What happened?
On 21 December, China’s President Xi Jinping met with Australian Governor-General David Hurley and Prime Minister Anthony Albanese as the two countries celebrated 50 years of establishing diplomatic relations with each other. Xi claimed that China was prepared to advance its relations with Australia based on win-win principles and mutual respect.  
 
The joint statement affirmed to increased cooperation in bilateral relations, trade and economic issues, consular affairs, climate change, defence and regional and international issues.  
 
On the same day, the Foreign Ministers of China and Australia, Wang Yi and Penny Wong, held the sixth China-Australia Foreign and Strategic Dialogue. Wang Yi expressed dissatisfaction with the state of the bilateral relations with Australia and said: “China and Australia have no historical grudges and conflicts about fundamental interests, and the two sides should and absolutely can become partners with mutual needs.”  

What is the background?
First, the recent tensions in the China-Australia relationship. Political analysts across the world have called the latest meeting “an ice-breaking visit.” China’s relations with Australia witnessed a downward spiral since early 2020 when former Prime Minister Scott Morrison called for an inquiry into the origins of the coronavirus pandemic and hinted at China for being the culprit. The call for inquiry resulted in diplomatic tensions, heightened trade tariffs, import restrictions and a ban on Huawei’s 5G technology in Australia. Canberra also passed laws to review and restrict the operation of Chinese companies and projects within the country.  

Second, the recent thaw. Despite the differences that have deepened over the years, the last six months have displayed a change in their approach. In June 2022, the Chinese and Australian Defence Ministers broke the ice for the first time by engaging with each other in Singapore. Following the public engagement, the Ministers also met privately for an hour and discussed the obstacles in bilateral ties. Wang Yi and Penny Wong then engaged again at the G20 Foreign Ministers Meet in July 2022, followed by President Xi and Prime Minister Albanese’s meeting in Bali during the G20 Summit.  
 
Third, the competition in the Indo-Pacific. Besides the bilateral issues, China and Australia are also competitors in the Indo-Pacific. For China, the increased cooperation between Australia, Japan, India and the US through the Quad in the region is a cause for concern. In May 2022, the Quad leaders met for the fourth time in one year and held an in-person meeting in Japan. The countries agreed on an Indo-Pacific Partnership for Maritime Domain Awareness and pledged to increase their presence in Southeast Asia, Pacific Island countries and the Indian Ocean region. Australia is vexed by China’s growing closeness with the Pacific Islands Countries, which it considers as its backyard of influence. At the same time, China’s aggression and unilateral actions of changing the status quo in the South China Sea is seen as a worrying development by Australia and the West.

What does it mean?
Even though the bilateral relations seem to be improving in the second half of 2022, the ties between the two are ridden with many obstacles. Australia may seem prepared to restart relations with China, however Canberra will not be forgetting its national security concerns and its suspicions.  
 
The competition in the Indo-Pacific, close relations with the US, the fight for influence in the Pacific Island countries, and the impediments to China-Australia trade are yet to be resolved. These issues are a few of the many and will be time-taking when it comes to resolution.