[principles] which should prevail here

So, John Howard is to meet the Dalai Lama in Sydney. A report says:

Australia is one of the best placed countries in the world to benefit from China's economic development. Beijing has condemned the meeting, saying the Dalai Lama is a political exile engaged in what it calls splittist activities over Tibet. But Canberra says Australia is one of the world's great liberal democracies.

The issue here is that a country is dealing, at diplomatic level, with a known opponent of a regime that that country is trading with. The other side is that China unilaterally annexed a sovereign nation and the leader of that nation is now visiting another nation, to meet with its leader.

What are the rights and wrongs of this?