"Just because the Philippines or Vietnam are not as large as China doesn't mean that they can just be elbowed aside," said the US president. China's response? In effect, "yes we can". And that has become clear in the last few days. Aerial photography shows that China is using land reclamation to expand two islands in the Paracel Islands chain and to build or expand seven others in the Spratly group. Both island groups are in the South China Sea where China has drawn a so-called "nine dash line" that lolls like a great tongue dipping down and across the sea. Beijing's claims clash with those of the Philippines, Vietnam, Malaysia and Brunei. "The bottom line", says Alan Dupont, a professor of international security at NSW University, "is that China is terraforming its way to control of the South China Sea by creating artificial islands and then militarising them." Dupont says "it's pretty clear-cut" that Beijing is seeking to "control the South China Sea and the eastern approaches to the Malacca Straits, which is the key choke point for global shipping given that 50 per cent of global trade goes through there."

This is terribly awkward for governments around the world. Few will defend China's relentless expansionism, yet no one is prepared to stand in its way. Beijing's behaviour is in breach of an agreement it signed in 2002 with the ten-nation ASEAN group, the Association of South East Asian Nations. Under the pact, all governments forswore any destabilising action such as building new structures on the disputed islands. But the deal was non-binding. China has waged a years-long go-slow on negotiating a binding code of conduct for the region. Last week the Philippines asked its fellow ASEAN members to say something about it. China was "poised to consolidate de facto control of the South China Sea," the country's Foreign Affairs Secretary, Albert Del Rosario, told his counterparts. "ASEAN should assert its leadership, centrality and solidarity," he said. "ASEAN must show the world that it has the resolve to act in the common interest."

Instead ASEAN showed that it was weak, divided, and unwilling to confront China. It issued a communique expressing concern that land reclamation "may undermine peace, security and stability in the South China Sea" yet it failed to name China as the culprit. So ASEAN won't even talk about the problem openly, much less act. Three of the ASEAN countries were reportedly keen to take a tougher line with China – the Philippines, Vietnam and Indonesia – but were overruled by the majority. The Foreign Affairs Minister of the host country for the meeting, Malaysia's Anifah Aman said: "ASEAN's stand is that we want to engage with China." He added, "In short, we are not confrontational." That suits Beijing just fine. A few days later, a top Chinese military commander sought to reassure the US about its reef expansions. In a video hookup, China's chief of navy, Admiral Wu Shengli, told his US counterpart, Admiral Jonathan Greenert, that China's reclamation would not affect freedom of navigation or overflight. According to China's Defence Ministry, Admiral Wu told the American: "We welcome international organisations, the US and relevant countries to use these facilities, when conditions are ripe, to conduct co-operation on humanitarian rescue and disaster relief."

So China is now setting the terms of access to territories which are not, under international law, even Chinese. In sum, it seems China has gotten away with it. As Alan Dupont says, this is "part of China's strategy for becoming the pre-eminent nation in Asia, and perhaps eventually the pre-eminent nation in the world. This creates a very difficult problem for the Australian government to deal with." So far Australia has dealt with it the same way almost all countries have – by pretending that it's not really happening. The benefits of trade and investment with China are lucrative. Governments do not want to put trade relations at risk by confronting Beijing over its bad behaviour in taking territory from weaker states. In the US there is a growing realisation that American forbearance is failing. "Washington needs a new grand strategy toward China that centres on balancing the rise of Chinese power rather than continuing to assist its ascendancy," writes a distinguished American strategist, Bob Blackwill, in a new report for the establishment Council on Foreign Relations.