I suspect it is more commercial than security. The Aussies after a long and controversial exercise chose the French for new class of conventional subs but they have been having issues with the agreement on the amount of local content. No work has started and China seems to be the excuse to get out of the agreement without facing a massive local backlash. The China threat is real but in this case China has become the convenient bogeyman.
I think the issues with the agreement cannot be overstated. The Aussies had nothing on paper to show for nearly 5 years worth of work, often butting heads with the French contractors who when asked to view progress would be met with cries of "national security risks" by the French. The Aussies have their own national security concerns and im not at all surprised by this. Not knowing the details of the agreement, there seems to be some discrepancies between what was expected of both countries from the French and Aussie sides.
On the China threat. Im not sure what you mean with regards to them being the convenient bogeyman. Are you talking in respect to the Aussies ripping up the deal with the French? I'll assume that.
You have to remember, Designing and building a fleet of Submarines, catering for its infrastructure, skills, manpower, materials, operational efficiency etc etc doesn't happen overnight. I'll use the US Virginia Class submarines as an example as they are part of a navy with the highest budget and naval warship manufacturing capabilities in the world...
First designs started as far back as 1991. The first Virginia class was commissioned in 2004. The next in 2006. Only around now is production at its fastest and most efficient where they are churning our around 2 a year and the last Sub is going to roll off in 2043ish. Of course, we are talking large scales here, but the complexity will likely be even higher for Australia as they have never built or commissioned a Nuclear powered submarine before and is a huge undertaking, even with experts working on their side.
With that in mind, a submarine fleet is not really a reactionary fleet you can just build but more of a planned capability some decades into the future. The "just in case" type of capability. You'd rather have it, than wish you'd had it...
The regional partners are happy to see this deal in motion is because there is nothing the Japanese, Taiwanese etc want more, than to have another capable player in the region on their side in the event of war, with the French deal, nothing was moving forward and the current fleet of Australian Collins Class Submarines are limited in capability, range than kind of thing and a new class of stealthy nuclear submarines is a welcome partner in the region.
