For Australia, China looms large, but the reverse is not necessarily true. The Chinese Communist Party has many pressing issues domestically in managing 1.3 billion people and the world’s second largest economy, and internationally with the Covid-19 pandemic, a volatile US president and exasperated neighbours. In Beijing, Australia must seem a distant land of limited positive or negative import.

Paradoxically, this gives Australia real agency in the relationship. Australia’s greater concern and attention towards China provides more freedom of manoeuvre than the apparent economic and military power imbalance suggest. Consequently, Australia’s grand strategy for managing its China relationship may be decisive.

A grand strategy involves developing and applying national power to improve the relationship our nation has with another. This whole-of-nation activity integrates multiple interests while using diverse forms of power including diplomatic, economic, societal, cyber and military. Australia’s grand strategic thinking on China should be framed around three key factors.

First, the Australia–China relationship is primarily one of mutually beneficial economic interdependence, not security issues. The two national economies are complementary rather than duplicative. This asymmetry gives scope for economic coercion where one nation threatens to break a valuable linkage unless certain action is taken. Such coercion carries risks, as disrupting even a single link may cause a cascade affecting many others. This becomes more likely when political tensions rise and emotions are inflamed.

China continues to see economic coercion as advantageous even if it gives some in the US a rationale for decoupling from China. The US economy is structurally quite different to Australia’s, but there would be strong pressure to follow any such US move, possibly without any recompense.

Please click here to read the full “Designing an Australian grand strategy for China” article originally published at The Strategist, written by Griffith Asia Institute Visiting Fellow, Dr Peter Layton.