Look beyond the so-called stabilisation of diplomatic ties between Australia and China. Look beyond Beijing’s lifting of trade bans and its ending of the freeze on ministerial dialogue that began in 2020.

China’s unfair trade measures against Australia have indeed ceased, but its broader strategy of compulsion is unchanged. It is still applying pressure through implicit coercive threats, military intimidation and exploitation of political and economic vulnerabilities.

We’ve stabilised just a part of our relations with an aggressor that shows no sign of backing down in its aggression. It’s a country that arbitrarily detains our citizens, pre-positions malware on critical infrastructure and has sent its navy to our nearby waters to intimidate us. If this is stability, it is thoroughly unsatisfactory, lopsided stability.

Yet Australia doesn’t say so.

The European Union is more honest in its dealings with China. It acknowledges trade as a sole common point of interest but, beyond that, sees diplomatic ties as managing security threats—for example, China’s sustainment of Russia in the war against Ukraine. The EU makes no bones about it: China is both an economic partner and a strategic rival. Australia should be similarly honest.

Such honesty will require dropping the current, reactive diplomacy that regards getting a meeting with Chinese officials as an outcome in itself. It’s diplomacy that seeks to ‘balance economic and security issues’, meaning selling down the national interest. Instead, Australia must adopt a long-term strategy of national resilience and regional deterrence that puts sovereignty in policymaking first.

The illusion of stabilisation: a new phase of Beijing’s coercion

Since taking office in 2022, the government of Prime Minister Anthony Albanese has restored diplomatic dialogue with China. In doing so, it has aimed for the goal of ‘stabilisation’ and been guided by the principle of cooperating with China where possible and disagreeing where necessary. Communication between national leaders and their teams is indeed vital, so the repairing of ties has been a clear positive.

But structural asymmetry in the relationship persists. China still pursues its objectives through coercion. The cessation of tariffs on Australian wine and the lifting of import bans on beef and lobster during the government’s first term in office has been welcome, but they distract from Beijing’s strategic use of implied threats to influence Australian decision-making.

In the first two decades or so after the Cold War, European countries mistakenly thought deeper economic ties with Russia would reduce its propensity towards tension and conflict. Globally, most countries made just the same miscalculation in regard to China, thinking that bringing it into the multilateral international system would promote its political liberalisation and stifle any latent aggression. Later they saw that China had begun changing the multilateral system to suit itself—and that its territorial ambitions had become ever more obvious.

Now Australia is obdurately making the same mistake again.

Unfortunately, the re-engagement of ministerial channels has coincided with troubling signs of bipartisan political complacency, in contrast to the bipartisan consensus from 2017 to 2022 on the Chinese threat. During the campaign for the 3 May federal election, both Albanese and the then opposition leader, Peter Dutton, said they had no reason to distrust Xi Jinping—the leader of a country which militarised the South China Sea despite promising not to and which persists in cyber theft and political interference in Australia.

We seem to have a misguided bipartisan belief that diplomatic civility will prompt China to behave itself.

Australian society needs transparency on the threats it faces, just as it’s kept up to date by the Australian Security Intelligence Organisation on the risk of a terrorist attack. Such openness won’t prevent an attack, but it reassures the public that the government is aware and doing everything it can to prevent one. It also ensures that the country is not unnecessarily shocked when an attack does happen. This strengthens national resilience as it builds both deterrence and preparation.

Coercion without sanctions: China’s tactic of strategic ambiguity

Because the government isn’t candid, there’s little public understanding of China’s coercive behaviour. Canberra gives the impression that punishment is coercion only when it’s in effect—so, now that Beijing has restored trade rights and ministerial communications, coercion has ended.

Wrong. The threat of future punishment is a potent and ongoing form of coercion. Beijing relies on implicit threats to influence foreign decision-making, and it knows that the tactic works. It punished South Korea in 2017 for accepting deployment of a US THAAD missile-defence battery. Seoul stood its ground. But years later, South Korean law enforcement cited fears of renewal of the 2017 economic sanctions as one justification for punishing a South Korean company for helping Taiwan to build submarines.

Australia is now in the same position as South Korea after the THAAD stand-off. Beijing lifted its coercive measures, but not before it made a generation of Australian leadership aware that certain actions would come with real costs.

This means Beijing continues in its use of carrots and sticks. The carrots worked on Australia for years until about 10 years ago, when various security threats that had been tolerated became a national-level threat of reduced sovereignty. When Australia finally decided in 2017 that it could not keep giving trade opportunities the same priority as security, Beijing raised its sticks.

What we’ve seen since is that Beijing’s coercion has evolved: it’s no longer limited to overt economic punishment. Instead, it increasingly relies on strategic ambiguity—the credible threat of future measures—to deter sovereign action. This form of latent coercion is subtle but potent. Australia’s decision to suspend two cases in the World Trade Organization against China just before expected rulings in its favour allowed Beijing to avoid international censure and save face. Australia missed a chance to learn from both Japan and the Philippines, which not only began international cases against China but had the courage to see them through. In doing so they defied China’s pressure and achieved rulings that identified behaviour in breach of international rules.

China itself pursued, and won, a WTO case against Australia on steel. So Australian obsequiousness achieved not reciprocal goodwill but a reputational win for Beijing. Australia also lost an opportunity to reinforce global rules in its WTO case.

Relationships depend on a willingness of all sides to compromise. But why should China compromise with Australia when it can stand its ground and wait for Australia to retreat?

This is how coercion works through implicit threats of punishment. The idea that simply being nicer to Beijing will elicit a reciprocal response is demonstrably wrong. If one party (Australia) seeks stability while the other (China) pushes and shoves, the destabiliser keeps gaining and has no reason to stop.

China’s ambassador to Australia, Xiao Qian, signals clearly enough what Beijing demands Australia must do, or not do, in order to maintain stable relations. After Albanese said in April that the government was arranging a sale of Darwin Port from a Chinese to an Australian firm, Xiao called ^[1] the plan ‘ethically questionable’ and said Australia, as China’s ‘comprehensive strategic partner’, should honour the ‘binding commitments’ of the contract. The implication was that such a sale would damage bilateral relations.

Beyond trade: multifaceted, ongoing coercion

China may have dropped its trade restrictions, but it keeps up other forms of coercion.

Military intimidation and strategic signalling. Beijing has expanded its use of grey-zone and conventional military tactics to reinforce its strategic position. Unsafe intercepts of Australian military aircraft persist, while unprecedented Chinese navy operations, such as live-fire drills in the Tasman Sea and a near circumnavigation of the Australian continent, have sent a clear message: China can project power deep into the Pacific and threaten countries such as Australia.

Beijing even seems to be suggesting that this is the new status quo, so any push-back by Australia or others would itself be destabilising. ‘As a major power in this region, as a country that has so many things to look after, it is normal for China to send their vessels to different parts of the region to conduct various kinds of activities,’ Ambassador Xiao said ^[2] in February after the Chinese ships had sailed around Australia, so ‘there should be no overreading into this.’

Meanwhile, China’s military aggression in the Indo-Pacific has become more pronounced, with unsafe encounters between Chinese and Australian military assets continuing to strain relations. These actions send a clear message not only to Australia and New Zealand but also to Southeast Asian and Pacific partners as well as the United States: that Beijing is strong enough to establish a sphere of influence, and US power is waning.

Diplomatic and political manipulation. Beijing also continues to exploit political openings, eroding resolve through diplomatic engagement that creates the illusion of normalisation. This is reinforced by narratives suggesting that cooperation with China is conditional on compliance with it. There is an inherent risk with portraying leader-level or ministerial meetings as political wins for the Australian government. This type of political relationship in which bilateral meetings are rewards for good behaviour is then something that can be taken away if Australia says something or does something that displeases Beijing.

Technological dominance. China’s growing technological dominance, including having near-monopolies in batteries, solar panels and a suite of rare earths, has already been used by Beijing to coerce other nations. From 2010 to 2014 China blocked rare earth exports to Japan in an attempt to have Tokyo change its policy on the Senkaku islands, and more recently Beijing has exploited its dominance in magnets in its trade war with the Trump administration. ASPI’s Critical Technology Tracker shows that China leads high impact research in 57 of 64 advanced technology fields, many with direct military applications, such as radar, drones and navigation satellites. As China gains dominance in more technology fields it expands its range of opportunities to coerce other countries, including Australia, if they become over-dependent on Chinese supply.  Australia should act in collaboration with likeminded partners to avoid further vulnerability.

From intent to capability: recalibrating Australia’s strategic posture

Australia must stop accepting Chinese assurances that it seeks stability. Instead, it must start focusing on Beijing’s actions and its potential for developing even greater leverage that creates future Australian vulnerabilities that it could exploit. Coercion, whether applied or implied, remains central to China’s playbook. Sovereignty must therefore be placed at the centre of Australia’s China policy, even if doing so risks economic or political discomfort. This does not preclude selective cooperation where interests align. But engagement must be underpinned by rigorous risk assessments to ensure our sovereignty and values are protected. For instance, collaboration on climate change must acknowledge and address Beijing’s systemic use of forced labour in renewable energy supply chains and its manoeuvring to dominate them. The focus must be on ensuring that today’s policy decisions do not constrain tomorrow’s sovereign choices.

Conclusion

Beijing’s coercion of Australia has not ended; it has evolved. Pressure through trade measures has been replaced with implied threats, military intimidation and the systematic use of narratives that portray Australia, not China, as the party whose exercise of sovereign decisions puts the future of the relationship at risk. Australia cannot afford to misread this moment. Strategic clarity, not diplomatic comfort, must guide the next phase of Australia’s China policy.

The era of seeing China through the narrow lens of economic opportunity ended long ago. We must not return to it.

Where Beijing breaches international rules or is aggressive, it must be called out.

Australia is only complying with China’s desires when the government says nothing and leaves the public to trust that the threats posed by China are all being dealt with in the classified realm. This is not viable policy. Australia’s sovereignty must not be contingent on Beijing’s preferences.

Australian politicians and officials need to show long-term resolve, make the necessary commitments to strengthen national resilience and prioritise the national interest. By doing so, Australia can weather Beijing’s pressure. The short-term costs of occasionally upsetting Beijing and risking some economic pain are small compared with incrementally losing our strategic freedom in a region in which power and influence will be heavily contested for many years to come.

This is an edited version of an article that first appeared in Institut Montaigne’s publication China Trends, in the new issue titled ‘Canada, Japan and Australia: Swing States or Pawns for China? ^[3]’