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On a visit to China to commemorate 50 years of establishing diplomatic relations, Australia’s Foreign Minister Penny Wong said that the two governments agreed to continue high-level dialogue on ways to “achieve what … is in the best interest of our countries.” Wang Yi, Chinese Foreign Minister, agreed that “dialogue is a prerequisite for managing this relationship wisely.”

The two countries have been locked up in multiple disagreements since Australia since 2018.

Australia started its diplomatic relations with China since 1972. To mark the anniversary while the foreign ministers met in Beijing, Chinese President Xi Jinping and the Australian Prime Minister Anthony Albanese spoke over the phone expressing desire to “promote a sustainable development of the China-Australia comprehensive strategic partnership” based on mutual respect and mutual benefit.

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Australia — China relations came about at an opportune time for both countries. Late 1970s and 1980s was the time when Australia started deregulating and China under Deng Xiaoping launched China’s open-door economic policy.

China needed resources and Australia had plenty of them.

Strong ties

China’s formidable growth, based on Australia’s exports to China shielded Australia from the 1997 Asian financial crises and 2008 global financial crises. With China becoming its biggest trade partner, Australian economy grew three times faster than Japan’s, twice as fast as Europe and one-third more quickly than the US.

Before Covid-19 Australia was the number one destination for the Chinese tourists. 200,000 Chinese students — one third of all foreign students, were studying in Australia at that time.

Relations between the two countries became frayed in 2018 when, following America’s lead, Australia banned Huawei and ZTE — the two major Chinese telecommunication companies.

The Chinese, with some justification, viewed Australia’s actions as blind alignment with the American interests against China. With exports to China plummeting, the Australian economy is hit by its first recession since 1991.

Notwithstanding the friction, “China remains Australia’s largest trading partner, importing $164.82 billion worth of goods in 2021, up 40 per cent on the year, according to Chinese government figures. In the same year, China’s exports to Australia reached $66.38 billion, a 24 per cent increase.”

Within the region however, the elevation of Quad — that groups Australia with Japan, US and India and the subsequent creation of AUKUS, nuclear partnership program grouping Australia with the UK and the US — is seen as a counterweight to China.

Australian Foreign Minister Penny Wong poses for a photo with her Chinese counterpart Wang Yi in Beijing, China, December 21, 2022. Image Credit: Handout via REUTERS

Improvement in relations

Australia’s change of government in May 2022 — from the hawkish Scott Morrison to the centre-left Labor Party under Anthony Albanese, indicated possibility of improvement in relations.

Consequently, the two foreign ministers have met twice. Prime Minister Albanese and President Xi Jinping met during the G-20 meeting in Jakarta in November — the first summit between the leaders of the two countries since 2016.

This cloud of distrust between the two also puts into question China’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) the 11-member trade bloc, which America jettisoned as soon as

Before their disagreements started in 2018, the two nations had no historical, political or economic grievances, which was a rarity in international relations.

When dust finally settles, Australia is likely to realise that China has the world to trade with, and Australia also owes some of its economic success to China.

Sajjad Ashraf served as an adjunct professor at the Lee Kuan Yew School of Public Policy, National University of Singapore from 2009 to 2017. He was a member of Pakistan Foreign Service from 1973 to 2008 and served as ambassador to several countries.