Australia and its China agenda: balancing contestation and engagement

This article appeared in The Pacific Review, published online May 26 2026 https://doi.org/10.1080/09512748.2026.2672990

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ABSTRACT

Despite escalating strategic tensions, Australia continues to pursue qualified cooperation with China. Even as the effects of recent Chinese trade measures persist and geopolitical competition intensifies, Canberra maintains a dual-track strategy: contesting Beijing’s actions in security and governance domains while sustaining cooperation in areas of mutual benefit. This article addresses two core questions: why does Australia continue to engage with an increasingly assertive China, and how is this managed in practice? Focusing on developments from 2017 to 2025, the analysis integrates system-level and unit-level perspectives to explain Australia’s evolving strategy. System-level dynamics, including China’s rise, intensifying US-China rivalry and the erosion of a stable Indo-Pacific order, have driven closer alignment with the US and like-minded partners through initiatives such as AUKUS and the Quad, as well as expanded engagement in Southeast Asia and the South Pacific. At the unit-level, domestic economic interdependence, political incentives, public opinion and the role of Chinese-Australian communities have moderated calls for confrontation, sustaining cooperation in trade, diplomacy and transnational security, as well as sub-national and multilateral engagement. Together these dynamics underscore a model of coopetition in which deterrence and engagement coexist.
 

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Introduction

The Australia-China relationship presents a paradox of economic interdependence coexisting with intensifying strategic mistrust. On one side are the hardening of geopolitical fault lines driven by China’s regional assertiveness and persistent uncertainties surrounding US strategy in the Indo-Pacific. On the other lies a deeply embedded economic relationship underpinned by mutual trade dependencies. This paradox of intensifying rivalry alongside continued economic ties defines the contemporary phase of bilateral relations.

Beijing’s punitive trade measures in 2020–2021 and its placement of Australia in the diplomatic ‘deep freeze’ from 2017 to 2022 alongside Australia’s embrace of initiatives like AUKUS and the Quad have signalled rising bilateral tensions. Subsequent developments, however, such as the resumption of high-level ministerial dialogue and removal of key trade restrictions, indicate that neither government seeks outright rupture. From Beijing’s perspective, Australia’s defence alignment signals participation in containment; from Canberra’s view, China’s economic coercion and rejection of international legal norms in contested areas such as the South China Sea have eroded trust and compromised sovereignty.

In this context, the Albanese Labor government’s policy of ‘stabilisation’ aims to reduce diplomatic volatility without reversing Australia’s strategic shift. This approach reflects a recognition that while structural rivalry is unlikely to abate, outright disengagement would jeopardise economic prosperity and regional influence. The dynamic also reflects a broader pattern among regional powers navigating structural rivalry while retaining strong economic ties.

Australia’s China policy thus continues to navigate the inherent tension between security alignment with the US and economic reliance on Beijing. Bisley (2018) highlights this longstanding dilemma, while Gill (2023) positions the Albanese government’s stabilisation effort as an attempt to reduce diplomatic friction without reversing strategic commitments. Korolev (2023) attributes Australia’s recent approach to structural pressures from US-China rivalry and a weakening rules-based order. In a complementary vein, Wesley (2021) highlights the triangular logic of Australia’s foreign policy, namely that Canberra’s manoeuvring cannot be understood outside the strategic pressures exerted simultaneously by both Washington and Beijing.

Domestic dynamics have reinforced this shift. Xue (2023) identifies Beijing’s economic coercion as a trigger for greater Australian policy assertiveness, while Pan and Hagström (2021) demonstrate how a ‘China emergency’ narrative functions as a response to domestic ontological insecurity linked to neoliberal state transformation, supporting the expansion of the national security apparatus.

Together, these contributions show how systemic pressures and domestic transformations interact, but they often consider these forces separately rather than as parts of an integrated causal process.

This article builds on and extends Yu and Sui’s (2023) demonstration of how systemic rivalry and unit-level dependencies combine to produce a structurally ambivalent relationship between Australia and China. It employs this two-level analytical framework, grounded in the concept of great power coopetition,¹ to examine how Canberra manages this ambivalence. Coopetition refers to the coexistence of competition and cooperation under conditions of systemic rivalry. External pressures push states toward alignment and deterrence, while domestic imperatives and economic interdependence sustain selective engagement.

Applied to Australia, this framework highlights how system-level forces, such as the broader geopolitical shift marked by China’s rise, US-China rivalry and the erosion of a predictable rules-based order in the Indo-Pacific,² have disposed Canberra toward greater security alignment and deterrence. Simultaneously, unit-level forces, such as economic imperatives, political constraints and societal ties to China, have moderated this shift, sustaining engagement and constraining the feasibility of wholesale disengagement. Continued trade interdependence, public opinion cautiously favouring engagement, the political salience of Chinese-Australian communities and subnational linkages all function as stabilising influences.

This synthesis of system- and unit-level analysis clarifies the logic of regional power coopetition that defines Australia’s China policy. The following sections trace how this logic is operationalised.

This article applies the Coopetition Framework (COOPF) developed in this special issue to the Australia-China dyad. In line with COOPF, it distinguishes analytically between coopetition drivers—the system- and unit-level forces that structure Australia’s incentives and constraints—and coopetitive behaviour—the observable policy practices through which Canberra blends competition and cooperation.

System-level drivers dispose Australia toward strategic competition through alignment with the US. Unit-level drivers, including economic exposure, domestic political economy and identity-based considerations, moderate the scope and pace of this competition by raising the domestic costs of disengagement. The analysis proceeds sequentially: it first identifies these drivers and then traces how they manifest in Australia’s policy behaviour toward China from 2017 to 2025.

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System-level analysis

Australia’s strategic environment is increasingly defined by intensifying great power competition in the Indo-Pacific, driven by China’s rise and its deepening rivalry with the US. These dynamics have pulled Canberra closer to its traditional allies and partners, prompting deeper integration into US-led security architectures. Yet the Albanese government has also pursued a parallel strategy of stabilising ties with Beijing, defending core interests without forgoing engagement. This approach reflects the challenge of managing systemic volatility without relinquishing strategic autonomy.

This section examines three system-level forces shaping Australia’s approach to China: (1) intensifying US-China rivalry; (2) the turn to minilateral frameworks such as AUKUS and the Quad; and (3) regional competition across the South Pacific and Southeast Asia.

US-China rivalry and Australia’s strategic realignment
China’s rise has disrupted the regional balance of power and heightened perceptions of risk (Han & Paul, 2020); (Lind, 2024). Since overtaking Japan as the world’s second largest economy in 2010 (World Bank, 2025), Beijing has combined sustained economic growth with rapid military modernisation. Its real defence budget was estimated at approximately US$476 billion in 2021, about 59% of that of the US, and military equipment expenditure has risen at an average rate of 10.2% per annum since 2000, six percentage points faster than the US (Robertson, 2024).

This expansion has been matched by more assertive behaviour, including the militarisation of features in the South China Sea to economic coercion against Australia during 2020–2021 and rejection of the 2016 arbitration case brought by the Philippines (Ministry of Foreign Affairs of the People’s Republic of China, 2024). More recent incidents, such as live-fire exercises in proximate waters and unsafe manoeuvres near Australian aircraft and naval vessels, have reinforced perceptions in Canberra that geographic distance no longer guarantees insulation. Developments such as the 2022 Solomon Islands-China security pact further deepened Australian anxieties about Chinese influence in its surrounding region, with concerns that the agreement could open the door to potential PLA access to regional facilities (Hitch, 2022).

These developments have sharpened Canberra’s dilemma: how to sustain prosperity through trade with China while relying on the US for security. US-China rivalry has become the dominant structural force shaping Australia’s security positioning (Australian Department of Defence, 2020, 2023). While Australia has historically hedged, pursuing economic engagement with China while relying on the US alliance under the ANZUS Treaty (1951) for security, this approach has become increasingly constrained (Korolev, 2024). White (2019) observes that the US alliance, once considered a strategic backstop, has become an organising principle.

The alliance is evolving beyond interoperability toward interchangeability,³ consistent with US expectations outlined in the 2022 National Defense Strategy, which calls for allies and partners to be integrated into ‘combined logistics, sustainment and command architectures’ (US Department of Defense, 2022). Australian Defence Minister Richard Marles publicly endorsed this shift in 2022 (Marles, 2022), a position reinforced at AUSMIN 2023.

These commitments are supported by increased rotational US Marine deployments in Darwin and major infrastructure investments in northern Australia, including an aircraft apron at RAAF Tindal to accommodate up to six B-52 bombers and expanded joint exercises such as Talisman Sabre. Intelligence cooperation through Pine Gap and Five Eyes remains a central component of operational integration.

This alignment also extends into geoeconomic domains, particularly critical minerals and clean energy (Ferguson et al., 2023). The 2023 Australia-US Climate, Critical Minerals and Clean Energy Transformation Compact recognised Australia as a preferred supplier of critical inputs for clean energy and defence technologies. Australia was also designated a ‘domestic source’ under the US Defense Production Act, enabling US investment in Australian critical minerals projects to bypass regulatory barriers (US Congress, 2023). Both, at least symbolically, integrate Australia into Washington’s supply chain strategy. In October 2025, the two governments signed the US-Australia Framework for Securing of Supply in the Mining and Processing of Critical Minerals and Rare Earths, aiming to mobilise near-term investments and unlock an up-to-US$8.5 billion project pipeline. Although analysts question the commercial impact (Commins, 2025; Laurenceson, 2025a), the political is signal is clear. Both major Australian political parties now treat critical minerals as strategic assets (Collinson, 2025). Australia’s 2023–2030 Critical Minerals Strategy aligns with US supply chain priorities. Domestic initiatives such as public investment in domestic processing (Mizen, 2025) and tighter scrutiny of Chinese acquisitions reflect bipartisan consensus that resource policy now serves both economic and strategic purposes (Marshall, 2024; Sharma, 2023).

This convergence forms part of a broader geoeconomic strategy to reduce Chinese centrality in regional production networks. Australia’s participation in US-led initiatives such as the Indo-Pacific Economic Framework reinforces this logic, even if outcomes remain limited (Murphy, 2024). The cumulative effect is a steady consolidation of cooperation across defence and areas of trade, yet one still mediated by Australia’s economic dependence on China.

Even so, Canberra continues to exercise discretion, working closely with Washington where interests converge while resisting pressures that jeopardise its economic autonomy. In 2025, responding to new US tariff measures, Albanese warned that broad tariffs were an ‘act of economic self-harm’ (Albanese, 2025a) underlining a pragmatic balance between alliance commitments and the defence of economic sovereignty.

Minilateralism as strategic adaptation

A defining feature of Australia’s shifting strategic orientation has been the embrace of minilateral frameworks such as AUKUS and the Quad which offer flexibility between bilateral and multilateral engagement. As Tow (2019) notes, minilateral security frameworks offer smaller powers with mechanisms to balance strategic alignment and operational autonomy, particularly in navigating complex great power rivalries. Australia’s turn to minilateralism can be understood as the construction of what Bisley (2025) terms ‘security infrastructure’: institutional mechanisms that enhance collective resilience through coordination and signalling.

AUKUS

Announced in 2021, AUKUS marked a major shift in Australia’s defence policy. While public attention has centred on the acquisition of nuclear-powered submarines under Pillar I, Pillar II’s advanced technology cooperation in, for example, quantum computing, artificial intelligence and hypersonic missile development, is more transformative long term. AUKUS reflects a bipartisan view in Canberra that traditional diplomacy and multilateralism are by themselves insufficient to counter coercive state behaviour in an increasingly unstable strategic environment (Coleman, 2025; Wong, 2023a). The 2024 National Defence Strategy explicitly cites Chinese coercion and unsafe intercepts as key drivers of regional instability (Australian Department of Defence, 2024), abandoning the assumption of a 10-year warning time for major conflict and introducing the doctrine of ‘impactful projection’ (Marles, 2024).

While Australian and British officials have refrained from explicitly framing AUKUS as a containment mechanism, US officials, such as then-Deputy Secretary of State Kurt Campbell, acknowledged that the submarines would likely be relevant in a potential Taiwan contingency (Campbell & Fontaine, 2024).

Domestically, AUKUS signifies a shift from off-the-shelf procurement to co-development and sovereign capability. It also binds Australia more deeply to the industrial bases of its partners. While some former defence officials have cautioned about cost, workforce and nuclear stewardship challenges (Smith, 2025), the government continues to treat AUKUS as central to Australia’s long-term strategic orientation. Albanese’s categorical refusal to reopen the agreement to parliamentary negotiation (Albanese, 2025b) reflects from the bipartisan determination to insulate AUKUS from domestic political bargaining.

The Quad

Alongside AUKUS, Australia has revitalised its engagement with the Quad, comprising Australia, India, Japan and the US. While lacking formal defence guarantees, the Quad’s re-emergence since 2017⁴ shows a collective effort to shape regional norms and provide alternatives to China’s growing influence. Unlike AUKUS, the Quad is often characterised as a platform for soft balancing (He & Feng, 2025) through coordination in non-military domains such as vaccine diplomacy, digital infrastructure, climate resilience and maritime domain awareness.

Beijing has consistently criticised the Quad as a containment mechanism, characterising it as a ‘mini-NATO’ (Ministry of Foreign Affairs of the People’s Republic of China, 2020; Zhang, 2020).

Several initiatives illustrate this agenda. The 2021 commitment to deliver over one billion COVID-19 vaccine doses across the Indo-Pacific, though only partially realised, signalled the grouping’s intent to contest regional influence through the provision of public goods (Pao, 2021; Surianta & Dressel, 2025). The Quad Infrastructure Coordination Group promotes ‘transparent, demand-driven, quality, sustainable and climate-resilient’ infrastructure investment (Ministry of External Affairs, Government of India, n.d.), challenging the opaque and debt-driven reputation of China’s Belt and Road Initiative (Green, 2024; McBride et al., 2023).⁵ The Quad’s Statement of Principles for Clean Energy Supply Chains similarly advances collective efforts to diversify production of key inputs such as hydrogen and lithium-ion batteries, positioning energy transition as both a climate and security issue.

The September 2024 Wilmington Declaration deepened coordination among members while reaffirming the Quad’s informal, non-military character (White House, 2024). As Cannon and Rossiter (2022) observe, this informality is a ‘geopolitical necessity’, allowing four diverse states to cooperate without binding commitments or overtly antagonising China. Thus, the Quad’s functions as a signalling mechanism, projecting normative alignment and building regional capacity.

However, shifts in Washington’s focus toward managing crises in Europe and the Middle East, coupled with domestic political gridlock, have reduced the Quad’s prominence within US strategic planning. While cooperation continues across working groups, the absence of major new initiatives since 2024 suggests that it now operates more as a coordinating forum than a driver of US regional policy. For partners such as Australia, this has reinforced the value of sustaining Quad engagement as part of a broader, diversified network of regional partnerships rather than as a central pillar of strategy.

Regional balancing beyond minilateralism: strategic engagement in the Pacific and Southeast Asia

While minilateral frameworks such as AUKUS and the Quad have reinforced Australia’s alignment with major powers, they are complemented by a parallel strategy of regional engagement in the South Pacific and Southeast Asia, arenas where competition with China is most immediate and locally contested. These subregions, though distinct, now form interconnected theatres of systemic competition (Wallis & Le Thu, 2024). Foreign Minister Penny Wong has described them as ‘where Australia’s interests are most at stake’ (Canales, 2025).

China’s pursuit of a ‘global network of partnerships’ and expanding ‘circle of friends’ (Loke & Guo, 2025) seeks to legitimise a China-centred model of regional governance. For Canberra, this has demanded a shift from episodic diplomacy (Wallis, 2017) toward more multidimensional statecraft that links development and security.

The South Pacific: strategic denial through partnership

Australia has sought to move from donor paternalism toward more embedded partnerships in regional development and security frameworks. Yet as Wallis (2024) notes, this statecraft still reflects the logic of strategic denial, seeking to preserve influence while fostering partnership, with outcomes constrained less by resources than by the agency of Pacific Island governments. This underlying tension was captured by former Prime Minister Scott Morrison’s admission that Australia once viewed the South Pacific as ‘a bit of an extension of our own country’ (Livingston & Bagshaw, 2022), a complacency that China’s activism has since exposed.

The Pacific Step-up (2016) and its successor, the Pacific Family initiative, exemplify this change. As O’Keefe (2022) notes, their timing closely tracks China’s expanding presence. Although couched in partnership and development language, these frameworks serve a clear strategic purpose to reinforce Australia’s central role in a contested region. Foreign Minister Wong (2024) describes this as a ‘permanent contest’ with Beijing.

The 2022 Solomon Islands-China security agreement crystallised these anxieties. Interpreted in Canberra as a direct challenge to regional stability and the existing security order—then-Prime Minister Morrison referred to the prospect of a Chinese military presence in the Solomon Islands as a ‘red line’ for Australia (Hitch, 2022)—it accelerated Australian engagement. Development assistance remains pivotal. Having provided about 40% (A$17 billion) of total development finance between 2008 and 2021, Australia still remains by far the South Pacific’s largest donor (Dayant et al., 2024). The Australia-Pacific Regional Development Partnership Plan 2025–2029 outlines a whole-of-government strategy, targeting climate adaptation, health systems, education, infrastructure and governance reform—framed as mutually reinforcing areas of influence.

Security cooperation has expanded alongside aid. Initiatives such as the Pacific Maritime Security Program, Pacific Policing Initiative and Pacific Response Group address governance and capacity challenges that China has increasingly targeted bilaterally. Australia’s bilateral security architecture has also been expanded. The 2017 security treaty with the Solomon Islands marked a precedent, followed by the 2023 Australia-Papua New Guinea Bilateral Security Agreement, the 2023 Falepili Union with Tuvalu and the 2024 Nauru-Australia Treaty. The latter two agreements include provisions that restrict signatories from entering into security pacts with third states without Australian consultation or consent, effectively granting Australia veto rights.

A 2024 Guardian analysis documented over 60 security, defence and policing agreements across the 10 most populous Pacific Island states, with Australia accounting for the largest share (Srinivasan & Harrison, 2024). While numerical dominance does not ensure uncontested influence, it demonstrates a conscious effort to institutionalise its role as the principal external security partner in the region.

Diplomatically, symbolism complements substance. Wong’s decision to make Fiji her first solo overseas visit in 2022 was a signal of the Pacific’s elevated status within Australia’s foreign policy hierarchy. Albanese’s walk along the Kokoda Track with Papua New Guinea’s Prime Minister James Marape, an unprecedented action for a sitting Australian leader, signalled renewed political investment. In early 2025, Deputy Prime Minister Richard Marles became the first minister to visit Kiribati in nearly two years, following the lifting of its restrictions on foreign diplomatic access, contributing to Australia’s broader re-engagement with Pacific nations after periods of limited contact. High-level visits across the region, reciprocated by Pacific Island leaders, have reinforced a sense of partnership.

Australia also works multilaterally through the Partners in the Blue Pacific (PBP), launched in June 2022 with Japan, New Zealand, the UK and the US. By coordinating external engagement around the 2050 Strategy for the Blue Pacific Continent, the PBP aims to reduce fragmented aid competition and offer a collective alternative to China’s bilateral model.

Maritime contestation and norm-building in Southeast Asia

In Southeast Asia, Canberra applies similar logic through diplomatic and institutional means rather than security dominance. grounding its approach in the principle of ASEAN centrality and the promotion of a rules-based regional order.

China’s militarisation of the South China Sea has been accompanied by grey-zone coercion via maritime militia, coastguard interference and obstruction of oil and gas exploration by Southeast Asian claimants. Despite the 2016 arbitral tribunal ruling rejecting China’s ‘nine-dash line’ claims, Chinese activities continue, eroding confidence in legal norms.

Although estimates that 60% of Australia’s trade transits the South China Sea (Bishop, 2015; Glaser, 2015) are contested (Bateman 2015; Laurenceson, 2017), uninterrupted access to these sea lines of communication remains vital. Canberra therefore views Chinese coercion as a systemic risk to both regional stability and commercial security, necessitating a response that combines deterrence with renewed diplomatic and institutional engagement.

Key policy documents, including the 2017 Foreign Policy White Paper and the 2024 National Defence Strategy, emphasise Southeast Asia’s importance as a stabilising buffer and zone of overlapping strategic interests. The 2017 White Paper affirms that ‘Southeast Asia frames Australia’s northern approaches and is of profound significance for our future’, while the 2024 Defence Strategy designates ‘maritime Southeast Asia’ as a ‘primary area of military interest’ (Australian Department of Defence, 2024; Australian Department of Foreign Affairs and Trade [DFAT], 2017).

The 2021 elevation of ASEAN-Australia ties to a Comprehensive Strategic Partnership and the 2022 launch of the ASEAN Futures initiative, underscore a jointly articulated agenda for deeper cooperation, seeking to present Australia as a responsive and reliable partner. However, some regional analysts have noted that despite these intentions, Australian initiatives at times risk being perceived as externally steered or overly securitised, particularly where strategic objectives are closely aligned with broader US-led frameworks (Kamaruddin & Lum, 2022).

Bilateral defence cooperation has expanded through partnerships with Vietnam, Indonesia and the Philippines, as well as recurring exercises like Indo-Pacific Endeavour. Royal Australian Navy vessels regularly operate in the South China Sea, supporting freedom of navigation under the United Nations Convention on the Law of the Sea without directly replicating US-style freedom of navigation operations within 12-nautical-mile territorial zones, an approach that asserts maritime norms without provoking unnecessary escalation.

The evolution of Australia-Philippines defence relations is particularly illustrative. In September 2023, the two countries signed a Strategic Partnership that built upon the existing Status of Visiting Forces Agreement, enabling joint operations and training. The inaugural Exercise Alon in 2023, Australia’s first major amphibious exercise with the Philippines, demonstrated increasing interoperability. This bilateral engagement complements broader US-Philippines cooperation under the Enhanced Defense Cooperation Agreement, which has expanded US access to key Philippine military bases. In this context, Australia’s role forms part of a larger, networked security architecture.

Australia has also sought to offer economic alternatives to China’s state-led investment model. The Partnerships for Infrastructure program and the Southeast Asia Economic Strategy to 2040 aim to diversify regional investment away from China’s state-led model while demonstrating the practical benefits of long-term partnership with Australia and its allies.

In Southeast Asia, Australia’s support for ASEAN centrality serves both to maintain legitimacy among regional partners and to hedge against China’s coercive behaviour without over-relying on military alliances. Australia’s engagement in the South Pacific and Southeast Asia reflects a broader shift from ad hoc diplomacy to sustained, strategically aligned statecraft. However, these external initiatives are conditioned by internal drivers—unit-level factors that continue to shape the scope and character of Australia’s strategic positioning—to which this analysis now turns.

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Unit-level analysis

At the unit-level, Australia’s approach to China is shaped by two internal characteristics. The first is a liberal economic structure that prizes open markets and growth as foundations of national welfare. The second is an officially promoted identity as a liberal, multicultural middle power that seeks to advance its interests through diplomacy and a rules-based order (DFAT, 2017). These two traits create enduring incentives for cooperation even as strategic competition intensifies.

Alongside external strategic pressures, unit-level factors, particularly Australia’s economic interests and domestic political economy, political constraints and considerations around regional stability, continue to support ongoing, albeit qualified, engagement with China. Over time, however, domestic debates about foreign interference, economic vulnerability and national identity have narrowed the space for this cooperative logic. These tensions came to a head in the mid-2010s, when a more defensive policy stance emerged (Chubb, 2023; Collinson, 2017). As He and Feng (2025) posit, this inflection was not driven by external power dynamics alone but by internal political and ideational processes. Building on their framework, this analysis interprets the shift through a liberal lens, highlighting the consolidation of the security-intelligence apparatus, and a constructivist lens, emphasising Australia’s enduring identity anxieties as a US-aligned middle power.

These strands illustrate how Australia’s domestic institutions and ideas mediate system-level pressures. The securitisation of China did not erase the liberal logic of economic engagement but produced instead persistent trade interdependence alongside political and normative distancing. In this sense, Australia’s China policy reflects the interaction of liberal economic interests and constructivist identity anxieties, which together generate a structured ambivalence, balancing cooperation and competition within a single strategic framework.

Why to cooperate

In COOPF terms, the dynamics discussed in this section are unit-level coopetition drivers rather than instances of cooperation themselves. They refer to domestic structural conditions—including economic exposure, political incentives and societal linkages—that constrain the range of policy options available to Canberra under systemic rivalry. These drivers operate prior to, and independently of, specific cooperative acts, shaping the incentives that make selective engagement both economically rational and politically viable.

Australia’s resource-intensive export-oriented economy is foundational to its continued engagement with China. China is Australia’s largest two-way trading partner, accounting for 26% of its total goods and services trade in 2023-24, totalling A$325 billion (DFAT, n.d.-a). By comparison, Australia’s next-largest trading partner, Japan, comprised just over a third of this value (DFAT, n.d.-b).

This relationship reflects the economic exposure that increases the domestic cost of disengagement for both sides, thereby limiting the political feasibility of severing ties. This structural interdependence is most evident in trade in commodity flows, with iron ore as the cornerstone. Even at the height of diplomatic tensions in 2020-21, when Beijing imposed tariffs of up to 218% on Australian wine and 80.5% on barley, as well as informal bans on goods including coal, beef, cotton, lobster, timber, copper and sugar, Beijing excluded iron ore, and to a large extent LNG, from its sanction list. This was no coincidence as China sources approximately 70% of its iron ore from Australia and is unable to straightforwardly source this input elsewhere (Russell, 2023). Likewise, more than 80% of Australia’s iron ore exports go to China (Observatory of Economic Complexity, n.d.).

Beyond traditional resources, critical minerals and clean energy have emerged as the next pillar of economic interdependence. Australia produces over half of the world’s mined lithium and possesses around 4% of global rare earth reserves (Dawkins, 2024; King, 2023). These inputs are essential for energy transition and defence technologies, embedding the bilateral relationship within a broader shift in the global economy. This interdependence is reinforced through an extraction-processing nexus: Australia supplies key raw materials, while China retains dominance in midstream refining and downstream manufacturing. China controls roughly 60% of global lithium refining and nearly 90% of rare earth processing (International Energy Agency, 2023). This asymmetry limits Australia’s control over supply chains and underscores how the benefits of cooperation coexist with vulnerabilities. Successive governments have sought to reduce this dependence by expanding domestic processing and diversifying partnerships with like-minded economies, though progress has been uneven and Australia remains primarily an upstream supplier. Despite these constraints, the clean energy transition continues to bind the two economies. Chinese firms remain major investors and offtakers in Australian lithium such as Tianqi’s joint venture in Greenbushes and Ganfeng’s contracts with Pilbara Minerals, while Australian exporters depend on China’s midstream capacity. This interdependence illustrates how, even amid geopolitical friction, the material logic of the energy transition raises the economic and industrial costs of disengagement, thereby constraining the scope for full-spectrum competition.

Australian governments across the political spectrum have continued to face a dual imperative at the unit-level: sustaining economic growth and domestic welfare by engaging with China, while managing national security considerations. Policymakers acknowledged that diversification of trade is necessary to reduce vulnerability, yet any notion of abruptly ‘decoupling’ from China has been viewed as economically untenable. Analysts have noted that while China represents over a quarter of Australia’s trade, Australia accounts for only a small fraction of China’s global trade, underlining an asymmetry in dependence (Uren, 2020). This asymmetry means Beijing might weather a rupture more easily than Canberra (aside from specific commodities), heightening Australian caution.

The economic exposure generated by trade with China is felt directly at the household level. Beyond aggregate trade figures, economic modelling by Bankwest Curtin Economics Centre estimated that in 2022–2023, trade with China increased disposable income by an average of A$2600 per household, reaching as high as A$8,700 in some states. This translated to 4.6% of disposable income per capita and a total household income gain of A$29 billion. The study also found that access to Chinese imports reduced cost-of-living pressures. In the absence of this trade relationship, households would have paid 4.2% more for the same bundle of goods (Buckland et al., 2024). These findings underscore how deep economic linkages constrain abrupt policy shifts by raising the domestic political costs of confrontation.

Tourism has also re-emerged as a significant channel of economic and societal engagement. Prior to the COVID-19 pandemic, China was Australia’s largest source of visitors, with more than 1.4 million arrivals in 2019 (Australian Bureau of Statistics, 2020). Recovery has been strong: by November 2024, China had become Australia’s second-largest visitation market, recording 0.8 million arrivals, an 83% increase from the previous year (Tourism Australia, 2024). In expenditure terms, it was the largest tourism market in 2024, with Chinese visitors spending A$7.89 billion (Small Business Australia, 2025). Tourism reinforces the structural exposure underpinning engagement, embedding economic dependence within regional labour markets and service sectors, thereby increasing the domestic costs of sustained confrontation.

The prospect of economic decoupling in the near term has been repeatedly evaluated and dismissed across successive governments. Internal reviews under the Abbott, Morrison and Albanese governments reportedly concluded that no single market, or combination of markets, could absorb Australia’s bulk exports at the same scale and price as China (Wong, 2023b). Modelling by Tyers and Zhou (2020) further suggests that a sustained trade rupture could reduce Australia’s GDP by up to 6% over a 10-year horizon, compounding direct export losses with broader economic dislocation. Such findings confirm that diversification is a long-term hedge, not an immediate substitute. Indeed, Australian leaders openly reject the idea of severing ties; they speak instead of diversification while maintaining the Chinese trade relationship. As one commentary observed, ‘The two economies will remain highly connected and interdependent… making it neither possible nor wise for Australia to decouple from China’ (Zhou, 2020). Consistent with this logic, no Australian government policy has sought blanket disengagement; rather, Canberra has continued with trade liberalisation (e.g. joining the Regional Comprehensive Economic Partnership with China in 2020) and continues to court Chinese buyers for its exports. Even amid the diplomatic freeze, Australian officials quietly encouraged business to keep trading with China where viable. Unit-level economic exposure has consistently constrained the government’s ability to sustain prolonged confrontation, increasing the likelihood of measures re-engagement following episodes of strategic estrangement.

Public opinion reinforces these domestic incentives. While concerns about China’s intentions are widespread, Australian voters continue to favour a dual-track approach. According to a 2024 nationwide poll of 2000 Australians, 62% of Australians said they saw the benefits of Australia’s relationship with China, even as 64% identified concerns about the relationship. A majority (54%) agreed that ‘without close engagement with China, Australia would not be as prosperous as it currently is’, 61% agreed that ‘trade with China has created job opportunities in Australia’ and 65% said that ‘Australian companies should continue to pursue business opportunities with China’ even as 74% said that ‘Australia is too economically reliant on China’. This two-sided sentiment, scepticism of China’s power but support for commercial engagement, provides political space for governments to compartmentalise the relationship, maintaining economic ties even amid growing strategic mistrust (Collinson & Burke, 2024). This two-sided sentiment gives governments political space to compartmentalise: sustaining trade while contesting security issues.

Australia’s engagement with China is also informed by a strategic imperative to prevent escalation and preserve regional peace. The 2017 Foreign Policy White Paper frames regional stability as a core national interest, emphasising the need to manage US-China rivalry through diplomacy and multilateral engagement (DFAT, 2017).

This principle has been reinforced by Foreign Minister Wong, who in an April 2023 address stated that ‘preserving the regional balance of power’ is critical to protecting Australian sovereignty, prosperity and security. She emphasised that Australia must ‘use all elements of national power’ to shape its environment, asserting that ‘diplomacy is how we avoid worst-case scenarios’. Wong stressed that engagement with China does not equate to concession but is part of ‘assertive diplomacy’ aimed at reducing the risk of miscalculation and maintaining space for peaceful competition (Wong, 2023a).

Senior Australian defence officials echoed this caution. In 2021, then-Defence Chief General Angus Campbell stated that ‘conflict over the island of Taiwan would be a disastrous experience for the peoples of the region’, and that ‘Australia is very clear that the future of China and Taiwan needs to be… resolved peacefully’. Admiral Chris Barrie, Defence Chief 1998–2002, has been even more explicit, warning, ‘Unlike the experience of the conflicts in Iraq and Afghanistan that affected only the members deployed into conflict, and their families, a war with China will have an impact on all Australians—economically, financially and personally. It is likely to impoverish us all; it may even kill most of us if it goes nuclear’ (Lyons, 2023). This blunt assessment highlights the stakes for Australia in avoiding escalation and underscores why a policy of pragmatic engagement remains not only economically sensible but strategically necessary.

Chinese-Australian communities and broader migration ties constitute a durable connective tissue in the Australia-China relationship, enabling continuity in engagement regardless of fluctuations in official diplomacy. These social and familial networks act as stabilisers in the bilateral relationship, grounded not in geopolitics but in everyday exchange.

Australia is home to one of the largest overseas Chinese communities outside Asia. As of the early 2020s, more than 550,000 Australian residents were born in mainland China (2.2% of the population) with over 1.4 million Australians identifying as having Chinese ancestry (5.5% of the population). Mandarin is now the most spoken language other than English in Australian households (Australian Bureau of Statistics, 2022). These linkages are long-standing; Chinese migrants have contributed to Australian economic and civic life since the nineteenth century gold rushes. However, over the past two decades, Chinese-Australian communities have grown markedly in both size and political salience, reflecting broader immigration and educational trends.

Increasingly, this demographic has also emerged as a significant political constituency. Both major Australian political parties have intensified efforts to engage Chinese-Australian voters (Collinson, 2025), who are not only numerous but strategically located in electorates that often decide national outcomes. Although individuals of Chinese heritage account for approximately 5.5% of the national population, their presence is disproportionately concentrated in marginal seats, many of which fall within a critical swing range of under six percentage points. As analysts have pointed out, this makes them a uniquely influential voting bloc (Australia-China Relations Institute, 2025).

Chinese-Australian community leaders have linked the Coalition’s previously bellicose rhetoric on China to decreased appetite to vote for them (Rachwani, 2022). Following a notable decline in support among Chinese-Australian communities at the 2022 federal election, the Coalition has sought to repair its standing through more culturally sensitive messaging and increased local outreach. Labor, by contrast, is aiming to reinforce the inroads it made in that cycle, portraying itself as a more consistent advocate of multicultural inclusion and respect. Heading into the 2025 election, both parties targeted Chinese-Australian voters as a pivotal electoral group, a factor that contributed to more moderated political messaging on China, particularly from the Coalition (Collinson, 2025).

Chinese-Australian communities have also been subject to increased discrimination during recent peaks in geopolitical tension, particularly during the COVID-19 pandemic (Sun, 2024). Research indicates that nearly one in five Chinese-Australians experienced racist attacks more than two years into the pandemic, highlighting the persistence of such issues (Hsu, 2023). These experiences underscore the importance of fostering social cohesion and addressing the implications of inflammatory rhetoric.

Chinese-Australian communities’ lived experience demonstrates that cooperation with China is not solely an external matter of diplomacy or trade; it is internalised within Australia’s own social fabric. This internal plurality makes it more difficult, both politically and ethically, for governments to pursue an uncompromising or overly securitised posture toward China without accounting for the repercussions at home. The result is a domestic constituency that values intercultural ties and benefits directly from sustained cooperation, thereby serving as a moderating influence in shaping national policy and rhetoric toward China.

How to cooperate

Australia’s management of its relationship with China operates less as a sequence of discrete events than as a continuous process of adaptation within a structurally competitive environment.

The cooperative practices examined below should be understood as policy responses conditioned by the unit-level drivers outlined above. They do not constitute the drivers themselves; rather, they represent the government’s chosen balance within the constraints imposed by economic exposure, domestic politics and risk-management imperatives. In this sense, cooperation emerges not as an autonomous preference, but as a bounded outcome shaped by structural and domestic incentives.

While this sub-section follows the distinction between cooperation mechanisms and empirical cases, in practice these dimensions are mutually constitutive. Mechanisms are not static structures but dynamic processes whose efficacy fluctuates under changing system-level and domestic conditions. The subsequent discussion therefore treats mechanisms and case studies as analytically linked moments within a continuous cycle of adaptation. Rather than presenting these dimensions as discrete subsections, the analysis integrates them throughout the discussion to reflect how Australia-China cooperation operates as a single, evolving system of adjustment.

Australia’s approach to managing its complex relationship with China has remained grounded in policy compartmentalisation, separating the relationship into distinct strategic and economic tracks where still possible to do so. Notwithstanding Foreign Minister Wong’s rhetorical rejection during a foreign policy debate in early 2022 of the long-standing view that Australia need not choose between Washington and Beijing, stating ‘we have already chosen’ (ABC, 2022), Canberra has maintained a parallel strategy of contesting China’s actions in security and governance spheres while continuing to engage economically where interests align. The Albanese government has encapsulated this balancing act in the phrase, ‘cooperate where we can, disagree where we must and engage in the national interest’ (DFAT, n.d.-a).

This logic underpins Australia’s engagement architecture, within which cooperation unfolds as a continuous process of adjustment across economic, diplomatic, societal and security domains.

Trade and economic engagement

The economic domain remains the most institutionalised arena of cooperation, but also the one where vulnerabilities most clearly expose the limits of institutional design.

The China-Australia Free Trade Agreement (ChAFTA), signed in 2015, codified market access and provided a legal foundation for economic engagement. Since its entry into force, bilateral trade has risen from A$144.8 billion to A$325.5 billion, an increase of 124.8% compared to 76.5% growth in Australia’s trade with the rest of the world (Laurenceson, 2025b). Drawing on Australian Bureau of Statistics data, Laurenceson (2025b) also notes that between 2014–2015 and 2019–2020, the number of Australian businesses exporting to China grew by 37.9%, with a 260% increase in total export transactions. This expansion spans both imports and exports and cuts across nearly all major sectors (Figure 1). These figures illustrate how unit-level incentives such as economic growth, employment and fiscal stability continued to sustain engagement even as strategic tensions rose.

However, China’s campaign of economic coercion revealed how system-level pressures can override legal frameworks. Beijing’s tariffs on barley and wine and informal bans on commodities such as coal, timber and lobster, demonstrated that ChAFTA’s provisions offered no shield against discretionary political action. The agreement remained in force but was functionally hollowed out with its dispute resolution mechanisms sidelined by power politics.

By 2023–2024, de-escalation through a combination of negotiated measures and institutional reactivation demonstrated partial recovery rather than full restoration. Beijing’s gradual removal of punitive tariffs and trade bans and Australia’s withdrawal of its World Trade Organisation cases against China occurred outside the ChAFTA framework but helped create the conditions for re-engagement. In parallel, the Joint Commission overseeing ChAFTA resumed formal meetings for the first time in several years, re-establishing a procedural forum for dialogue and technical adjustment. Together, these developments reflected a phased process of re-engagement: while legal mechanisms did not prevent coercion, their survival allowed them to be reanimated once political conditions permitted. ChAFTA thus proved durable but not self-enforcing, a structure capable of stabilisation ex post, rather than constraining behaviour ex ante.

The process culminated in Albanese’s July 2025 visit to Beijing, during which both governments signed a memorandum of understanding (MoU) activating ChAFTA’s built-in review mechanism, reopening structured channels for industry feedback and technical improvement. Complementing this were new export protocols granting Australian apple producers market access for the first time and reciprocal arrangements for Chinese jujube imports. Albanese’s inclusion of Chengdu in his 2025 China visit itinerary underscored how the reactivation of ChAFTA’s institutional machinery was paired with a broader strategy of regional diversification, linking formal mechanisms of trade diplomacy to emerging inland growth markets. This marked not a return to pre-2020 normalcy but a measured restoration, demonstrating how cooperation mechanisms can be re-energised after coercive shocks, yet remain contingent on broader strategic stability.

In parallel with traditional trade, climate and energy cooperation has emerged as a new functional arena of engagement. Building on resource interdependence, both governments have sought to align commercial and environmental objectives through a new memorandum of understanding establishing regular exchanges on industrial decarbonisation, including a joint dialogue on steel decarbonisation.

In July 2025, Albanese hosted a roundtable with Chinese steelmakers in Shanghai to explore low-emission production and supply chains. Although early in development, this initiative shows how economic interdependence is extending into climate-linked sectors. Advancing cooperation with China in the priority areas of climate change, steel decarbonisation and sustainable agriculture—since at least 2022 supported by NFACR grants.

Diplomatic dialogue and political re-engagement

Despite strategic rivalry, Australia has maintained and, in recent years, reinvigorated diplomatic engagement with China.

At the political level, the Comprehensive Strategic Partnership (CSP), established in 2014, served as the latent framework for diplomatic recovery after 2021. Although the term ‘CSP’ was largely absent from official discourse during the period of acute bilateral friction, neither government renounced it (Collinson, 2023). The partnership thus functioned as a dormant mechanism of continuity, preserving a procedural foundation for re-engagement once conditions stabilised.

The 2017–2021 freeze represents the clearest failed case of diplomatic cooperation. During this period, regular ministerial and leader-level communication collapsed following disputes over foreign interference legislation, Australia’s exclusion of Huawei and ZTE from 5 G networks and Canberra’s call for an independent inquiry into the origins of COVID-19. The absence of dialogue deepened misperceptions and removed stabilising feedback channels, allowing coercive measures to escalate unchecked. Here, geopolitical competition and normative divergence overwhelmed unit-level incentives for engagement, hardening mistrust.

The election of the Albanese government in 2022 marked a decisive inflection. The new administration signalled early that it sought to ‘stabilise’ rather than ‘reset’ relations, language carefully chosen to convey a change in tone without implying policy reversal. This semantic precision was critical as it offered rhetorical space for re-engagement without domestic political cost. Within months, high-level contact resumed. In November 2022, Prime Minister Albanese met President Xi Jinping on the sidelines of the G20 Summit in Bali, the first leader-level meeting in six years.

The diplomatic tempo quickened in 2023. Albanese’s official visit to China in November, the first by an Australian leader since 2016, served as a high-level reaffirmation of mutual interest in restoring political dialogue. By 2024, the rhythm of diplomatic engagement became sustained. In March 2024, Chinese Foreign Minister Wang Yi visited Australia, followed by a visit by Premier Li Qiang in June. Australian Treasurer Jim Chalmers travelled to Beijing in September, the first visit by a Treasurer in seven years. A cross-party parliamentary delegation visited China in October, ending a five-year hiatus. In November, Albanese and Xi met again on the sidelines of the G20 Summit in Rio de Janeiro. In July 2025, Albanese travelled to Beijing, followed by an informal discussion with Xi on the margins of APEC in South Korea in October 2025, reaffirming both governments’ intent to maintain a working relationship.

Alongside these meetings, ministerial dialogues, such as the Australia-China Foreign and Strategic Dialogue, the Strategic Economic Dialogue and the Dialogue on Climate Change, senior officials’-level dialogue, such as the Strategic Defence Dialogue, and 1.5 track diplomacy, such as the Australia-China High-Level Dialogue were progressively reactivated. In 2024 the two sides also agreed to establish a bilateral maritime affairs dialogue to manage tensions in contested maritime zones such as the South China Sea.

These diplomatic mechanisms are reinforced by rhetorical discipline, itself a meta-mechanism of engagement. Albanese has emphasised that ‘dialogue is the most effective way to deliver our national interests’ (Albanese, 2023). This framing reframes communication as management rather than ideological compromise, insulating it from partisanship and public scepticism.

Under Labor, this approach has been operationalised through message control and institutional framing. Ministers continue to raise concerns on issues such as human rights, maritime conduct and regional security, but typically within multilateral or procedural contexts rather than unilateral rebuke (Collinson, 2025). The government’s response to the February 2024 suspended death sentence of Australian writer Yang Jun exemplifies this approach: Canberra issued a formal protest emphasising due process and human rights norms but avoided escalation.

This pattern illustrates both the potential and limits of diplomatic cooperation. When dialogue is framed as functional management it becomes sustainable even under competitive pressure. Yet its efficacy remains conditional: communication channels can stabilise rivalry but not transform it. The Australia-China diplomatic relationship thus exemplifies adaptive cooperation, a system in which mechanisms survive breakdowns, are periodically reactivated and serve primarily to prevent deterioration rather than generate convergence.

People-to-people links, tourism and education

While political and economic cooperation has fluctuated with the strategic climate, people-to-people exchanges have remained the most resilient and depoliticised layer of the Australia-China relationship.

Educational exchanges have long formed the backbone of this interface. As of December 2024, approximately 241,000 Chinese students were enrolled in Australian higher education institutions, comprising 22% of the total international student cohort (Australian Department of Education, 2025a). These flows not only sustain roughly A$12.1 billion annually in export revenue (Australian Department of Education, 2025b) but also promote intercultural understanding and long-term familiarity. Despite policy debates over international student caps (Truu, 2025), Chinese nationals remain the largest international student group by a significant margin.

The Australia-China education relationship remained operational through the 2020–2021 nadir: with borders closed, Australian universities delivered courses to large cohorts offshore via online and distance modes, and overall Chinese enrolments held broadly steady (Chamas, 2021). As conditions improved, cooperation was formalised again through the June 2024 Memorandum of Understanding on Cooperation in Education, Training and Higher Education Research between Australia’s Department of Education and China’s Ministry of Education.

Government initiatives have actively reinforced these educational linkages. Launched in 2014, Australia’s New Colombo Plan funds undergraduate students to undertake study and internships across the Indo-Pacific. Prior to the COVID-19 pandemic, China was consistently among the top host countries under the scheme.

In October 2025, Australian university leaders, under the auspices of Universities Australia, travelled to China to renew partnerships and participate in the inaugural Australia-China University Leaders Dialogue. The mission, described as ‘one of the most significant higher education delegations in years’ (Universities Australia, 2025), was a sector-initiated effort that complemented but did not originate from government policy. Its significance lay in demonstrating continuity and agency beyond formal diplomacy: universities, acting through professional networks and market incentives, moved to consolidate research and innovation partnerships once political conditions allowed.

The Albanese government has also elevated people-to-people diplomacy as a central pillar of its China strategy. At a 2024 luncheon welcoming Chinese Premier Li, Prime Minister Albanese declared that these ties were ‘at the heart’ of ‘what connects our nations today—and will into the future’ (Albanese, 2024). Similarly, Foreign Minister Penny Wong, at an event marking a century of Chinese student enrolment in Australia, described multiculturalism as ‘a source of national pride and national power’. She added that Australia’s diversity, particularly the contributions of Chinese-Australian communities, constitutes ‘a profound national advantage in this world’.

While rhetorically inclusive, this approach is also strategically instrumental: people-to-people links are treated as a form of social infrastructure that sustains stability by deepening mutual literacy and mitigating prejudice. The National Foundation for Australia-China Relations (NFACR) operationalises this approach. To date, it has disbursed nearly A$37 million across 190 grants to support educational, cultural and community-based projects. Its objectives—’strengthen risk-informed engagement with China in Australia’s national interest and to reinforce social cohesion by engaging our Chinese-Australian communities’—reflect an explicit effort to domesticate the stabilising function of cooperation (NFACR, 2025).

In March 2024, the Albanese government announced a pilot program to ‘build Australia’s Asia literacy and create a pipeline of senior Asian-Australian representation in civic life’ (Wong, 2024). It also pledged A$2.6 million to support the establishment of the Museum of Chinese in Australia. These initiatives demonstrate a domestic turn in engagement, anchoring cooperation within Australia’s multicultural identity politics rather than relying solely on external diplomacy.

China has reciprocated with mobility facilitation. In June 2024, Australia was added to China’s list of countries eligible for 15-day visa-free travel, which was extended to 30 days from November 2024. These steps have lowered barriers to short-term mobility and reflect a shared interest in encouraging people-to-people flows. During Albanese’s 2025 visit, Australia and China renewed an MoU between DFAT and China’s Ministry of Culture and Tourism to encourage travel in both directions. Tourism Australia also signed new strategic cooperation agreements with the China Media Group and Trip.com to expand media exposure and strengthen China-facing marketing.

Despite their resilience, people-to-people exchanges are not immune to geopolitical contagion. The most recent period of heightened tension demonstrated how system-level rivalry can erode societal trust and constrain the political space for cooperative narratives. These episodes revealed that, while social and educational links can stabilise relations during diplomatic strain, they cannot fully shield them from broader geopolitical pressures. The durability of such exchanges thus depends on both institutional maintenance and discursive restraint, conditions that are themselves shaped by the broader political climate.

Law enforcement and transnational security cooperation

Law enforcement and judicial cooperation between Australia and China represents perhaps one of the most technically resilient yet politically constrained dimensions of the bilateral relationship. Unlike trade or people-to-people ties, which are driven by market and societal incentives, cooperation in security and policing operates within a narrow corridor of functional necessity, where mutual interests in addressing transnational crime coexist uneasily with systemic mistrust. This domain thus provides a critical test of Australia’s capacity to ‘cooperate where it can’ under conditions of strategic competition.

A key institutional foundation for this cooperation is the Treaty on Mutual Legal Assistance in Criminal Matters, which entered into force in 2007. The agreement commits both parties to providing the ‘widest measure of assistance’ in investigating and prosecuting criminal offences (DFAT, 2007). Despite subsequent political fluctuations, the treaty has remained in continuous operation, reflecting an underlying consensus that transnational crime control is a shared interest transcending divides.

Even during the peak of recent bilateral tensions in 2019–2021, Australia and China exchanged 13 mutual legal assistance (MLA) requests—eight initiated by Australia and five by China. These included requests for evidence sharing, document transmission and witness interviews in cross-border criminal investigations.

Beyond the MLA framework, bilateral cooperation in law enforcement has extended to direct agency-to-agency ties. The Australian Federal Police (AFP) has maintained a presence in Beijing for over 25 years and liaises with the Ministry of Public Security (MPS) of China on a range of transnational crime issues. These include narcotics trafficking, cybercrime, money laundering and the diversion of precursor chemicals. A flagship example of this cooperation is Taskforce Blaze, a joint AFP-MPS counter-narcotics initiative launched in 2015. It has led to the seizure of large quantities of illicit drugs and disrupted trafficking networks targeting the Australian market, described by the AFP in 2024 as ‘one of the most successful joint efforts in stopping illicit drugs impacting Australia and Pacific Island countries’ (Australian Federal Police, 2024).

The continuity and expansion of such cooperation is further evidenced by Australia’s participation in broader multilateral security efforts. In 2023, the AFP became a leader member of the Global Coalition to Address Synthetic Drug Threats, a US-led initiative that includes China as a partner. This coalition focuses on synthetic opioids and amphetamine-type stimulants, an area of growing concern given the Asia-Pacific’s central role in their production and distribution. The AFP’s partnership with China is leaned on as a framework for Australia to tackle issues on behalf of the Global Coalition.

Yet not all institutional initiatives have endured. Of note is the 2017 withdrawal of Australia’s proposed extradition treaty with China. Although signed in 2007, the treaty faced persistent domestic opposition over concerns regarding China’s judicial transparency, human rights standards and the risk of political persecution (Joint Standing Committee on Treaties, 2016), culminating in its withdrawal from parliamentary consideration.

In addition to operational collaboration, bilateral law enforcement cooperation is supported by a network of MoUs and implementing agreements. As of early 2024, at least seven active cooperation agreements between the AFP and Chinese authorities remained in force, including some renewed during the 2023–2024 period. These cover areas ranging from joint investigations to personnel exchanges and training (Hurst, 2024). While some of these arrangements have come under increasing scrutiny and drawn criticism regarding sovereignty and due process (Hurst, 2024), they remain part of bilateral law enforcement architecture.

Law enforcement cooperation between Australia and China reflects a pattern of functional persistence within defined limits. Coordination has continued in areas of clear mutual interest but remains constrained where legal and normative standards diverge, as the extradition treaty episode demonstrated.

Subnational and state-level interactions

Australian states and territories have cultivated extensive direct relationships with Chinese counterparts, sometimes helping to act as a counterweight to federal tensions. Most Australian state governments have maintained representative offices in China’s major commercial centres, such as Shanghai, Guangzhou and Beijing, to pursue trade and investment opportunities.

Even when political tensions between Canberra and Beijing were starting to sharpen, Australian state premiers and city mayors continued engaging with Chinese counterparts.

A particularly prominent, though ultimately contentious, example was the Victorian government’s 2018 MoU on the Belt and Road Initiative (BRI). The agreement sought to attract infrastructure investment and signal openness to economic cooperation but was later cancelled by the Commonwealth in 2021 under the Foreign Relations (State and Territory Arrangements) Act 2020. Canberra justified the cancellation on national interest grounds.

Beyond the BRI controversy, subnational engagement remains routine. State-level trade delegations to China became commonplace in the 2010s, continuing across political cycles, and Chinese provincial delegations frequently visit Australian states. Likewise, many Australian local governments have ‘sister city’ or ‘sister state/province’ agreements with Chinese counterparts. Roughly one hundred such partnerships link Australian and Chinese jurisdictions. These partnerships rarely deliver large-scale outcomes but perform an important symbolic and relational function: they keep local governments, universities and businesses tied into Chinese networks even when national rhetoric hardens.

Cooperation in multilateral fora

Australia and China have also sustained cooperative engagement through multilateral institutions, an arena where shared functional interests often override political frictions. These forums have allowed both countries to advance common objectives even as bilateral ties have fluctuated.

A primary example is the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement, which includes both Australia and China alongside ASEAN members, Japan, South Korea and New Zealand. Signed in 2020 and entering into force in 2022, RCEP institutionalised liberal trade rules and supply chain integration across the Indo-Pacific. The fact that negotiations concluded during the lowest point in Australia-China diplomatic relations (2018–2021) illustrates that functional cooperation through multilateral channels can persist independently of political sentiment. Australia’s continued endorsement of RCEP reflects a pragmatic understanding that inclusive regional economic institutions can serve as stabilising mechanisms within a fragmented strategic order.

Similarly, Australia was a founding member of the Asian Infrastructure Investment Bank (AIIB) in 2015, contributing capital and participating in its governance structures. Through the AIIB, Australia and China have jointly co-financed infrastructure projects in third countries, including in Southeast Asia and South Asia. Although Canberra has since reviewed its engagement due to governance and transparency concerns, it remains a shareholder.

At the global level, Australia and China maintain coordinated engagement in entities such as the G20, Asia-Pacific Economic Cooperation (APEC) and the WTO. Both have, for example, co-endorsed G20 statements rejecting protectionism and calling for WTO reform. Even when bilateral rhetoric has been adversarial, Australian officials have continued to cooperate with Chinese counterparts on specific agenda items, such as pandemic recovery, where interests align.

Australia’s participation in multilateral forums also enables a degree of diplomatic flexibility. In specific global governance contexts, such as UN peacekeeping, international development financing or reform of Bretton Woods institutions, Canberra has occasionally aligned with Beijing’s positions, particularly where such stances converge with the interests of the Global South.

Importantly, this mode of cooperation is technocratic rather than strategic. It enables Australia to pursue economic and developmental objectives within liberal institutional frameworks while compartmentalising strategic and normative disagreements. In this way, multilateral institutions serve as stabilising arenas that facilitate practical engagement amid fluctuating bilateral dynamics.

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Whither the relationship

The Australia-China relationship now operates within what may best be understood as a coopetition framework, a configuration in which cooperation and competition coexist across different domains, mediated by shifting system-level pressures and domestic-level constraints. At the system-level, the relationship is structured by enduring strategic rivalry between the US and China, which compels alignment choices and narrows Australia’s policy flexibility. At the unit-level, economic interdependence, domestic political pluralism and institutional norms of liberal diplomacy continue to generate incentives for engagement. The interaction of these variables produces a relationship defined by partial stabilisation punctuated by recurrent contestation.

While both sides have taken steps to arrest the deterioration of bilateral ties, notably through resumed ministerial dialogue and the removal of selected trade restrictions, these developments reflect tactical restraint rather than strategic convergence. They indicate a shared interest in avoiding unmanaged escalation amid a volatile regional environment and slowing economic growth.

System-level dynamics are trending toward deeper competition. Australia’s integration into US-led security architectures has consolidated its position within an Indo-Pacific deterrence framework that Beijing interprets as part of a containment strategy. Participation in AUKUS and the Quad reflects Canberra’s effort to shape regional rules alongside like-minded states while defending a rules-based order that China increasingly contests. These alignments, though framed as stabilising, entrench Australia within the logic of strategic balancing and constrain opportunities for trust-based engagement.

At the same time, unit-level incentives sustain cooperation in specific functional areas. Economic complementarities remain substantial. Canberra’s diversification agenda through new agreements with the EU, India, Indonesia, the UAE and the UK represents an attempt to rebalance risk without severing ties. Chinese firms, for their part, are diversifying resource supply and pursuing vertical integration to reduce exposure to Australian regulation. The result is a pattern of selective coupling and managed decoupling, the operational hallmark of coopetition, where interdependence persists under strategic caution.

This equilibrium remains fragile, however. A major system-level disruption such as conflict in the Taiwan Strait or a serious maritime incident in the South China Sea could collapse the cooperative floor. In such a scenario, the coopetition framework may give way to full-spectrum competition, compelling Canberra to deepen military integration with the US and regional partners, or even to support more formal collective defence arrangements akin to an ‘Asian NATO’. The 2024 National Defence Strategy, which abandoned the previous ten-year warning horizon for major conflict, already reflects planning for such contingencies.

Conversely, a relative easing of system-level tensions could reopen space for engagement. A reduction in US-China rivalry, a shift in Chinese diplomacy toward regional détente or a more multilateral US foreign policy could collectively expand Canberra’s latitude for manoeuvre. Under such conditions, Australia could widen multilateral cooperation and economic linkages without undermining core security guarantees.

The trajectory of coopetition will also depend on domestic political variables. The second Trump presidency has already introduced new uncertainty into alliance management, testing Canberra’s ability to sustain its approach. Pressures for greater military burden-sharing and accelerated economic decoupling are narrowing Australia’s room for manoeuvre, increasing the likelihood that its calibrated balance of cooperation and competition could harden into overt polarity. By contrast, continued Labor governance, with its emphasis on stabilisation and risk containment, is more likely to preserve a pragmatic mode of measured engagement.

The broader trajectory of Australia-China relations will not be linear. It will be shaped by the dialectic between system-level pressures for strategic polarisation and unit-level imperatives for engagement. Neither strategic convergence nor wholesale decoupling appears likely—at least in the absence of major external shocks. Instead, the relationship will continue to evolve through managed frictions, transactional cooperation and periodic adjustments driven by both regional events and domestic constraints. Whether this strategy endures will depend less on any one policy choice than on Canberra’s capacity to manage uncertainty at multiple levels of the international order.

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Conclusion

Australia’s engagement with China reflects the strategic calculus of a middle power navigating intensifying great power rivalry without surrendering economic or sovereign agency. Rather than wholesale decoupling or uncritical engagement, Canberra has adopted a two-pronged approach asserting national interests in security and governance, while preserving mutually beneficial economic and societal ties.

This approach represents an adaptive response to structural change in the Indo-Pacific: the erosion of a stable rules-based order, China’s emergence as a systemic challenger and evolving expectations of Australia’s principal ally, the US. Through initiatives like AUKUS and the Quad, Australia has deepened integration with major power partners to strengthen deterrence and norm-shaping. It has also expanded diplomatic, developmental and security engagement in the South Pacific and Southeast Asia, seeking to shape its strategic environment through regional partnerships rather than military confrontation.

At the same time, Canberra has re-stabilised relations with China through resumed dialogue and selective trade normalisation. Beneath these system-level alignments, unit-level drivers, including economic interdependence, public opinion and diaspora engagement, continue to pull policy toward qualified cooperation, limiting the scope for outright confrontation. The resulting equilibrium is one in which deterrence and engagement coexist within a single strategic framework.

Australia’s approach illustrates how middle powers can manage systemic rivalry through coopetition: sustaining economic and societal connectivity while aligning strategically to protect sovereignty and order. But this balance remains contingent. Flashpoints in the Taiwan Strait, South China Sea or South Pacific, or abrupt shifts in leadership across Canberra, Washington or Beijing, could quickly destabilise the current modus vivendi.

For now, however, Australia’s China strategy demonstrates an effort to turn vulnerability into agency by using alignment to deter coercion and engagement to preserve stability as it navigates an Indo-Pacific defined not by choice between cooperation and competition, but by the necessity of managing both.

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Notes

1 See the introduction of this special issue, Fong (2026).

2 Throughout this article, Indo-Pacific is used as a geographic descriptor encompassing the Indian and Pacific Oceans and the countries that border them, reflecting the prevailing terminology in Australian foreign and defence policy discourse.

3 Traditionally, interoperability referred to the ability of Australian and US forces to operate effectively together, coordinating tactics and logistics while remaining fundamentally separate entities. Interchangeability denotes a higher threshold of defence collaboration: it implies forces being so closely aligned in their doctrine, logistics, equipment and command structures that elements from one military can be seamlessly substituted or integrated into the other’s operations without significant adjustments.

4 The Quad was originally formed in 2007 but dissolved shortly after due to political sensitivities. It was revived in 2017.

5 China’s debt trap diplomacy has been the subject of intensive academic debate. For a discussion, see Himmer, M., & Rod, Z. (2022). Chinese debt trap diplomacy: Reality or myth? Journal of the Indian Ocean Region, 18(3), 250–272. https://doi.org/10.1080/19480881.2023.2195280.

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