Introduction: A Crucial Juncture in Bilateral Relations

Australia and China are at a pivotal moment in their bilateral relationship. As two nations intricately tied through trade, education, migration, and regional security interests, the dynamics of their foreign policy engagements are under increased scrutiny. The Australia-China foreign policy landscape is evolving rapidly, driven by shifting global alliances, strategic competition in the Indo-Pacific, and rising domestic expectations for transparency and independence in international dealings.

At the AustChina Institute (ACI), we believe now is the time to foster informed dialogue. As a Melbourne-based, not-for-profit think tank dedicated to independent research and analysis, we are committed to helping policymakers, businesses, and the public better understand and navigate this complex relationship.

Historical Context: From Cooperation to Strategic Ambiguity

Australia’s relationship with China has undergone profound transformation over the past two decades. In the early 2000s, bilateral ties were defined largely by economic opportunity and mutual growth. China quickly became Australia’s largest trading partner, importing vast quantities of iron ore, coal, and agricultural goods.

However, rising geopolitical tensions, particularly those involving the United States, have complicated this once-straightforward arrangement. From debates over Huawei’s 5G involvement to growing concerns around Chinese political influence, Australia’s approach to its largest trading partner has become increasingly cautious, and at times confrontational.

The resulting foreign policy stance is often described as one of “strategic ambiguity”—an attempt to balance economic pragmatism with national security concerns. While this may be diplomatically convenient, it leaves critical questions unanswered about Australia's long-term strategy.

Core Challenges in the Australia-China Foreign Policy Landscape

1. Economic Dependence vs Strategic Autonomy

A key challenge lies in balancing Australia’s economic reliance on China with its commitment to maintaining strategic autonomy. In 2023, trade between the two nations was valued at over AUD 280 billion. Yet, rising tariffs, trade bans, and politicised economic pressure have exposed Australia’s vulnerability.

Maintaining healthy economic relations while pursuing a sovereign foreign policy is no small task. Australia must diversify its trade partnerships and invest in value-added industries to reduce exposure to geopolitical leverage.

2. Regional Security and the Indo-Pacific Puzzle

China’s increasing assertiveness in the South China Sea and its growing military presence across the Indo-Pacific region present strategic dilemmas for Australia. As a close ally of the United States and a regional stakeholder, Australia finds itself navigating a delicate path between supporting a rules-based order and avoiding direct antagonism with China.

The Australia-China foreign policy must prioritise regional stability through diplomatic engagement, defence preparedness, and multilateral cooperation with ASEAN and Quad nations.

3. Public Perception and Political Polarisation

Public sentiment toward China has shifted significantly, influenced by political rhetoric, media narratives, and events such as the COVID-19 pandemic. A 2024 Lowy Institute Poll found that 63% of Australians see China as a security threat—up from 41% just five years earlier.

This polarisation affects domestic policymaking and limits the space for constructive dialogue. Educating the public with balanced, evidence-based insights is crucial, and this is where organisations like ACI play a vital role.

The Role of the AustChina Institute (ACI): Informing the Future

As an independent think tank, ACI serves as a bridge between academia, policy, and the broader public. Our mission is to generate rigorous, non-partisan research that fosters understanding and promotes a more nuanced Australia-China discourse.

We remain fully independent from government, foreign entities, and state influence, sourcing funding exclusively from within Australia through government grants, private donations, and ethical sponsorships. This model allows us to maintain integrity while exploring difficult questions around trade, diplomacy, technology, and strategic alliances.

Recent ACI initiatives include:

• Policy Roundtables: Bringing together policymakers, business leaders, academics, and civil society to explore shared interests and disagreements constructively.

• Public Reports and Briefings: Offering actionable insights into foreign policy trends, economic dependencies, and regional security.

• Educational Outreach: Hosting seminars and lectures aimed at improving public literacy on Australia-China relations.

Policy Recommendations: Pathways to a Stable, Productive Relationship

ACI’s research highlights several strategies to recalibrate and stabilise the Australia-China foreign policy framework:

1. Institutionalised Dialogue Mechanisms

Restarting regular diplomatic dialogues at ministerial and sub-ministerial levels can help de-escalate tensions and rebuild trust. These platforms should include economic, environmental, and cultural components.

2. Trade Diversification Strategy

While maintaining strong ties with China, Australia must invest in new trade agreements with India, Southeast Asia, the EU, and Africa. Encouraging domestic innovation and exports in clean energy, tech, and services can also reduce reliance on commodity-based trade.

3. Civil Society Engagement

Public understanding of international affairs is limited but crucial. Supporting media literacy, cultural exchange, and open discussions can bridge misconceptions and depoliticise bilateral discourse.

4. A Stronger Indo-Pacific Identity

Australia can strengthen its role in the region by investing in development partnerships, disaster relief capacity, and sustainable infrastructure. A confident, outward-facing foreign policy reduces the risks of binary strategic alignment.

Conclusion: A Forward-Looking Foreign Policy for a Changing World

The Australia-China foreign policy debate is not a binary choice between security and prosperity—it is a complex balancing act that demands vision, resilience, and informed decision-making. Australia’s future depends not on the isolation of China or blind alignment with any single power, but on strategic adaptability and a deep understanding of the regional landscape.

At ACI, we believe that open dialogue, rigorous analysis, and public education are the pillars of a smarter foreign policy. As global dynamics continue to shift, Australia has an opportunity to redefine its role—not as a passive actor, but as a proactive, principled force for stability and progress in the Indo-Pacific.

The question is not whether Australia can manage its relationship with China, but how wisely and deliberately it chooses to do so.