Cuddle the panda, but don’t forget the wolf

Prime Minister Anthony Albanese’s second official visit to China—his longest formal trip to any foreign country—marked a further normalisation of bilateral relations following China’s unilateral diplomatic freeze and economic sanctions in response to Australia’s call for an independent inquiry into the origins of COVID-19. Albanese’s visit coincided with the tenth anniversary of the China–Australia Free Trade Agreement, underscoring trade as the enduring cornerstone of Australia-China relations. 

Albanese’s itinerary included the usual political and economic centres of Beijing and Shanghai, but also Chengdu, a rare diplomatic choice that carried symbolic weight. Chengdu, one of the wealthiest cities in western China is also home to the world’s largest panda breeding centre, a soft power emblem of China’s Panda Diplomacy. Notably, Sichuan’s provincial capital is also a Beijing-designated inland economic powerhouse, envisioned as part of the Chengdu–Chongqing Economic Circle, an initiative designed to advance China’s long-standing “Go West” blueprint for developing its landlocked interior provinces. Chengdu also hosts Cochlear Australia, one of Australia’s largest investments in China, highlighting the city’s role in bilateral commercial ties.

This warm diplomatic choreography, however, masks deeper tensions. Beneath the surface of panda hugs and trade deals lies a persistent ideological divide. China’s authoritarian system continues to extend its reach beyond its borders, engaging in transnational repression that directly affects Australian citizens and residents. Surveillance, harassment, and coercion have occurred on Australian soil. The Hong Kong Police recently issued an arrest warrant for Sydney-based academic Feng Chongyi, further illustrating China’s willingness to target individuals, including foreign nationals beyond its borders. Feng joined a line of high-profile dissidents in Australia such as the cricket-loving lawyer Kevin Yam, and former legislator turned political fugitive Teddy Hui, both wanted by the Hong Kong Police. Yam and Hui each have HK$1 million bounties on their heads and have been repeatedly targeted and intimidated by pro-China nationalists, including an alleged assault of Hui in a Sydney restaurant. The imprisonment of Australian national Gordon Ng in Hong Kong serves as a stark illustration of the China’s continued crackdown on dissent and political pluralism. It also serves as a reminder that the Chinese Communist Party has a history of using hostage diplomacy to gain concessions and exert leverage over targeted nations.

Most notably, just days after Albanese’s return, a Chinese national based in Canberra was arrested for alleged foreign interference, accused of covert operations on behalf of China’s Public Security Bureau. This is the third case involving China since the Foreign Interference Legislation was passed in 2018. It also is the first case where a foreign national has been charged for alleged community interference.

These developments are a wake-up call. Despite the constructive reset in Australia–China relations, fundamental political differences persist. Australia’s pluralistic democracy and China’s single-party authoritarian system are divided not just by ideology, but by competing visions of the world. Australia must remain cleared-eyed about the fundamental tension between economic engagement and national security.

Australian businesses are acutely aware of this duality. Although the Prime Minister’s delegation featured prominent representatives from mining, renewable energy, higher education, the legal sector, and tourism, many firms continue to exercise caution. Direct investment from Australia into China has nosedived, with many companies maintaining only a skeletal expatriate staffing inside the country. Targeted economic sanctions during the so-called “Wolf Warrior” phase of Chinese Diplomacy, was estimated to have cost approximately $20 billion across industries such as lobster, barley, and wine. The damage was felt not only in monetary terms but also in an erosion of trust and confidence that further heightened corporate sensitivity to the geopolitical risks of doing business with, and within, China.

It also is doubtful that the thaw between Canberra and Beijing will lessen frictions in the strategic domain. In February this year a Chinese J-16 released flares thirty metres from an Australian P-8 conducting a routine patrol in the international airspace above the South China Sea, endangering the aircraft and its crew. Such unsafe encounters have become increasingly common over the past few years as China attempts to coerce ships and aircraft from Australia and other nations out of its maritime near abroad. Areas of friction might in fact be expanding. Only a couple of weeks after the dangerous intercept, a Chinese Navy flotilla conducted live-fire drills 340 nautical miles from the New South Wales coast, before circumnavigating Australia in what was largely described as an “act of intimidation.”

To navigate this complexity, Australia must move beyond vague references to ‘grey zone’ activity. We need a sharper vocabulary, one that calls out China’s tactics as Illegal, Coercive, Aggressive, and Deceptive (ICAD). From sonar assaults on Australian divers to flare interceptions of Royal Australian Air Force aircraft and naval intimidation near Australia’s Exclusive Economic Zone, these actions demand clarity and consequence.

Compounding the challenge is a shifting global landscape. The “America First” second Trump administration has turned even more transactional, and anti-globalist than during his first tenure. Multilateralism and alliance-building have become increasingly passé in Washington. Albanese has yet to meet with Donald Trump, and AUKUS is under official scrutiny, despite Australia having already paid over US$1 billion this year alone in support of the agreement. The US-led “liberal international order” Australia has long relied on is fraying.

Australia must navigate the growing tension between its economic reliance on China and its security alignment with the United States. This requires a foreign policy that actively defends national interests without sacrificing economic stability or strategic autonomy. The days of assuming that trade alone could insulate Australia from geopolitical risk are over.

Former Prime Minister Scott Morrison’s megaphone diplomacy may have been counterproductive, but he was not wrong when he testified before the US Congress: 

“Discussion is fine, engagement is good, it’s better than the alternative. But if we think that is going to produce a change in the mindset in Beijing about what the objectives are, then we’re frankly kidding ourselves.” 

The panda may be smiling, but the wolf is never far behind.

Roger Lee Huang is senior lecturer of Security Studies at Macquarie University. 

Yves Heng-Lim is senior lecturer of Security Studies at Macquarie University.