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Australia and China: Embracing while sparring
About the author
Graham Fletcher
Graham Fletcher is a Nonresident Fellow at the Lowy Institute and a former Australian Ambassador to China.
Australia’s China ties are consequential: there is a lot to gain if things go well; a lot to lose if they do not. Such fluctuations have often required careful management, but have rarely proved unworkable. From 2017, after an accumulation of disagreements, however, a serious breakdown occurred that exposed the risks inherent in deeper links with Beijing. Australia’s change of government in 2022 provided an opportunity to escape the negative spiral, which both sides were willing to do. Most bilateral activities resumed, but it was a modest new normal, not a reset. This appears good enough for Canberra, which is quietly confident in its resilience yet wary about Beijing’s overtures to go further and into new areas of activity.Canberra continues to focus on defensive measures, reducing risk and potential vulnerability. Domestic critics claim the government’s positioning is too weak and its public criticism of Beijing’s actions too rare. But if differences can be managed pragmatically, mutual self-interest is sufficiently strong to anchor a long-term partnership. Yet conflicting strategic interests and values will prevent genuine closeness. As a result,the relationship remains liable to disruption, poised in an international context that could pull or push in unexpected directions. Stability will remain a goal, not a given.
Australia’s relationship with China combines reward with risk. China is both a major economic partner and a source of disruption. For Canberra, the relationship has also become controversial domestically. Internationally, it is watched by those facing similar challenges with Beijing.
When things are going well from its perspective, Beijing has pointed to Canberra as an exemplar for other US partners. Yet for China, Australia is both an asset and an irritant — a source of key imports and a potential weak link in AUKUS and the Quad, but also a capable US ally with access to desirable technology and something of a nuisance in terms of its diplomatic activism.
Australia–China ties prior to 2017 were never trouble-free, but in retrospect they experienced steady progress: regular political engagement and leader visits; growing trade (China has been Australia’s top trading partner since 2007, with a surplus favouring Australia); and extensive community links, with China a big source of migrants, students, and tourists. Australia’s 2021 census reported that 5.5 per cent of respondents identified as having Chinese ancestry. In 2013, the relationship was designated a “strategic partnership”, and then in 2014 a “comprehensive strategic partnership”. In the same year, Xi Jinping, China’s paramount leader, addressed the Australian Parliament. In 2015, a bilateral Free Trade Agreement entered into force; over the ensuing decade, two-way trade grew by 125 per cent.
Even so, constant vigilance was needed: there were chronic disagreements over Taiwan, human rights, trade restrictions, regional defence policies, and consular cases. There were diplomatic slumps in 1989–90, 1996–97, and 2009.
From the early 2000s onwards, a steady broadening of contact was accompanied by increasingly serious frictions. Beijing was pursuing its objectives more forcefully, including domestically (e.g. large-scale detention of Uyghurs and others in Xinjiang) and with “wolf warrior” diplomacy. China introduced the concept of “core interests” on which it could not budge. Its uncompromising ambition was seen in the construction of military bases in the South China Sea from late 2013, and in the repudiation of the Permanent Court of Arbitration’s ruling against China in July 2016, rendering moot any hopes for a negotiated settlement with other claimants. Beijing was determined to control these waters come what may. Its state-owned companies began to invest in key resources supply chains, then infrastructure, including in Australia. At one point, Australia was briefly the top recipient of Chinese foreign direct investment. In Canberra, Beijing’s persistent covert influence activities and cyber penetrations heightened concerns about its objectives. The Australian government responded with stronger legislative and regulatory frameworks covering espionage, political donations, foreign investment, and critical infrastructure.
Canberra policy debate was vigorous, especially regarding how policy measures should be presented and implemented. The hawks wanted to name, shame, and impose costs on China to deter bad behaviour. The doves advocated “balance” and “nuance”, with decisions finessed to reduce the risk of collateral damage. Similar divisions were evident in the community: commentators were mostly hawkish; business, state governments, and universities were not. Among politicians, accusations of “soft on China” began to be heard.
Australian officials became accustomed to frequent demarches from their Chinese counterparts, including warnings that bilateral ties would suffer unless Canberra changed course. China’s sensitivities were factored into policy deliberations, but final decisions were based on broader national interest grounds.
From 2017, the Australia–China relationship began to cool. Four instances are representative. In February that year, ahead of Premier Li Keqiang’s visit to Canberra, Australia rejected China’s push to conclude a bilateral memorandum of understanding on Beijing’s Belt and Road Initiative. In March, parliamentary opposition prompted the government to drop ratification of a bilateral extradition treaty. In November, Australia’s formal reiteration of its position on the South China Sea in the 2017 Foreign Policy White Paper sparked grave concern from China’s Foreign Ministry spokesperson and a spate of negative media coverage. On 7 December, Prime Minister Malcolm Turnbull identified China as one of the triggers for new legislation countering foreign interference. The following day, China’s Foreign Ministry spokesperson expressed “shock” and “strong dissatisfaction”, and warned of possible damage to bilateral ties.
From then on, normal bilateral contact began to deteriorate, and in Beijing, diplomatic access began to dry up. From July 2017, actions such as China’s suspension of sixAustralian meat establishments — ostensibly for labelling errors — began to accumulate. In August 2018, Australia made the decision to prevent Chinese firms from supplying its 5G telecommunications network. The final tipping point came in April 2020, with Canberra’s call for international inspectors to investigate the origins of the Covid-19 pandemic. China decided to teach Australia a lesson. It ceased political-level contact, restricted trade (stopping imports of coal, bottled wine, barley, timber logs, live rock lobster, copper ores, cotton, and some hay and meat), and issued travel warnings about Australia. Everyone in China’s system recognised that Australia was out of favour, causing ripple effects across multiple sectors.
China had previously pressured other countries in similar ways, including Japan, the United Kingdom, Norway, and South Korea, but this dispute was larger in the range of disagreements and scale of responses. It was also more overt, with Chinese officials making little attempt to conceal the political origin of trade bans.
As the destination for about one-third of Australia’s exports, China appeared to possess strong leverage. But there is more to an economy than trade, and economic interdependence cuts both ways. Commodities are fungible, and China’s measures spared its key Australian imports. So, while Beijing’s measures caused pain to certain sectors, particularly wine, timber, and lobster, the bans ended up having negligible macro-economic impact and failed to impose meaningful political pressure on Canberra’s decision-making. Rather, China’s measures strengthened Australian resolve and hardened public opinion against Beijing.
Australia’s change of government in May 2022 provided a potential circuit breaker. Canberra and Beijing were each stuck in a rut; there was now an opportunity to reduce public antagonism and find a more productive pathway. Both sides proved willing to do so.
The Australian public was open to an improvement. While it had backed the previous government’s stance on the various disagreements, it did not favour a permanent souring of relations with China. Attempts during the election campaign to politicise the relationship — including suggestions the Australian Labor Party was inherently pro-China and unreliable on national security — had not landed well.
China, too, was open to moving on. Its pressure campaign had not delivered the expected results. This very public spat could become embarrassing if it continued for another three years, with negative attitudes in Australia solidifying further.
Beijing had appointed a new ambassador to Australia in January 2022 — Xiao Qian — who indicated his desire to make progress during his posting. He issued a forward-looking statement declaring his aim to “jointly push the China–Australia relations back to the right track”.
The first tentative exchanges post-election signalled a slight change of tone by both sides. This led to meetings between defence ministers in June (Singapore), followed by foreign ministers in July (Bali) and September (New York), and a further phone call between foreign ministers on 8 November. Then, on 15 November, Prime Minister Anthony Albanese met President Xi Jinping in the margins of the G20 summit in Indonesia.
This was a significant moment, restoring direct leader-level contact. Positive front-page media coverage throughout China demonstrated that ties with Australia were on the mend.
The broader context may have helped. President Xi had just triumphed at the 20th National Congress of the Communist Party of China in October, where he had replenished the Party’s senior echelons on his own terms and secured an unprecedented third five-year term as China’s top leader.
And in the United States, the Democrats had performed unexpectedly well at the 8 November midterms, strengthening the authority of the Biden administration, which had just announced moves to restrict China’s access to advanced semiconductors. Beijing needed to focus on its main challenge of intensifying rivalry with Washington. Now was the time to settle peripheral distractions and perhaps peel off some US partners. Beijing was looking for friends; Australia was a potential candidate.
Be that as it may, the tentative Australia–China rapprochement continued. On 20 December, Foreign Minister Penny Wong arrived in Beijing for a visit that coincided with the 50th anniversary of diplomatic relations. Her meeting with Foreign Minister Wang Yi resulted in a one-page outcomes statement listing broad areas for dialogue: bilateral relations, trade and economic issues, consular affairs, climate change, defence, and regional and international issues.
Stabilisation was underway.
The government-to-government relationship between Canberra and Beijing is again functioning. Annual meetings between leaders have resumed, as have other ministerial talks including the Foreign and Strategic Dialogue (between foreign ministers) and the Strategic Economic Dialogue (between the chair of China’s National Development and Reform Commission and Australia’s Treasurer). The various measures targeting Australia’s exports were resolved progressively, with the last — lobsters — being lifted in December 2024.
It is no doubt intentional that Canberra still refers to stabilisation as an ongoing process rather than a recovery phase that is complete. Similarly in 2022–23, Canberra avoided speaking of a reset or returning to business as usual. The parameters of this relationship have altered.
Canberra now pitches its ambition at a more moderate level, recognising the underlying contradictions between the two countries. During her visit in December 2022, Foreign Minister Wong summarised the approach: “we can grow our bilateral relationship and uphold our national interests, if both countries navigate our differences wisely”. This echoed a similar formulation by Prime Minister Albanese that Australia would “cooperate where we can, disagree where we must and engage in our national interest”. In other words, Australia is prepared to move forward where interests align, hold firm on sovereignty and national security, and avoid outright hostility — keeping the relationship functioning.
Australia remains troubled by China’s strategic ambitions and its activities impinging on the Chinese–Australian community, but is realistic about its ability to shift Beijing’s behaviour. In a major speech in April 2023, Foreign Minister Wong acknowledged that “China is going to keep being China”. Beijing’s strategic goals and conduct are unlikely to alter any time soon. As a result, Australia has continued to work on its domestic safeguards and resilience, while strengthening external partnerships to contribute to regional balancing.
The economic relationship continues to be substantial. China remains Australia’s top trading partner by a large margin, as well as its largest market for international education and tourism (second in visitor numbers but first in dollars spent). Yet the growth of the past two decades is unlikely to be sustained, due to shifting economic patterns and limits on capacity at both ends. China’s steel production and coal consumption have probably peaked. And student numbers are likely to soften, due to policy adjustments by Canberra as well as trends within China that make international study less appealing.
In terms of bilateral architecture, it has not been a default return to business as usual. Some things remain dormant: the High-Level Security Dialogue (between security agencies, held once in April 2017); the China–Australia State/Provincial Leaders’ Forum (last held in March 2017); and an officials-level Human Rights Dialogue (last held in 2014). Canberra is being selective; these three are likely viewed as of limited value currently, and liable to invite domestic criticism.
China, nonetheless, has greater ambition, signalling its willingness to move beyond mere stabilisation. In the lead-up to Australia’s 2025 election, Ambassador Xiao called on Australia to build with China “an open, inclusive, equitable, secure and non-discriminatory AI development environment”. Similarly, in April 2025, during the initial shock following the Trump administration’s announcement of tariffs on “Liberation Day”, Xiao suggested Australia should cooperate with China to counter the disruption of US trade measures. These offers gained no traction. In March 2026, Xiao again flagged China’s willingness to go further, to “better align development strategies with Australia, support Australia’s productivity growth with high-quality development, enhance cooperation in high-speed rail infrastructure, new energy vehicles, and other emerging sectors, and actively foster collaboration in industries of the future, such as artificial intelligence, quantum technology, and life sciences.” Beijing has not given up on hopes of drawing Australia closer into its orbit.
Canberra is more focused on consolidating current pillars in the relationship, including orienting them to cope with a future decarbonised world. One such example is the steel decarbonisation dialogue involving business and government, launched during Prime Minister Albanese’s July 2025 China visit, with a memorandum of understanding signed in December.
With the exception of fuel supply chains, now topical given the US–Iran conflict, the scope for initiatives in new areas appears limited.
From Canberra’s perspective, when it comes to bilateral architecture, political engagement, and economic substance, the new status quo is probably good enough. The relationship is delivering what Canberra wants. Going further, in terms of depth or breadth, entails a degree of risk that is not worthwhile.
The downturn demonstrated the unpredictability of China. Politics ranks first, so everything, ultimately, can be political. Economic and other links remain susceptible to disruption; any leverage China believes it possesses is liable to be exploited at times of political need. Therefore, it is prudent not to allow such leverage to accumulate. Accordingly, Canberra has encouraged the private sector to pursue diversification among trading partners. It also watches potential vulnerabilities in critical infrastructure, supply chains, and emerging technologies. This caution will likely affect Canberra’s readiness to accept further Chinese involvement in energy (including renewables), other key infrastructure, and critical minerals.
Another consideration is domestic opinion. It is risky for Australian politicians to be seen as pro-China. The public has not forgotten China’s pressure campaign and periodically is reminded of Beijing’s assertiveness: unsafe encounters between the People’s Liberation Army and the Australian Defence Force; cyber penetrations; and China’s more hardline stances on Taiwan, the South China Sea, and Hong Kong democracy activists. Moreover, while Australians are generally favourably disposed towards China, they have serious reservations about its internal system, including how this impacts human rights and consular cases. This most recent downturn, including some high-profile detentions, reinforced these reservations. As a result, while there are domestic pitfalls for politicians who question the loyalty of voters with Chinese heritage, equally there are few votes to gain from being regarded as close to China.
International perceptions are also relevant. Australia’s economic interdependence with China has led to concerns, particularly in the United States, that Australia might prove unreliable if ever put to the test. Canberra would not agree. But its awareness of such views adds a cautionary element to policy considerations.
The stabilisation policy has its critics. Commentators variously call it “a work of fiction” and “deluded nonsense”, “a self-imposed trap”, and “a restoration of relations secured largely on terms and conditions favourable to Beijing”. Canberra’s approach has been labelled “weak”, “appeasing”, and a “kowtow”. A common criticism is that the government ought to push back more strongly and be blunt with the public about the dangers China poses. Others point to the contradiction between a supposedly stable bilateral relationship and China’s continued destabilising behaviour, including intimidatory military moves. Some object to more trade with China, because this increases vulnerability to future coercion.
This brings us to the nub of the problem: how best should Australia respond to the various challenges posed by China, both to the nation and to the wider strategic landscape? What approach enables the government to prosecute the full range of national interests, not just some? Critics tend to represent one sector or another, but Federal Cabinet has to weigh up all of them, and also consider feasibility, impact, and consequences.
Australia has robust discussions with China about its concerns. To convey these more sharply becomes counter-productive: public hostility shuts down contact, makes progress on the particular concern less likely, and prevents the pursuit of other objectives. As for China’s disruptive regional role, stabilising bilateral ties was never premised on China changing its spots. The government deals with the reality of China as it is, conscious that more vigorous strategic pushback would hardly resolve the problem, while hampering other objectives. Rather, stabilisation is a pragmatic tool to enable resumption of normal contacts and trade, and cooperation where possible, while maintaining protections against risk. (It is worth recalling the current government has kept and strengthened the tougher settings of its predecessor.) As for trade with China, no one is under any illusions this is immune to future disruption. By the same token, recent experience shows that renewed economic coercion is unlikely to succeed.
A functioning bilateral relationship is not an end in itself, yet it is a necessary mechanism for prosecuting the national interest. Australia will manage well enough if its North Korea relationship is moribund; it is not sensible for this to be the norm with China.
The circuit-breaker of 2022 was successful because both sides were able to pause, save face, and move forward. Canberra pocketed its gains without crowing: any attempt to claim victory would have been unwise. Australia emerged, nevertheless, with greater confidence in the resilience of its economy, institutions, and community.
Australia and China are brought together by pragmatic self-interest. This is a sufficient basis for a successful partnership, notwithstanding significant differences in outlook. But this relationship is unlikely ever to become genuinely close — like the relaxed, intimate fellowship Australia enjoys with like-minded partners elsewhere in its region and beyond. The gulf in terms of diverging worldviews and national security agendas is simply too wide. It would be pointless for Canberra to pursue such a goal; it recognises this and is realistic.
Beijing often does not read Australia well. Chinese officials frequently assume Canberra is acting at Washington’s behest — against its own will — when it takes decisions that Beijing regards as contrary to Australia’s “real interests” (it considers economic self-interest comes first), underestimating the weight of political and strategic considerations and of public sentiment.
Beijing also often does not recognise how its actions are perceived. With both the 2009 and 2017–22 downturns, Foreign Ministry officials did not agree that Canberra’s decisions were in response to Chinese actions. They claimed Canberra had made unilateral moves without justification.
The mismatch of worldviews and strategic agendas makes the relationship vulnerable to future disruption. China is more confident and demanding; Australia too is more confident and determined. The key risks are (1) another accumulation of serious disagreements that cannot be successfully managed or (2) some cataclysm — an upheaval within China, or Beijing’s use of force against Taiwan, or some other conflict.
In terms of the first risk, Beijing is increasingly prickly, for example, about EU and US security-driven restrictions on its technology and investment and is developing mechanisms to push back that could be applied globally. Canberra’s decision to return the Port of Darwin to Australian ownership faces dogged resistance and may well be conflated with US moves to exclude Chinese interests from the Panama Canal ports. Unrest or a political crisis in the Pacific Islands could sharpen the ongoing contest for influence there, with Canberra and Beijing pursuing different outcomes, and uniformed personnel on the ground. Canberra’s steps to avoid deepening China’s rare earths supply chain monopoly could grow more contentious, as could Taiwan, with Beijing seeking to impose tighter constraints on Australia’s unofficial dealings despite Canberra’s consistent “one China policy”.
In terms of the second risk, an upheaval or conflict is always a possibility, though not, in my opinion, a strong one at present.
There are other wildcards. One is a fracturing of bipartisan consensus on China policy. This featured during the 2022 Australian election campaign. It would be unfortunate if this consensus crumbled. In facing China, any Australian government is on firmer ground when it has bipartisan support on the essentials and when politicians do not seek to exploit difficulties for domestic advantage. Bipartisanship produces policy consistency and limits China’s ability to play games within the Australian system.
Another is if US–China rivalry worsened to the point that Australia became caught between unacceptable demands — from Beijing and/or Washington — including on critical minerals, technology, or infrastructure.
A final consideration is where Australia now sits on China’s diplomatic chessboard. Four years ago, when China was gearing up for an intensified contest with the United States, it may have been looking for friends. But Beijing is now more confident in its positioning vis-à-vis Washington. In addition, as governments in the United Kingdom, Canada, and India warm to China, Australia may be less of a priority. Even so, Australia possesses distinctive attributes — a supplier of key commodities and a welcoming, law-based, safe, successful, and multicultural polity, in a similar time zone — which remain attractive.
On balance, while several wildcards could disrupt the new status quo, it is also feasible that a partnership grounded in realism and focused pragmatically on mutual interest could still prove durable with sufficient foresight and astute handling, notwithstanding inevitable tensions.
China remains a key partner for Australia. The relationship warrants the effort it receives. Now emerging from a significant rough patch, the character of the relationship has altered. Expectations are more realistic; parameters are less ambitious and probably more sustainable. Another downturn is not imminent. In Canberra, there is now more vigilance regarding risk, as well as confidence in its ability to withstand pressure. Both sides have learned some lessons and recognise better where the bottom lines lie — future tensions should be navigated better. Even so, the relationship remains poised in an international context that could pull or push in unexpected directions. Stability will remain a goal, not a given.
