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Lowy Institute for International Policy | China-Australia Relations

Overview Australia-China relations are characterised by strong trade bonds. China is Australia’s largest trading partner, while Australia is a leading source of resources for China. More recent trends show that Australian exports are now expanding well beyond the resource sector. Politically the relationship has had its ups and downs. In recent years there have been concerns over Chinese investment in Australia, Beijing’s establishment of an Air Defence Identification Zone in the East China Sea, and the arrest of ethnically Chinese Australian citizens in China, among others.  But there have also been high points to the political relationship. In 2013, China and Australia agreed to establish a prime-ministerial level dialogue between the two countries, which makes Australia one of only a handful of countries to have such a dialogue. Free Trade Agreement In recent years, new life has been breathed into negotiations for a free trade agreement between the two countries. On then-Prime Minister Tony Abbott’s April 2014 visit to Beijing, there were encouraging signs that an agreement could be reached before the end of 2014, and in the wake of the Brisbane G20 Summit in November 2014 the deal's draft details were released. The deal (known as ChAFTA) was formally signed in June 2015, and in October 2015 Opposition Leader Bill Shorten announced that Labor would back the deal after reaching a compromise with the Government on elements of the agreement, giving the deal bipartisan support. Chinese Investment The Australia-China investment relationship has sometimes been a source of tension for broader bilateral ties. For example, in 2009 when a Chinese state-owned enterprise tried to make a play for Rio Tinto, the Australian Foreign Investment Review Board delayed approval of the bid for so long that the deal collapsed.   Since then both sides of politics and bureaucrats in Australia have put more effort into explaining Australia’s investment environment. The current government has pushed hard to make Australia attractive to Chinese investors, with then-Prime Minister Tony Abbott raised the prospect of China investing heavily in Australian infrastructure with Chinese Premier Li Keqiang during his visit to China in April 2014. It is rumoured that an FTA will raise the foreign review screening threshold for private Chinese investors in Australia from $248 million to over $1 billion. There has also been mention of relaxed investment rules, under an FTA, for state-owned investors that have a strong track record in Australia. However, Chinese investment is not popular among the broader Australian community. The annual Lowy Institute Poll has consistently shown that a majority of Australians believe that too much Chinese investment is being allowed into Australia. This is a potential source of tension in the relationship moving forward. The political relationship and US-China In Australia, there has been an ongoing debate about how Australia should handle its relationships with both the US and China in the face of a China that is being perceived as more assertive by the US, its allies and other nations in the region. There are questions around how Australia balances its alliance commitments against its economic dependence on China. What the Lowy Institute does East Asia Program Director Dr Merriden Varrall and others provide regular commentary on Australia-China issues. The Lowy Interpreter blog also features regular discussions on the bilateral relationship from a wide range of contributors.

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