FAST FOCUS | The 2026 outlook for Australia-PRC relations

Fast Focus by the Australia-China Relations Institute at the University of Technology Sydney (UTS:ACRI) provides concise, informed commentary by UTS:ACRI experts on key developments in Australia-China relations.

Bilateral relations

Elena Collinson, UTS:ACRI Manager, Research Analysis

Looking into 2026, relations between Australia and the People’s Republic of China (PRC) show limited scope for improvement, while downside risks remain asymmetric and the margin for miscalculation continues to narrow. 

Economic engagement with the PRC remains durable, but further engagement is constrained by PRC actions that elevate regional crisis instability, alongside Australia’s long-term alignment trajectory and associated structural settings. These constraints are further reinforced by the growing role of geoeconomic policy, including efforts to de-risk critical minerals and strategic supply chains, which increasingly embed competition into economic and regulatory frameworks.

The central PRC risk over the year ahead is unlikely to take the form of a base-case conflict, but rather escalation dynamics arising from miscalculation during sustained coercive activity across multiple theatres, including the South China Sea, Taiwan and regional air and maritime operating zones. Alongside this, the risk of selective economic pressure remains non-trivial. While broad-based trade sanctions appear less likely given mutual economic costs, targeted measures remain a plausible response to geopolitical frictions.

US behaviour under President Donald Trump shapes this environment. Most recently, intervention in Venezuela and coercive diplomacy toward allies over Greenland signal a higher tolerance for unilateral action and less predictable escalation thresholds. While the alliance with the US remains central to Australia’s security, this introduces greater uncertainty around coordination and escalation management in any regional crisis. Looking ahead, this uncertainty increases the likelihood that Australia will continue to place emphasis on sustaining and selectively deepening regional partnerships.

Trade

Professor James Laurenceson, UTS:ACRI Director

In 2025, the doomsayers about the PRC’s economy and Australia-PRC trade relations got it wrong once again.  

In the first 11 months of the year, Australian goods exports to the PRC were down two percent compared with a year earlier. But that’s despite a nearly 10 percent fall in the global price of iron ore. 

Iron ore volumes were up by two percent. Agriculture, forestry and fisheries exports remain at record levels, while education services eclipsed their previous peak.  Short-term visitor arrivals have been slower to recover after the pandemic but nonetheless returned to one million annually.  

Goods imports were up 11 percent with the headline being that the PRC is now Australia’s second largest source of passenger vehicles, following only Japan. 

Iron ore volumes might trend downwards as the PRC produces less steel, but with the overall growth forecast remaining at between four to five percent and economic complementarities remaining intact, there’s no obvious reason to expect any component of trade to take a serious dive in the coming year. 

Critical minerals

Dr Marina Zhang, UTS:ACRI Associate Professor – Research 

The Australia-US Critical Minerals Cooperation Agreement signals a decisive shift in the geopolitics of critical minerals toward a new phase defined by strategic ‘de-risking’ from PRC-centric inputs, despite the PRC remaining the largest buyer and processor of Australia’s resources. The recently unveiled $1.2 billion Critical Minerals Strategic Reserve is positioned as complementary to the Australia-US bilateral agenda and to broader efforts to diversify supply chains.

Looking ahead to 2026, Australia’s critical minerals investment environment is undergoing a structural transformation. 

For Australia-PRC relations in this domain, tighter national security-based investment screening, the construction of ‘green barriers’ through ESG standards and increasingly stringent requirements on data governance are set to shape the terms of cooperation. 

For PRC enterprises, success in Australia’s critical minerals sector will no longer rest on capital scale or technological advantage alone. Instead, it will depend on a systemic capability to integrate strategic intelligence, regulatory compliance, localisation and political resilience within an increasingly security-conscious investment landscape.

Clean technology

Professor Xunpeng Shi, UTS:ACRI Research Principal

Clean technology represents a potential area of Australia-PRC engagement as both countries navigate a rapidly evolving global energy system. At present, clean technology supply chains remain heavily concentrated in the PRC, reflecting economies of scale, dense industrial ecosystems and cost advantages associated with agglomeration. While this concentration has supported rapid global deployment of clean technologies, it has also contributed to heightened geopolitical sensitivity around supply chain resilience and dependence.

Policy language emerging from the Fourth Plenary Session of the 20th CPC Central Committee referenced the need for a ‘reasonable and orderly’ cross-border layout of clean technology supply chains. This signalling is aspirational in nature and does not imply near-term restructuring, but it suggests some openness to greater geographic dispersion of production networks over time.

For middle powers such as Australia, this evolving context may create scope to explore selective and conditional forms of engagement across manufacturing inputs, software, standards development, critical minerals, R&D and investment. As the strategic environment continues to evolve, there remains potential for Australia and the PRC to maintain dialogue aimed at identifying areas of mutually beneficial cooperation in clean technology supply chains, subject to regulatory and commercial constraints.

Community and society

Professor Wanning Sun, UTS:ACRI Deputy Director

Without a federal election looming, we are unlikely to see many Australian politicians touring Chinatowns and eating dumplings for photo-ops. And with national leaders’ attention consumed by anti-terrorism and hate speech, the media may well pay as much heed to what ASIO says about its scrutiny of potential terrorists as about its monitoring about Chinese-Australian organisations and individuals. Nevertheless, one thing is certain: Chinese-Australians will continue to fight for recognition as rights-bearing citizens and cultural ambassadors, rather than being cast as national security risks.

This struggle will be an uphill battle. For the fourth year in a row, the UTS:ACRI/BIDA Poll has found that almost four in 10 Australians suspect Chinese-Australians could be mobilised to act against Australia’s national interests. Troubling statistics aside, leaders of many Chinese-Australian communities disclose that they continue to fear undue suspicion for voicing their critical opinions on issues such as AUKUS.  And despite deep-seated and widespread distrust of these communities, media outlets and politicians are unlikely to frame it as a ‘social cohesion’ issue, even though the term will – rightly – be on many politicians’ lips.