A major conflict between China and the United States is unlikely but there are several potential flash points for tension, according to Australia's latest defence strategy.
The territorial disputes in the East China and South China seas and respective airspaces could generate rising tensions, the Australian Defence White Paper released on Thursday concludes.
International rules dealing with space and cyberspace could also be contentious.
The paper predicts the relationship between the US and China will be a mixture of cooperation and competition depending on how interests intersect.
"While China will not match the global strategic weight of the United States, the growth of China's national power including its military modernisation means China's policies and actions will have a major impact on the stability of the Indo-Pacific to 2035," the paper says.
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It calls on China to provide reassurance to its neighbours by being more transparent about defence policies.
"China's miliary modernisation means it has greater capacity to share the responsibility of supporting regional and global security," the paper says.
On the South China Sea maritime dispute, Australia calls on claimants to halt land reclamation and construction activities.
"Australia is particularly concerned by the unprecedented pace and scale of China's land and reclamation activities," the paper says.
It's important China and South East Asian countries develop a code of conduct soon.
Meanwhile, the paper predicts Indonesia will become the biggest defence spender in South East Asia by 2035.
