Australia’s economic relationship with China remains strong, but growing restrictions on investment and research risk undermining long-term economic and national security.
Within Australia, much of the critique of the government’s foreign policy settings revolve around the defence portfolio, in particular, the degree to which strategy and capabilities have become ever more aligned with, and dependent upon, the US at the same time as it has become a less trustworthy partner.
The AUKUS agreement with the US and UK, struck in 2021, is a case in point.
That former prime minister Paul Keating and prominent strategist Hugh White quickly came out in opposition is perhaps not surprising.
Both have long warned that in the face of rapidly expanding Chinese power it would be unwise for Australia to rely on an alliance with the US to underwrite the nation’s security, let alone double down on it and discard any Plan B in the process.
But as time has passed, another former Prime Minister, Malcolm Turnbull has also described AUKUS as a ‘terrible deal’. This is despite having positioned Australia to more actively contest Chinese power when he was in office. Turnbull argues that AUKUS means Australia will be bound so closely to the US that “we will have lost both sovereignty and security, and a lot of money as well”.
Other strategic commentators with reputations for being China hawks also describe the faith that AUKUS puts in the strategic decision-making nous of the US and the likelihood of touted defence capabilities arriving as “magical thinking”.
In the international economic portfolio, however, it is not so easy to accuse Canberra of uncritically following the US.
In fact, an objective assessment would conclude that Canberra is frequently more aligned with Beijing than it is with Washington.
Australia and China remain firm supporters of the World Trade Organization (WTO).
In December 2019, US actions drove the WTO’s Dispute Settlement Body into insolvency. Each month since, Australia and China, along with 128 other co-sponsors, propose a motion to restore it. Each month, the US rejects the proposal.
Last month, China joined Australia and 64 other members to sign a new WTO Agreement on E-Commerce. The US remained on the sidelines.
While Chinese electric vehicles are blocked from the US market by 100 per cent tariffs, they enter Australia tariff and quota-free thanks to the China-Australia Free Trade Agreement, which continues to enjoy bipartisan domestic political support.
In the face of US pressure to curtail economic ties, Australia’s trade minister says, “We don’t want to do less business with China, we want to do more business with China. We’ll make decisions about how we continue to engage with China based on our national interests and not on what the Americans may or may not want.”
While in the international economic portfolio Canberra has distanced itself from Washington, there are nonetheless still areas where greater critical scrutiny of policy settings might be applied.
One is Chinese investment.
The volume of Chinese investment in Australia is now so small that China no longer appears in quarterly reports of the Foreign Investment Review Board because it does not rank among the top 10 foreign investors.
Not only has new Chinese investment slowed to a trickle but past investments have been sold: the stock of Chinese investment in Australia today is one-quarter less than it was in 2019.
The collapse coincides with security risks being increasingly prioritised in the investment screening process. In the case of the lease to operate Darwin Port, an asset acquired by a Chinese investor through a commercial process more than a decade ago is now facing forced divestment.
Given the significant geopolitical differences between Canberra and Beijing, there are legitimate reasons to run a security ruler over Chinese investment proposals.
The issue is not that some investment proposals have been blocked.
Rather, it is whether the environment created by current settings appropriately weight Australia’s broader and longer-term interests.
The government has also recognised that national security is underpinned by economic security.
But just how Australia can cement its economic security absent deep and extensive partnerships with world-leading Chinese companies and capabilities never gets explained.
Today, in many industries an American or Japanese investor is a poor substitute for a Chinese one.
It is Chinese investors that have the best technology, talent and access to rapidly evolving supply chains.
Another area where a proportionate response to security risks is arguably not being struck is the scientific research collaboration that allows Australia to stay connected to the global knowledge frontier.
In 2019, the Australian Research Council funded 166 projects that involved Chinese partners. This accounted for 18 per cent of all ARC-supported projects involving international collaboration.
By 2025, this had slumped to just 84 projects and 10 per cent of the total.
This is not because Chinese partners have become less capable. To the contrary, according to the InCites database, in 2025, researchers affiliated with a Chinese institution appeared on 42 per cent of top-decile, most-cited publications globally. Researchers affiliated with US institutions appeared on just 22 per cent.
Rather, what has cratered the level of support for research collaboration with China is that Australian universities and researchers have been bombarded with warnings from security agencies and commentators about nefarious Chinese interference and intellectual property theft.
Of course, just like Chinese investment, any research collaboration with China should proceed in a risk-informed manner. But the weight of evidence points to an overreaction.
Given that China is a much more important hub of global knowledge creation than Australia, the assumption that Australia is more vulnerable to intellectual property theft is wrong-headed.
In any case, when Australian and Chinese researchers collaborate to create new knowledge, the gains are available to both sides.
Australian universities also overwhelmingly engage in research that js ‘fundamental’, not ‘classified’ or covered by other restrictions such as Defense Export Controls (DECs). Just 2 per cent of research and development spending in the higher education sector relates to ‘defence’.
And when research is classified or covered by DECs, it is subject to an entirely different and more stringent set of risk mitigations.
The danger then is that in areas like investment and research collaboration with Chinese partners, policy settings might appear to be heading off security vulnerabilities associated with individual projects.
But the aggregate impact, particularly over the longer-term, could well be the precise opposite: Australia’s economic security, and therefore national security, will have been undermined.
James Laurenceson is Director of the Australia-China Relations Institute with the University of Technology, Sydney.