Out of deep freeze: just how real is the thaw in Australia’s relationship with China?

Hundreds of people are gathered on the back lawns of the Chinese embassy in Canberra. Chinese and Australian flags surround a podium set up for speeches marking the imminent 50th anniversary of diplomatic relations.

But towards the back of the garden, where members of the Canberra diplomatic corps, businesspeople, academics and journalists are milling about, stands a striking image. A large oil painting depicts a 1973 meeting between Gough Whitlam and Mao Zedong in Beijing. Whitlam was the Australian leader who opened diplomatic relations with the People's Republic of China on 21 December 1972.

China's ambassador to Australia, Xiao Qian, is upbeat as he reflects on the more recent "positive, constructive, encouraging" meeting between today's leaders, Anthony Albanese and Xi Jinping.

"We're two great countries, China and Australia, we are two great peoples - the Chinese people and the Australian people. It's been a long tradition of friendly attitudes and atmosphere towards each other."

It is noticeable that Xiao sidesteps the breakdown in the diplomatic relationship over the past few years - which included China slapping tariffs and unofficial bans on a range of Australian exports and imposing a freeze on high-level talks. The former Coalition government said Beijing was engaged in a campaign of "economic coercion" to discourage Australia from standing up for its national interest.

But Xiao - who has been actively courting politicians, industry and academia since taking up his posting at the start of this year - maintains he has every reason to believe the two countries will continue to be friends and partners.

The most senior Australian government official at the festivities, Elly Lawson, is more circumspect. While she welcomes the resumption of high-level dialogue and speaks of the economic benefits to both sides from the relationship, Lawson also acknowledges "bilateral differences in recent years".

The acting deputy secretary of the Department of Foreign Affairs and Trade says the countries are trying to "navigate our differences wisely".

There was a stark reminder of those differences over the past week when senior ministers Penny Wong and Richard Marles visited the US and Japan to deepen defence ties at a time of China's growing military power.

A few days earlier, Australia and the US used the annual "Ausmin" talks to criticise China for "destabilising actions" and "dangerous encounters" in the South China Sea, while renewing "serious concerns about severe human rights violations in Xinjiang" and the erosion of freedoms in Hong Kong.

That is why the Australian government talks about "stabilising" the relationship, rather than using terms like "reset" that could suggest it is retreating from key policies. The mantra in Canberra is "cooperate where we can" and "disagree where we must".

Still, James Laurenceson, the director of the Australia-China Relations Institute at the University of Technology Sydney, says the Australian government "would have to be pretty happy with where things are at after just six months".

There is a long way to go to put the relationship on a more solid footing, he says, with the lack of a breakthrough on the trade disputes and China's continued detention of Australians Cheng Lei and Yang Hengjun being obvious examples. But Laurenceson believes developments are tracking as well as could be expected considering the rock-bottom situation Labor inherited from the Coalition.

A recalculation in Beijing is central to the ending of the high-level diplomatic freeze, with an apparent suspension of its wolf warrior tactics, which were backfiring. "China realised its approach to Australia over the last couple of years has been completely counterproductive," Laurenceson says.

Some analysts had been sceptical that a change of tone could bring about substantial improvements in the relationship, but Laurenceson says diplomacy and language do matter.

He gives examples that would have flown below the radar for most people. On several occasions after the election, Wong described the relationship between Australia and China as a comprehensive strategic partnership. While this might sound like a bland diplomatic formulation that was also used by the Coalition in the past, it actually responds to a fundamental question China asked of Australia over the past few years: do you see us as a partner, a threat or even an enemy?

Laurenceson also cites the way in which Wong responded to the trip to Taiwan by US House speaker Nancy Pelosi in early August, when the minister called on "all parties" to de-escalate tensions. That framing implicitly included both the US and China. It was only after the People's Liberation Army's military drills escalated to the point ballistic missiles were fired over Taiwan that Wong joined unequivocal demands for China to immediately cease the exercises.

"When I spoke to Chinese diplomats that week, they were very clear to me they had noted Penny Wong's caution," he says.

Finally, Laurenceson points to comments by the Australian trade minister, Don Farrell, that the government would prefer not to have to proceed with the existing challenges at the World Trade Organization against China's hefty tariffs on Australian barley and wine. This can be seen as Australia offering China an "off ramp" to enter direct talks, avoiding the more adversarial forum of the WTO dispute system with the risk of unfavourable rulings down the track.

But at the same time as it seeks to stabilise the relationship with China, the Australian government has given the green light to more US military rotational forces and the propositioning of fuel and munitions in the country.

Laurenceson believes these latest announcements are unlikely to seriously disrupt the thawing of the relationship with China, despite criticism from its foreign ministry and the state-affiliated Global Times. That's because Australia's alliance with the US and increased rotations of US forces are already baked into Beijing's calculations.

"They will have their diplomatic whinge but on these matters Beijing won't be surprised one bit," he says.

Tom Corben, a research fellow on foreign policy and defence at the United States Studies Centre at the University of Sydney, agrees China is well aware of the trajectory.

"There's nothing new in the joint statement that strikes me as something that would set back the Australia-China 'thaw'," Corben says.

Corben explains the US wants "a more diversified military basing footprint not just in Australia but across the region" because it is concerned about China's advancing missile and strike capabilities.

"The traditional big bases that America has in the Republic of Korea, Japan and Guam - that model isn't really sustainable now given the number of missiles China probably has aimed at those bases in anticipation of a conflict," he says.

Australia and the US plan to develop "agile logistics" at airfields in northern Australia, including bare bases near Weipa in Queensland, and near Derby and Exmouth in Western Australia. These three Royal Australian air force sites have small caretaker staff but can be activated quickly in emergencies.

Increasing the number of access locations for the US, even if they are not full bases, can create a "more complicated targeting matrix for China in the event of a conflict", Corben says.

Corben sees it as significant that this year's Ausmin talks called for "guardrails" like crisis communication channels to avoid tensions spiralling out of control. Wong also made the case emphatically in a speech in Washington DC, urging Xi to take up Joe Biden's offer to discuss safeguards. She implored leaders of all countries - big, middle and small - not to be "hostages to history".

"Australia and Japan have a clear interest in this actually working out," Corben says.

"It's not always clear to policymakers in Canberra, Tokyo, or elsewhere what or where the US sees the end-state of strategic competition with China. Countries like ours will have to live with Beijing regardless of the result, so it's an encouraging sign for us that there's this language."

The head of the Australian National University's national security college, Rory Medcalf, says while Australia is back on speaking terms with Beijing, "it would be a colossal misjudgement to assume this constitutes some kind of reset or provides a solid foundation for ongoing dependence on China."

He had argued in 2020 that the "trauma" in the diplomatic and economic relationship with China would be seen, down the track, as part of Australia building up its national resilience. Australia, he said then, was making decisions to safeguard its security and China was "turning economic goods into goads of coercion".

Medcalf says now: "At best, this is a fragile stabilisation."

In a lecture at the ANU on Wednesday, Medcalf warned of "highly plausible China-centric crises in the region" including an assault on Taiwan. Such events, he said, "would shatter any sector's brittle business model of reliance on China".

"Fairly much anyone in the private sector thinking beyond day-to-day revenue is already wargaming the reality that China is now at least as much a source of risk as of opportunity," Medcalf says.