Australia’s Prime Minister Visits China: Resetting Bilateral Ties

In July 2025, Australian Prime Minister Anthony Albanese’s official trip to China marked a pivotal moment in the two nations’ relationship—a relationship that has oscillated between deep economic interdependence and diplomatic tension over the past decade. The visit, the first by an Australian leader to China in seven years, came against a backdrop of gradually thawing relations following a period marked by trade restrictions, diplomatic spats, and public distrust. For context, China has remained Australia’s largest trading partner for 16 straight years, with bilateral trade totaling over AUD 280 billion in 2024—a figure that underscores the stakes of their engagement. Beyond numbers, the visit aimed to rebuild trust, strengthen economic bonds, and explore new areas of cooperation that could benefit both nations and the broader region.

Trade: From Traditional Strengths to Emerging Frontiers

On the trade front, discussions during the visit centered on updating the China-Australia Free Trade Agreement (ChAFTA), which first took effect in 2015. Both sides expressed eagerness to expand traditional partnerships in sectors that have long formed the backbone of their trade relationship: agriculture, energy, and iron ore. Australia’s top exports to China include iron ore (accounting for nearly 60% of its total exports to China), coal, natural gas, and agricultural products like barley, wine, and beef. For China, these imports are critical: iron ore feeds its massive steel industry, energy resources power its manufacturing sector, and agricultural products help meet the demands of its growing middle class.

However, the talks also ventured into emerging sectors, reflecting a shared recognition that economic collaboration must evolve with global trends. Artificial intelligence (AI) emerged as a key area of interest, with both nations exploring joint research initiatives in AI ethics, healthcare diagnostics, and smart city technologies. Australian AI startups, known for their innovation in machine learning and data analytics, stand to gain access to China’s vast market and funding pools, while Chinese tech firms could benefit from Australia’s strong regulatory frameworks and research institutions.

Healthcare was another focal point. With an aging population in both countries, there is growing demand for advanced medical technologies, telehealth solutions, and pharmaceutical research. Australian biotech companies, which excel in areas like personalized medicine and vaccine development, are poised to partner with Chinese healthcare providers to expand access to cutting-edge treatments. In return, China’s expertise in scaling healthcare services to large populations could offer valuable insights for Australia’s public health system.

Green energy and the digital economy also dominated conversations. Australia’s abundance of renewable energy resources—solar, wind, and hydro—aligns with China’s ambitious carbon neutrality goals (pledging to reach peak carbon emissions by 2030 and carbon neutrality by 2060). Discussions included plans for joint renewable energy projects, such as solar farms in Australia that could export green hydrogen to China, and collaborations in battery technology to reduce reliance on fossil fuels. In the digital economy, both sides agreed to streamline cross-border data flows, support e-commerce platforms, and explore digital payment integration—moves that could boost small and medium-sized enterprises (SMEs) in both countries.

A notable highlight of the visit was the participation of executives from Australian mining giants BHP and Rio Tinto, who met with leaders from Chinese steel firms Baowu and Ansteel to secure ongoing collaboration in resources. These meetings were not merely symbolic: China produces over 50% of the world’s steel, and Australia supplies more than 60% of China’s iron ore imports. However, challenges loom. As China accelerates its steel industry’s green transformation—aiming to reduce carbon emissions per ton of steel by 20% by 2030—Australia faces pressure to develop low-carbon iron ore production methods. This includes investing in technologies like hydrogen-based steelmaking and carbon capture, which could require billions in upfront investment but are critical to maintaining Australia’s market share. Failure to adapt could lead to revenue losses, as Chinese steelmakers may turn to alternative suppliers or shift to recycled steel.

Tourism and Education: Rebuilding People-to-People Ties

Beyond trade, the visit breathed new life into tourism and education ties—sectors that were hit hard by strained relations in recent years. China has long been Australia’s biggest source of international students and tourists, contributing billions to the Australian economy annually. Before the diplomatic rift, over 1.4 million Chinese tourists visited Australia each year, and Chinese students made up nearly 30% of Australia’s international student population, supporting universities, local businesses, and communities.

The resumption of the China-Australia Tourism Dialogue, announced during the visit, signals a fresh start. Both nations agreed to simplify visa processes, promote joint tourism campaigns, and restore direct flight routes that were reduced during the tensions. Australian tourism operators, from luxury hotels in Sydney to wildlife parks in Queensland, are already preparing for a surge in Chinese visitors, with some launching Mandarin-language services and tailored tour packages.

In education, the “Joint Outcome Statement” reaffirmed Australia’s welcome to Chinese students, acknowledging their valuable contributions to academic research, cultural diversity, and society at large. This comes after a period where enrollment numbers dipped due to safety concerns and political rhetoric. Australian universities, which rely heavily on international student fees, are optimistic about a rebound, with some planning to expand partnerships with Chinese universities in fields like engineering, environmental science, and business. For Chinese students, Australia remains an attractive destination due to its high-quality education system, post-study work visas, and multicultural environment.

These moves are not just economic: they are crucial for rebuilding trust at the grassroots level. People-to-people exchanges foster mutual understanding, break down stereotypes, and create a foundation for long-term diplomatic stability. As one Australian official noted, “A Chinese student studying in Melbourne or a Australian tourist visiting the Great Wall is more than a transaction—they are ambassadors for their countries.”

Southeast Asia’s Free Trade Momentum Builds

Southeast Asia has emerged as a hotbed for free trade agreement (FTA) activity in 2024-2025, expanding its economic cooperation network at a steady pace. Home to 650 million people and a combined GDP of over $3 trillion, the Association of Southeast Asian Nations (ASEAN) and its individual member states are increasingly leveraging FTAs to drive growth, attract investment, and reduce reliance on any single market. This momentum reflects a strategic shift: as global supply chains diversify away from overconcentration in China, Southeast Asia is positioning itself as a manufacturing and trade hub, while also deepening ties with traditional partners like China, Europe, and the Middle East.

ASEAN-China Free Trade Area (ACFTA) 3.0: A New Era of Integration

A major milestone in this trend is the “substantial conclusion” of the ASEAN-China Free Trade Area (ACFTA) 3.0, announced in March 2025 after three years of negotiations. First established in 2010, ACFTA has already eliminated tariffs on 90% of goods traded between ASEAN and China, facilitating over $600 billion in annual trade. The upgraded agreement, however, goes beyond traditional trade in goods to integrate green economy and digital economy initiatives, aiming to deepen economic integration and address 21st-century challenges.

In green sectors, ACFTA 3.0 includes plans for joint development and trade of renewable energy products, such as solar panels, wind turbines, and electric vehicle (EV) batteries. ASEAN nations like Vietnam and Malaysia, which have rapidly expanding renewable energy sectors, stand to benefit from increased access to China’s manufacturing capabilities and technical expertise. China, in turn, gains a larger market for its green tech exports and opportunities to invest in ASEAN’s renewable energy infrastructure. The agreement also includes provisions for sharing best practices in carbon pricing, sustainable agriculture, and waste management—critical steps for a region highly vulnerable to climate change.

The digital economy focus of ACFTA 3.0 is equally ambitious. It seeks to strengthen collaboration in e-commerce by harmonizing regulations on cross-border online sales, protecting consumer data, and simplifying customs procedures for digital goods. This could be a game-changer for ASEAN’s growing e-commerce market, which is projected to reach $170 billion by 2025. Platforms like Lazada (backed by China’s Alibaba) and Shopee (based in Singapore) are expected to expand their reach, connecting small businesses in rural ASEAN communities to Chinese consumers. Additionally, the agreement aims to boost digital payments by promoting interoperability between regional systems, such as China’s Alipay and Southeast Asia’s GrabPay, making cross-border transactions faster and cheaper.

The impact of ACFTA 3.0 extends beyond economics: it solidifies China’s role as a key economic partner for ASEAN, counterbalancing the influence of other powers like the United States. For ASEAN, the agreement is part of a strategy of “economic neutrality,” allowing it to benefit from partnerships with multiple nations without aligning too closely with any one bloc.

Bilateral Deals: Expanding Horizons

Beyond regional agreements, several new bilateral FTAs involving Southeast Asian nations have made headlines, reflecting a proactive approach to global engagement.

• Thailand and the European Free Trade Association (EFTA): On November 30, 2024, Thailand finalized its FTA with EFTA—a bloc comprising Iceland, Liechtenstein, Norway, and Switzerland—after two years of negotiations. The deal eliminates tariffs on 95% of goods traded between the parties, with a focus on Thai exports like automobiles, electronics, and processed foods. For EFTA nations, the agreement opens access to Thailand’s growing market for high-value goods such as pharmaceuticals, luxury goods, and renewable energy technologies. Switzerland, in particular, is eyeing opportunities in Thailand’s healthcare and precision engineering sectors.

• Vietnam and the UAE: Vietnam signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates on October 28, 2024, building on Cambodia’s similar deal, which took effect on January 31, 2024. The UAE, a major hub for trade between Asia, Europe, and Africa, offers Vietnam a gateway to Middle Eastern and North African markets. Under the CEPA, Vietnam will gain duty-free access for key exports like textiles, electronics, and coffee, while the UAE will benefit from reduced tariffs on petroleum products, chemicals, and construction materials. The agreement also includes provisions for investment in Vietnam’s infrastructure and renewable energy projects, with UAE-based firms already exploring partnerships in solar power and port development.

• The Philippines and South Korea: The Philippines and South Korea completed domestic ratification of their FTA in September and November 2024, respectively. Once implemented, South Korea will grant duty-free access to 11,164 Philippine products, a boon for exports of bananas, processed pineapples, mangoes, and other agricultural goods. For the Philippines, this is a significant win: agriculture accounts for 10% of its GDP and employs over 25% of the workforce. South Korea, meanwhile, will gain greater access to the Philippine market for automobiles, electronics, and K-pop merchandise—leveraging the strong cultural influence of Korean pop culture in the Philippines. The FTA also includes commitments to cooperate in healthcare, with South Korean hospitals exploring partnerships to build facilities in the Philippines.

These bilateral deals are more than just trade pacts: they are strategic tools that allow Southeast Asian nations to diversify their economic relationships, reduce risks from global volatility, and position themselves as attractive destinations for foreign investment. As one ASEAN trade official put it, “We’re no longer waiting for others to come to us. We’re going out and building partnerships that reflect our priorities.”

APEC Focuses on Cooperation Amid Global Uncertainty

The Asia-Pacific Economic Cooperation (APEC) forum, which brings together 21 economies accounting for 60% of global GDP and 48% of trade, has been actively addressing pressing issues in regional economic cooperation. In a world grappling with rising protectionism, supply chain disruptions, and climate change, APEC’s role as a forum for dialogue and practical cooperation has become more critical than ever. The APEC Business Advisory Council (ABAC), which represents the private sector, has been particularly vocal, urging member economies to prioritize collaboration over fragmentation.

Combating Protectionism and Fragmentation

ABAC has repeatedly voiced concerns over rising global protectionism, noting that tariffs, export restrictions, and “friend-shoring” policies (where countries prioritize trade with allies) are increasing costs for businesses and slowing economic growth. In its 2025 annual report, ABAC warned that regional fragmentation could reduce global GDP by up to 7% over the next decade—a loss of trillions of dollars. To counter this, the council emphasized that sustained commitment to cooperation, open markets, and non-discrimination is vital for shared prosperity.

ABAC’s proposed “building blocks” strategy seeks to advance regional integration by combining existing high-quality agreements—such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP)—with practical short-term goals. This dual approach balances progress toward a long-term Free Trade Area of the Asia-Pacific (FTAAP) with immediate, tangible results to keep momentum going. For example, member economies could first agree to simplify customs procedures for a subset of goods (like medical supplies or electronic components) before tackling broader tariff reductions. This incremental approach, ABAC argues, is more politically feasible and can deliver quick wins that build confidence.

Priorities: Digital Transformation and Climate Change

Two key priorities have emerged from APEC’s recent discussions, reflecting the region’s role as a leader in innovation and sustainability.

• Digital transformation: To keep pace with the global economy’s rapid digitization, ABAC introduced a “new services agenda” targeting barriers in digitally delivered services—such as cloud computing, online education, and telemedicine. These services, which now account for over 50% of global trade in services, face a patchwork of regulations that hinder growth. For example, some economies restrict cross-border data flows or require local data storage, increasing costs for tech companies. The new agenda proposes harmonizing regulations, establishing mutual recognition of digital credentials, and promoting digital literacy—efforts to unlock new growth through digital trade. APEC estimates that reducing barriers to digital services could add $2 trillion to the region’s GDP by 2030.

• Climate change: On climate action, the council recommended a “greener trade framework” featuring expanded trade in environmental goods and services (such as solar panels, carbon capture technology, and sustainable consulting) and harmonized carbon accounting standards. This is critical because inconsistent carbon measurement systems can create trade barriers—for example, a country with strict carbon standards might impose tariffs on imports from nations with lax rules, sparking trade disputes. By agreeing on common standards, APEC economies can avoid such conflicts and create a level playing field for green businesses. The framework also includes plans to phase out fossil fuel subsidies, which total over $300 billion annually in the region, and redirect those funds to renewable energy and green infrastructure.

APEC’s focus on these issues reflects a broader shift: economic growth is no longer measured solely by GDP but by its sustainability and inclusivity. As APEC’s 2025 host, Papua New Guinea, put it in its opening address, “We cannot talk about prosperity if our children inherit a planet that is unlivable or a digital divide that leaves billions behind.”

How These Developments Shape the Global Landscape

The economic and diplomatic shifts in the Asia-Pacific and Oceania regions carry significant implications for the world economy and international relations, reshaping trade flows, power dynamics, and global priorities.

Economic Implications: Reconfiguring Trade and Growth

Advancing FTAs in the Asia-Pacific and Oceania are reconfiguring global trade flows, leading to more efficient resource allocation. Expanded trade between Southeast Asian nations and their partners, for example, increases global product supply, fosters competition, and drives efficiency. For instance, Vietnam’s CEPA with the UAE could reduce the cost of Vietnamese coffee in Dubai, while making UAE oil more affordable for Vietnamese manufacturers. This interdependence creates a more resilient global economy, as shocks in one region can be absorbed by others.

Closer China-Australia ties will also influence global markets for iron ore, agricultural products, and more. A rebound in Australian wine exports to China, for example, could lower prices for Chinese consumers while boosting Australian winemakers, who have struggled in recent years. Similarly, increased collaboration in green energy could drive down the cost of renewable technologies globally, accelerating the transition away from fossil fuels.

Moreover, the region’s growth—fueled by digital and green economy advancements—promises to be a key driver of global economic recovery. The Asia-Pacific is home to 70% of the world’s tech unicorns (startups valued at over $1 billion), and its digital economy is growing at 10% annually—faster than any other region. Innovations in AI, fintech, and clean energy developed here are likely to spread globally, introducing new business models and industries. For example, Indonesia’s ride-hailing giant Gojek is already expanding into Africa, while Australia’s expertise in hydrogen production is being adopted in Europe.

Diplomatic Implications: Strengthening Cooperation and Shifting Power Dynamics

Diplomatically, stronger economic ties are strengthening regional cooperation, creating a more stable and interconnected Asia-Pacific. The Australia-China visit, for instance, has enhanced mutual understanding, supporting regional stability. Both nations have agreed to resume regular dialogues on issues like climate change and regional security—forums that can prevent misunderstandings from escalating into conflicts. Similarly, APEC’s collaborative efforts are deepening connections between member states, fostering a more harmonious diplomatic environment.

By Zhao Xi