solve disputes. But there are no Chinese negotiations. This is clearly just a diplomatic parry while it conducts territorial thrusts.

The report's idea to turn ANZUS into an anti-China buffer is partly born out of frustration. The authors are frustrated with a relentless China, frustrated with a limp Obama response, and frustrated that no one else such as ASEAN is stepping up to the task.

But it's not enough to be frustrated with China. The third question about the proposal is how much confidence Australia has in the US. The alliance is already very deep. Is Australia  prepared to go yet deeper and join a US confrontation of China?

If the US had been a wise and steadfast world power in recent years, the question for Australia would be easier.

But it has not. The 2003 invasion of Iraq was one of modern history's greatest strategic blunders.

The US Middle East policy under Bush and Obama has been a debacle. Its fickleness as an ally has appalled many capitals. The stupidity of the US Congress has killed attempted reform of global financial management through the IMF and World Bank and opened the way for China to take leadership.

How can any country trust that US policy in Asia will be more judicious than US policy in the Middle East?

Countries in the Asia-Pacific are deeply worried about China's assertiveness, yet cannot have confidence in US steadfastness.

Turning ANZUS into an openly anti-China "regional hub" would expose Australia further to both risks - the risk of Chinese hostility on the one hand and the risk of the US blundering on the other. And Australia is not a baseball nation.

Yet China's bullying is so troubling and so relentless that ideas like this one will go on being canvassed.

And if Beijing doesn't like debates about how to restrain China's bad behaviour, it has the solution readily to hand. Stop misbehaving.

Peter Hartcher is the international editor Sydney Morning Herald