As US navy ships, spy planes and satellites monitor Chinese activity in the South China Sea, officials in Washington are keeping a close eye on a big submarine deal that could bring the US closer to its Pacific allies Australia and Japan.

In Tokyo’s first large-scale attempt to export weapons in 70 years, Japanese, German and French companies are bidding for an A$50bn contract to replace Australia’s current fleet of submarines. The deal, one of the world’s biggest defence contracts of recent times, has strategic implications in a period when the US and its allies face an increasingly assertive Chinese navy in the waters of the Asia-Pacific region.

“As Australia is one of our closest allies, and given that they are positioned at the heart of one of the most important areas in the world, it goes without saying that the fact that Australia is investing in increased security capability, particularly in submarines, is significant,” says Vice Admiral Chris Aquilino, deputy chief of US naval operations for operations, plans and strategy. “This investment should significantly improve Australia’s — and by extension — our collective security efforts in a region of vital importance.”