Mr. World: Kevin Rudd

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Photograph for TIME by David Dare Parker

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Australia's complexion, too, is changing — literally. Until the 1970s, an exclusionist White Australia Policy kept out most Asian immigrants. But today, around 8% of Australians are of Asian descent. (If nothing else, Rudd jokes, the changing immigration pattern has catalyzed a culinary revolution in a country where Irish stew was once considered haute cuisine. "At last," says the Prime Minister, "we have some decent food to eat.")

Pad Thai and stir-fried veggies aside, not everyone is pleased with the way Australia has changed. While the reflexive xenophobia of conservative politician Pauline Hanson, who warned in 1996 that Australia was "in danger of being swamped by Asians," has retreated from politics, Asia's presence and influence in Australia still provoke controversy. Some Asian, Middle Eastern and African Australians complain that they are somehow considered less truly Australian than those who came from, say, Italy, Greece or Croatia. An influx of foreign students into Australian universities — many of them Asian — has heightened tensions. In an ugly series of incidents in Victoria in recent months, Indian students have been attacked in so-called "curry bashings." (Indians are the second largest group of foreign students in Australia, after the Chinese.) The attacks caused a storm in India, and when Rudd called Indian Prime Minister Manmohan Singh to congratulate him on his recent re-election, Singh brought up the assaults. (See pictures of Australia's apology for its past aboriginal policies.)

Tensions have also been exacerbated by the economy's increasing dependence on Asian markets. The long economic boom came courtesy of Asian — read Chinese — demand for Australian commodities such as iron ore, coal and bauxite. In large measure, Australians understand the benefit of this regional trade. "The Australian people are enormously practical about the reality of China," says Rudd. "That hundreds of thousands of Australian jobs, directly or indirectly, depend on Chinese trade is something Australians get."

Nevertheless, the specter of a communist country of 1.3 billion people can spook even close economic partners. In the eyes of some Australians, it is one thing to sell what lies underground to China, but rather another to let Chinese companies own Australian resources themselves. Twice this year, Chinese state-owned enterprises have snapped up major Australian mining stakes. But the biggest deal didn't go through. The state-owned Aluminum Corp. of China, better known as Chinalco, was supposed to take a $19.5 billion stake in Australian-British Rio Tinto, which controls, among other mines, vast iron-ore deposits in Australia. The bid sparked a huge controversy in Australia, with the political opposition running TV ads skewering any proposed deal. In June Rio Tinto's shareholders backed out, arguing that the company's recovering stock price allowed them to consider other offers. In the end Australian-British mining giant BHP Billiton stepped into the breach. (Read "Another Deal Blown, Where Will China Invest Now?")

The scuppered deal enabled Rudd, whose administration would have had to rule on whether a Chinalco – Rio Tinto tie-up would hurt national security, to sidestep a political grenade. Rudd's political opponents have called him a "Manchurian Candidate" who has allowed China to gobble up Australia's national treasures. The charge is unfair; he's no apologist for the communist rulers in Beijing. (In Taipei, where Rudd studied Mandarin, his home was the wonderfully named Republic of China Anti-Communist Recover the Mainland International Youth Activity Center.) Rudd wrote his university thesis on the trial of leading democracy activist Wei Jingsheng, and in a speech in Mandarin to students at Peking University last year, he infuriated his Chinese government minders by highlighting human-rights abuses in Tibet.

Then there's his government's defense white paper, released in May. The 140-page document outlines Australia's military aims for the next two decades and specifically mentions China's ascendancy as a reason for an arms buildup. In all, $72 billion will be dedicated to bulking up the nation's armed forces, doubling the submarine fleet and adding up to 100 joint-strike fighter jets to its air force.

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