Former prime minister Paul Keating has condemned the Australian government, media and security and intelligence establishment for their anti-China rhetoric and for failing to properly understand and respond to the "rise, legitimacy and importance" of China.

"Big states are rude and nasty but that does not mean we can afford not to deal with them," he told an audience at a strategic forum in Sydney on Monday.

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"China will be, and is, the predominant economic power in Asia … that proposition will not be usurped by a non-Asian power either economic or military [sic].

"The question for us is how does Australia respond to this. [Do we] help define and construct a set of arrangements which engages China but which prevents China from dominating the region? Or do we seek to insulate or remove ourselves from this enormous shift in world economic power by allowing our singular focus on the United States and our alliance with it to mark out our international personality?