Lyla Lindsey
Australia's relationship with China has been a complex one, with economic ties and investments intertwined with rising tensions and military threats. China is Australia's biggest trading partner, and over the years, Chinese companies have invested heavily in Australia, acquiring mining and energy companies, infrastructure, and agricultural land. However, in recent times, the relationship has soured, with a plunge in Chinese investment and growing concerns about China's military buildup and territorial disputes. With Australia's defence minister calling for transparency from China, the future of the two countries' relationship remains uncertain as Australia navigates its position in the region.
| Characteristics | Values |
|---|---|
| Is Australia owned by China? | No |
| China's rank among foreign investors in Australia | 10th largest foreign investor |
| Percentage of total investment in Australia from China | 1.9% |
| China's share of Australian water entitlement | 1.5% |
| China's rank among countries with property in Australia | 4th |
| China's rank among countries that Australia trades with | 1st |
| Chinese investment in Australia in 2022 | Down 70% from previous year |
| Chinese companies' view of Australia | A "test market" |
| Chinese investment in Australia between 2007 and 2021 | $158 billion |
| Examples of Chinese acquisitions in Australia | Energy Australia, Alinta Energy, Bellamy's, Balmoral Iron, Darwin Port, Port of Newcastle |
| Australian industries that export to China | Agriculture, mining, wool |
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What You'll Learn
Chinese investment in Australia
Australia is not owned by China, but China has invested heavily in the country. Between 2007 and 2021, China's state-owned enterprises and private companies invested a total of $158 billion in Australia, including in mining and energy companies, infrastructure, wind turbine farms, and a dairy processor. Chinese companies have also been major stakeholders in Australian agricultural land and water. In 2024, Chinese investment in Australia increased by 41%, from US$613 million in 2023 to US$862 million.
China's investments in Australia have not always been welcomed, however. Some deals, such as the 99-year lease of Darwin Port to the Chinese company Landbridge Group in 2015 and the 98-year lease of the Port of Newcastle to a Chinese-backed consortium in 2014, have drawn criticism from politicians and national security experts.
Despite these concerns, Australia has benefited from Chinese investment, and the loss of this investment could mean Australian companies miss out on future opportunities, including access to the Chinese domestic market. Australia is also losing an important source of foreign funding, with Chinese investment in the country plummeting by 70% in 2021 to its lowest level since the global financial crisis. This decline in investment may be due to a shift in the direction of China's foreign investment, as well as tensions between the two countries.
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China's military build-up
China has significantly increased its investments in Australia over the past two decades. Between 2007 and 2021, Chinese state-owned enterprises and private companies invested a total of $158 billion in Australia, acquiring mining and energy companies, infrastructure, wind turbine farms, and even a dairy processor. Chinese companies also have substantial stakes in Australian agricultural land and water, with China being the third-largest stakeholder in Australian water.
However, there has been a recent decline in Chinese investment in Australia, with a 70% plunge in 2022, leading some to question if China has already acquired what it wanted. This shift may be due to a change in China's foreign investment strategy or a result of increasing tensions between the two countries.
Australia has expressed concerns about China's ""extraordinary military buildup," calling for greater transparency and reassurance from Beijing. China's military budget is the second-highest in the world, after the United States, and it has been developing advanced capabilities in nuclear, conventional, cyber, and space domains. China's military buildup has been justified as a means to prevent foreign aggression and protect its interests, but it has also raised concerns among its neighbors and increased tensions in the region, particularly in the South China Sea and the East China Sea.
China's military buildup has been accompanied by increasingly assertive actions, such as declaring control over airspace in the East China Sea and its claims over Taiwan, which it considers a breakaway province. These actions have prompted responses from countries like Japan, which has proposed increasing its defense budget, and Australia, which has sought to strengthen its military ties with the United States. China's growing military power and its willingness to project it have significant implications for the Indo-Pacific region and beyond, challenging the dominance of the United States and potentially reshaping the geopolitical landscape.
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Australia's relationship with the US
Australia and the United States have a close relationship, with the US being Australia's largest foreign investor. US firms have been operating in Australia for over 100 years and are said to employ more than 300,000 Australians, contributing significantly to the country's GDP. Bilateral direct investment (FDI) between the two countries totals nearly US$230 billion.
The two countries also share membership in several international organizations, including the United Nations, ASEAN Regional Forum, Asia-Pacific Economic Cooperation (APEC), G-20, International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), World Bank, and the World Trade Organization (WTO). Australia is also a partner for cooperation with the Organization for Security and Cooperation in Europe (OSCE) and an Enhanced Partner of the North Atlantic Treaty Organization (NATO), both of which the US is a full member of.
The security relationship between the US and Australia was formalized in 1951 by the Australia, New Zealand, United States Security (ANZUS) Treaty, which has been the cornerstone of Australian security arrangements. In recent years, the two countries have further strengthened their defense cooperation through agreements like the US-Australia Force Posture Agreement signed in 2014, which includes the annual rotation of Marines to Darwin and enhanced rotations of US Air Force aircraft to Australia. They have also conducted joint military exercises, such as Talisman Saber, to ensure interoperability between their defense forces.
However, the relationship between the two countries has experienced some shifts in recent years, particularly during the Trump administration. Polling by the Australia Institute suggests that Australians' perception of the US-Australia alliance has been negatively impacted by the Trump presidency, with many questioning the reliability of the US as an ally. This has led to a growing sentiment in Australia towards pursuing an independent foreign policy and a potential shift in the country's security priorities.
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China's agricultural investments
Australia is not owned by China, but China has invested heavily in the country, including in its agricultural sector. In 2017, Chinese investment in Australia's agricultural sector tripled from $300 million to $1 billion. China has also been a major investor in Australian mining and energy companies, infrastructure, wind turbine farms, and dairy processors.
Australia has a global reputation for its expertise in agriculture and the high quality of its produce. It has large tracts of unused or underutilized areas in its northern regions, which, with investment in new productive capacity and technology, could produce more food for sale on world markets. China, meanwhile, has a surplus of investable capital and has developed plans for the further development of modern agriculture.
Both countries have therefore sought to strengthen investment and technological cooperation in agriculture to enhance food security. In the past, Australia has hosted delegations of Chinese government, business, and banking representatives in the agricultural sector, and Australian business representatives and officials have made reciprocal visits to China.
However, Chinese investment in Australia has been plummeting in recent years. In 2022, it reached its lowest level since the global financial crisis, with a 70% decrease compared to the previous year. Analysts argue that this loss of foreign funding means Australian companies may miss out on future opportunities, including access to the Chinese domestic market.
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China's influence on Australian trade
Australia and China have had a close trade relationship, with Chinese companies investing heavily in Australia. Between 2007 and 2021, China invested a total of $158 billion in Australia, including in mining, energy, infrastructure, wind turbine farms, and a dairy processor. Chinese companies have also been major stakeholders in Australian agricultural land and water, with China being the third-largest stakeholder in Australian water.
However, in recent years, Chinese investment in Australia has declined significantly, dropping to "literally none" in 2022, according to some sources. This decline has resulted in a loss of foreign funding for Australia, which may impact future opportunities for Australian companies in the Chinese market.
The shift in China's investment pattern may be due to a change in its foreign investment strategy. Under the "going out" strategy initiated at the turn of the century, Chinese firms were encouraged to invest abroad to secure natural resources and intellectual property to support economic growth. Australia, being a resource-rich country, was an attractive investment destination for China.
Despite the recent decline in Chinese investment, Australia continues to have a significant trade relationship with China. In 2023, China bought $219 billion, or 32.5%, of Australia's total exports worldwide, making it Australia's largest export market.
In the context of the US-China trade tensions, Australia has refused to partner with China against Trump's tariffs. Australia's Prime Minister Anthony Albanese criticized Trump's tariffs as "not the act of a friend" but also stated that his government would not retaliate.
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