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The latest round of American tariffs confirms that the global trade order is undergoing its biggest upheaval since the Second World War.
But while the US doubles down on protectionism, Asia is moving forward. Australia stands at a crossroads: cling to old alliances or define a new strategy that secures our economic future without surrendering our national interests. Standing still is not an option.
This isn’t just about tariffs — it’s about who shapes and controls the supply chains, technologies and standards of the future. The question is not whether Australia engages, but whether we do so as an observer or a strategic player.
While Australia hesitates, others are moving ahead. ASEAN nations are deepening ties with China across infrastructure, clean energy and digital trade. European firms are tapping into China’s consumer and services sectors. Even the US, despite its rhetoric and actions, remains deeply engaged in trade with China.
While the Trump administration retreats from global trade institutions, Asian leaders at the recent Boao Forum for Asia presented a clear alternative: regional resilience, openness and collaboration. Trade frameworks such as RCEP (Regional Comprehensive Economic Partnership), CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and the ASEAN–China Free Trade Agreement are reinforcing Asia’s position as the world’s most dynamic economic region.
Presentations from China and Southeast Asia showcased tangible outcomes — from smart city solutions and intelligent health systems to AI-driven environmental technology — highlighting a future built on cooperation.
China’s economy, despite its challenges, is still predicted to grow around 5 percent this year. Even if that rate is not achieved, China has one of the strongest projections globally. Other nations are positioning themselves to benefit. Asia is the engine for global economic growth, with IMF projections suggesting real GDP growth across the region of around 4.5%, contributing up to 60% of global growth in the year ahead.
If Australia hesitates, others will step in to capture the billions in trade and investment we once led.
Beyond iron ore: the next phase of the Australia-China relationship
Australia’s economic relationship with China is evolving, but the pace of change must match shifting global dynamics. While iron ore, coal, LNG and agriculture remain central, the coming decade will increasingly be shaped by renewable energy, advanced manufacturing, healthy living, education and other high-value services. Global competitiveness will increasingly depend on domestic capability — including onshore processing, technological innovation and integrated supply chains.
Security concerns will rightly continue to inform Australia’s policy settings, particularly in sensitive sectors such as critical minerals. With growing pressure from the US and Europe to reduce Chinese involvement in key supply chains, restrictions on direct investment are likely to persist. But it remains unclear what strategic benefit is gained from blunt, headline-driven policy settings.
Many Australian companies are already re-engaging with China — not just to maintain access, but to build deeper commercial ties in clean energy, aged care, health, education and financial services. These firms understand what many in Canberra already acknowledge: shutting the door on China is neither practical nor advantageous. A structured, de-risked engagement model — one that leverages Chinese capital, innovation and scale while protecting national interests — is both smart and achievable.
A smarter way
For all the political noise about critical minerals, the reality is that few projects are viable without significant external capital. If direct Chinese investment in strategic sectors is politically unworkable, joint ventures offer a viable alternative. JVs allow for shared governance and risk mitigation rather than outright ownership. This model has worked with Japanese investment historically into the energy sector and could help scale Australia’s critical minerals sector without overexposing it to foreign control.
Australia’s junior miners are pioneers of creative funding solutions — blending debt, royalty, streaming and offtake arrangements to preserve control while attracting investment. These mechanisms are already being used to reduce reliance on equity and retain operational independence. There is clear scope to expand their use, particularly in strategic industries.
Addressing the concerns of Australia’s foreign investment regime is fundamental to a smarter way. The current focus on “control, access and influence” can be managed by structurally separating the investment from security-sensitive functions — both at the board level and literally at the coalface. Joint ventures in which access to critical minerals, infrastructure or technology is restricted to Australians — and in which foreign investors are excluded from operational decision-making — could help bridge the gap between economic opportunity and national security.
Another promising pathway is collaboration in third markets, particularly in Southeast Asia. Australia and China both have deep economic ties with ASEAN and could co-invest in clean energy, infrastructure and digital trade — aligning with regional development goals while minimising direct bilateral risk.
In a dedicated Australia–China Senior Leaders Forum at Boao, convened by Fortescue’s Andrew Forrest, there was a commitment to accelerate the development of a green iron supply chain. This initiative could underpin long-term collaboration, support new productive investment into Australia and significantly reduce global carbon emissions. Other discussions explored how renewable energy, eco-friendly construction and digital innovations in energy management can combine to support long-term environmental stewardship while fuelling economic recovery.
These types of collaborations are not only commercially sound — they send a powerful signal that strategic cooperation is possible, even in complex geopolitical conditions.
The high cost of standing still
At the heart of this debate is a fundamental question: can Australia afford to step back from China? The answer is clear — no.
The cost of inertia is measured in missed trade deals, lost investments and diminished influence in the fastest-growing region in the world. Meanwhile, our regional competitors — Europe and even the US — are finding ways to balance security concerns with economic opportunity.
Australia’s pragmatic approach to engagement with China — “collaborate where we can, disagree where we must, and act in our national interest” — is proving effective. For business, this opens the door to deeper partnerships in priority sectors and new models of capital and collaboration.
Australia’s relationship with China will remain complex. But complexity is no excuse for paralysis. The challenge isn’t engagement versus disengagement. It’s about shaping a strategy that protects national interests while securing our economic future.
The next decade will be defined by those who act. If Australia waits too long, others will move first, and the opportunities will be gone.
David Olsson is an international director of King & Wood Mallesons and the president of the Australia China Business Council. He attended the recent Boao Forum for Asia in Hainan, China.
