Aus-- China Clash in Pacific Even as Trade Grows

Relations between Beijing and Canberra have improved over the past four years, but China’s ambassador is now warning of a ‘Cold War mentality.”

· Australia continues its policy of "cooperate where we can, disagree where we must" in managing relations with China.

· China's Ambassador Xiao Qian accused Australia of promoting a "Cold War mentality" and exaggerating the China security threat.

· Australia's intelligence chief Mike Burgess warned about foreign interference, coercive repatriation, and attempts to access critical infrastructure, without directly naming China.

· Beijing rejected these allegations, claiming they damage bilateral trust and cooperation.

· Despite political tensions, China remains Australia's largest trading partner, accounting for nearly one-third of Australian exports.

· Australian public opinion has improved toward China, with over 60% viewing China primarily as an economic partner, although security concerns remain.

· Prime Minister Anthony Albanese has pursued a pragmatic approach, restoring economic ties while strengthening regional security partnerships.

· Australia signed a new security agreement with Vanuatu, reaffirming Australia's role as its primary policing partner and restricting foreign military bases.

· China criticized the pact, arguing Pacific cooperation should not become a tool for geopolitical competition.

· Analysts note that while economic interdependence has stabilized relations, major disagreements remain over:

o China's regional military ambitions.

o Influence in the Pacific Islands.

o Foreign interference concerns.

o The U.S. security presence in the Indo-Pacific.

· Both Canberra and Beijing are increasingly managing disagreements without allowing relations to deteriorate as they did around 2020.

Key Takeaway

Australia and China have restored a more stable relationship driven by strong economic interests, but strategic rivalry, security concerns, and competition for influence in the Pacific continue to create periodic diplomatic friction.

[ABS News Service/04.07.2026]

Since resuscitating relations with China from a low point a few years ago, the Australian government has relied on an oft-repeated mantra to “cooperate where we can, disagree where we must.”

Some of those disagreements came into view this week as Chinese diplomats pushed back against an Australian intelligence assessment and Canberra’s security-deal making in the Pacific, accusing the country of stoking paranoia and unfairly targeting China.

In one of the public skirmishes, China’s ambassador to Australia, Xiao Qian, responded to an annual threat assessment speech given by Australia’s top intelligence official, Mike Burgess, by writing an opinion piece published this week in the Sydney Morning Herald.

Mr. Burgess warned about foreign interference in Australian society as well as “coercive repatriations” and attempts to gain access to critical infrastructure. He did not mention China by name, but a video at the event reportedly showed footage of Chinese nationals who were arrested in Canberra for allegedly covertly collecting information on a Buddhist group in Australia on behalf of Chinese security officials.

Mr. Xiao took issue with the clip, calling it “one-sided.” Saying Australian organizations and media outlets had “repeatedly fabricated and hyped falsehoods and fallacies regarding the security threat posed by China,” Mr. Xiao wrote that the allegations had “deeply wounded the feelings of the people of both China and Australia, and undermined the atmosphere of friendly cooperation between the two sides.”

In a twist on the Australian government’s China policy, Mr. Xiao said the two countries should be “seeking common ground while shelving differences.”

The comments come amid China’s efforts to burnish its image in the region as a responsible partner and global power, while reminding Canberra that relations could spiral again. (Punishing economic sanctions blocked Australian imports into China for several years, until 2024.)

At the same time, Australian public perception of China has reached a high point not seen in years, with more than 60 percent of Australians saying they viewed the country more as an economic partner than as a security threat — a drastic flip from about four years ago when those proportions were reversed. With the simultaneous erosion of Australians’ view of the U.S. administration, the levels of trust in either the United States or China to “act responsibly” in the world are now almost evenly matched.

Jingdong Yuan, associate senior fellow at the Stockholm International Peace Research Institute, said the pushback from the Chinese ambassador to Australia was a sign of the fragility of the relationship between the countries, which is “stable only to the extent that they both have enormous economic stakes.”

“It is neither party’s interest to deliberately destabilize or cause some problems. But it doesn’t mean they see things eye to eye, so there’s still a huge gap there,” he said.

Mr. Xiao, in his piece, accused Australian officials of viewing the relationship “through the lens of a Cold War mentality and using national security as a pretext to portray China as a hypothetical enemy,” warning that such an approach would run counter to Australia’s national interest.

An editorial in the state-run Global Times this week was blunt: “These recent petty moves by relevant Australian authorities inevitably recall the unpleasant period in China-Australia relations a few years ago.”

‘An excuse for geopolitical contest’

China is Australia’s most important trading partner, accounting for almost a third of its exports. At the same time, Beijing’s increasing military ambitions in the region have been felt closer and closer to Australian shores, as it pursued security agreements with Pacific island nations and sent warships to traverse nearby waters.

Since Prime Minister Anthony Albanese of Australia took office in 2022, he has performed a balancing act of trying to improve the economic relationship and back away from the previous government’s more confrontational stance toward Beijing, while aggressively tending to its partnerships in the Pacific to ward off China’s encroachment.

“The Albanese government has gradually recognized that China is not a neighboring power that can be marginalized, bypassed, or ‘controlled’ through security policies, but rather an important partner with whom Australia must coexist pragmatically over the long term,” said Chen Hong, director of the Australian Studies Center at East China Normal University in Shanghai.

This week, Australia finalized a long-sought security pact with Vanuatu, in which the small nation of about 330,000 about three hours by plane from Australia agreed that it will “not permit its territory to be used for any foreign military base or infrastructure” and confirmed that Australia is its “primary policing partner.” This comes after China has sought policing deals with several Pacific countries.

Asked about the agreement, a spokesman for China’s Ministry of Foreign Affairs said cooperation with Pacific island nations “should not target any third party, still less be used as an excuse for geopolitical contest.” China, which is also pursuing its own agreement with Vanuatu, is approaching nations in the region “fair and square,” said Guo Jiakun, the spokesman.

“Our cooperation is not imposed on anyone, nor does it target any third party,” he said.

When it comes to the Pacific islands, “That’s an area where the Albanese government isn’t hedging at all, it’s out-and-out to block incursions into the Pacific, making no apologies for that,” said James Laurenceson, director of the Australia-China Relations Institute at the University of Technology Sydney.

China and Australia will continue to disagree on spheres of influence in the region and over U.S. military presence in the Asia-Pacific, but have been able to register their differences without the relationship deteriorating as it did around 2020, Mr. Laurenceson said.

“You’ve got Canberra and Beijing agreeing to disagree, neither side overreacts, and the relationship kind of moves on,” he said.

The stabilization has been a hallmark of Mr. Albanese’s foreign policy, who has taken a vastly different tack than his predecessors, who made a point of pledging to “stand up” to China, publicly airing accusations of foreign interference and raising questions about the origins of the Covid-19 coronavirus.

Mr. Albanese has met with China’s leader, Xi Jinping, four times, trying to keep the focus on trade and tourism, and exercising restraint in remarks about Chinese military presence in a way the conservative opposition at home has attacked as “weak.”

Still, he has been forthright in speaking about Beijing’s ambitions in the region, saying in a recent interview that the Chinese are “interested in increasing their influence at a minimum, and hegemony in the longer term.”

The Australian public is similarly nuanced in its views of China, said Charles Lyons-Jones, a research fellow at the Sydney-based Lowy Institute, who carried out the recent opinion polls on Australian public perceptions of China and the United States.

“Australians support the trading relationship with China but remain cleareyed about the security threat,” he said. “They are highly capable of holding contradictory ideas at the same time.”