Australia’s relationship with China is about to be rocked by revelations of a major Chinese-linked attempt to dominate Australia’s media and other cultural influences as part of a growing "soft power" campaign.

The revelation, based on the work of Australian security agencies,  comes at a time when domestic debate about Australia’s, and the Rudd Government’s, relationship with China has entered a new phase of suspicion, with suggestions of an improper relationship between Defence Minister Joel Fitzgibbon and Australian-Chinese businesswoman Helen Liu, and claims that the Prime Minister is too active in China’s interests.

Crikey understands that Australia’s domestic and foreign intelligence services are also concerned at the Prime Minister’s own links with the shadowy figure at the centre of the campaign.

According to a joint briefing prepared by both ASIO and ASIS, the campaign centres on an attempt by Chinese-linked interests to control a major segment of the Australian media market by owning newspapers in most capital cities, as well as a national masthead that purports to "shape the agenda". In a number of cities, the group monopolises newspaper opinion. The group has a longstanding record of attempting to influence political and business issues to serve its own interests.

The group also has a major stake in Australia’s subscription television sector through a monopoly provider that has driven competitors out of the market. This enables television channels from the Chinese international broadcaster CCTV to pump pro-Chinese propaganda into Australian homes 24 hours a day. The group also has a substantial operation in Parliament House in Canberra, through which it has extensive access to key decisionmakers.

"The group has apparently unlimited ambitions," said one veteran intelligence analyst, speaking to Crikey on the condition of anonymity.

"They’ve even got a huge stake in the National Rugby League competition. I’ve never seen such a concerted effort to control how people think. China has really looked long and hard at how America uses its soft power and is determined to do even better, using the media as its conduit."

The group is controlled by an American businessman with extensive Chinese links. He is married to a Chinese businesswoman hailing from Jiangsu province, which borders Shandong province, home of Helen Liu. Shandong is famous as a source of senior soldiers in China. The businessman is on the public record as hailing China’s "industrialization and modernization" as "one of the most profound social transformations in human history", has attacked media services that are not sufficiently pro-Chinese, and criticised dissident movements such as Tibetan independence supporters and Falun Gong.

The group is also understood to have links with Mandarin-speaking Prime Minister Rudd, who is currently campaigning for China to be allowed greater power in the IMF. Yesterday, the Government approved a Chinese foreign investment bid in Fortescue Metals and is currently considering a Chinese investment bid for Rio Tinto.

According to reports, the Prime Minister dined with the businessman in New York prior to his election and had an hour-long meeting, details of which Mr Rudd refused to provide to the press.

More seriously, Rudd is also a long-time friend with one of the group’s senior executives, and is understood that the Prime Minister is godfather to the executive’s son.

"The role of ‘godfather’ is a very sacred and honoured position in Chinese society," said the analyst.

"It demonstrates both the high regard in which Rudd is held, and how close he is with them. It’s deeply disturbing."