China, Australia face tricky diplomatic road after trade row

The likely lifting of the final major tariffs on Australian products by China in coming weeks will conclude a bitter three-year trade war. That alone is unlikely to usher in a new era in relations between the two countries.

Chinese Foreign Minister Wang Yi’s first trip to Australia in seven years to meet with his counterpart Penny Wong in Canberra on Wednesday is the latest sign of a tentative improvement in ties. During his trip, Wang will attend the Australia-China Foreign and Strategic Dialogue, which was postponed for years during a diplomatic deep freeze.

Speaking at the start of her meeting with Wang on Wednesday, Australia’s Foreign Minister Wong said it was important that communication “never be withheld as a punishment or offered as a reward.”

“As you know, dialogue enables us to manage our differences; we both know it does not eliminate them. Australia will always be Australia and China will always be China,” she said.

Wang’s visit comes just over a week after China announced it was considering lifting trade tariffs as high as 218% on Australian wine, removing the last major sanction imposed after relations frayed in 2020. But even as the economic disputes ease, some experts caution the overall relationship still faces headwinds from persistent political differences and increased competition between China and Australia’s principal ally, the US.

“They’ve tried to take the very obvious, in-your-face economic disputes off the table, but that doesn’t mean the two sides have kissed and made up in any fundamental sense,” said Richard McGregor, Senior Fellow for East Asia at the Lowy Institute think tank. 

Australia and China have rapidly improved their diplomatic relations since the election of the center-left Labor government in May 2022, including the restoration of high-level official meetings and the lifting of trade sanctions imposed by Beijing at the height of tensions.

In October, China released Australian journalist Cheng Lei after detaining her for three years, which was followed shortly afterward by a visit to Beijing by Prime Minister Anthony Albanese - the first by a sitting Australian leader in seven years.

A Beijing court’s decision to hand Australian writer Yang Hengjun a suspended death sentence in February, however, took the government in Canberra by surprise, casting fresh doubts over the relationship.

Since then, the list of disputes between Beijing and Canberra hasn’t shrunk. Amid growing tensions in the South China Sea, where the Chinese government claims vast swathes of territory, Australia signed a memorandum of understanding on maritime security with the Philippines. President Ferdinand Marcos Jr delivered a defiant speech to the Australian parliament, where he said he would not cede “one square inch” of territory.

After Australia and Vietnam deepened their ties by agreeing to a comprehensive strategic partnership, China’s Foreign Ministry spokesman Wang Wenbin warned against building “exclusive circles.” Australia’s ambassador to Vietnam Andrew Goledzinowski made an unusually public rebuttal, saying on his official social media account that China was over-reacting.

“Vietnam has always valued self-reliance. If strengthening ties with Australia contributes to that why should another country object?” he said.

Some experts are urging Australia and China to keep the focus on improving relations. Former Australian diplomat Jocelyn Chey said despite the political differences, the two countries’ economies were “deeply complementary.”

“Certainly, on Australia’s side, we really can’t do without China,” said Chey, now a visiting professor at the University of Sydney. “You have to rebuild trust and the only way you can rebuild trust is by working together.”

But McGregor warned that there were many “geopolitical trapdoors” that both sides could fall into over coming years. While China and Australia had agreed to put aside their differences for the moment and focus on what they could agree on, he said, the shared agenda going forward “is still pretty narrow.”

“The big question is how China behaves and whether they can develop a modus vivendi with the US,” McGregor said.