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With China increasingly assertive in pursuing its economic and geopolitical interests abroad, US–China tensions are rising, leading many traditional American allies to consider following Washington’s lead in pursuing economic ‘decoupling’ from China. Their strategy aims to reduce economic reliance on China through extensive export controls and re-ordered supply chains. Yet in Western Europe, France and Germany are showing an unwillingness to join their allies in decoupling from China. French President Emmanuel Macron’s recent comments that Europe should not get ‘caught up in crises that are not ours’ demonstrate this. If anything, their relationship with Chinese capital is thriving. China is one of France and Germany’s major trading partners outside of the European Union and a significant export market for goods such as luxury goods and pharmaceuticals. Exports to China made up 7.4% of Germany’s total exports and 4.21% of France’s in 2019, with these numbers growing over the last three years to record levels. Given China’s growing middle class, the country presents an enormous potential consumer market in years to come. According to recent reports, France’s bilateral trade in goods with China exceeded US$100 billion for the first time in 2022, an increase of 14.6% on 2021­. The recent signing of 18 cooperation agreements by 46 French and Chinese companies across numerous sectors further emphasises the gathering pace of these trade relationships. As for Germany, its total trade with China saw an increase of 21% from 2021. While exports increased by a modest 3.1%, Germany’s imports from China accounted for much of the growth, soaring by more than a third. Specifically, Germany imports from China about two thirds of its rare earth elements, many of which are indispensable in batteries, semiconductors, and magnets in electric cars. This shows that Germany and France will rely more on China as time passes for the critical raw materials needed to fuel their economic growth and energy transitions. Furthermore, various French and German companies would prefer to grow their established production facilities and extensive sales networks in China. With the trade relationship expanding so rapidly and estimates suggesting that more than 2 million German jobs depend on exports to China, the countries’ economies are set to become even more intertwined. German companies Volkswagen and chemical processor BASF, for instance, are significantly expanding their investments in China. Volkswagen, which already has more than 40 plants in China, recently announced that it will invest billions in new local partnerships and production sites. BASF, which has 30, says it will invest US$10.9 billion in a new chemical production complex there. Given all this new activity, making a show of decoupling from China could cause significant repercussions for France and Germany. Ultimately, the costs of decoupling outweigh the benefits for the two governments. While their allies might come to bemoan their inaction, they just won’t forgo such significant opportunities for French and German companies in China. Additionally, decoupling could trigger retaliation, as it did with Australia, with China halting exports to the two countries, increasing tariffs, or reducing market access to French and German goods. All in all, France and Germany are unlikely to shift from their stance. They’d prefer to let their markets flourish and work out the rest later.

It aims to signal its diplomatic ascendance and challenge Washington as the big shaper of outcomes. Late last month, Chinese President Xi Jinping finally made that much hoped-for call to Ukraine’s President Volodymr Zelensky and informed the world that his nation “always stood on the side of peace.” This was the first outreach by Beijing to Ukraine since  the latter’s invasion by Russia last February, and Zelensky was keen on this engagement, especially after Xi’s visit to Moscow in March. Ukraine views China as an important interlocutor that can engage with Russia and seems to have been encouraged by the “long and meaningful” phone call between the two leaders that in its view would “give a powerful impetus to the development of our bilateral relations.” Last week, Ukraine’s finance minister also suggested that Kyiv should use its bilateral relationship with China as leverage to bring an end to Russia’s full-scale invasion, though he refused to consider China as a friend. The Chinese President has been reported as saying that China, “as a responsible majority country,” would “neither watch the fire from the other side, nor add fuel to the fire, let alone take advantage of the crisis to profit.” But there was no suggestion that Beijing would be doing anything meaningful going forward. The call and associated choreography had more to do with positioning China as a global power that is willing to engage in resolving problems, as opposed to the US that is creating more trouble by continuing to support Ukraine and prolonging the war. China has already laid out its cards on the table when it comes to the Ukraine crisis. It had released a 12-point position paper on the political settlement of the Ukraine crisis earlier this February. In an attempt to present itself as a neutral peace broker, Beijing has enunciated a few standard principles, including respect for the sovereignty of all countries, resumption of peace talks, keeping industrial and supply chains stable and opposition to unilateral sanctions  as well as the use of nuclear weapons. Taking this forward, China has decided to send special representatives to Ukraine and hold talks with all parties in an attempt at peace-making. But beyond these principles, China’s credentials are hardly supportive of a larger role as a peace-maker, as it has long refused to view its ties with Ukraine and Russia at the same level. Russia has shown no inclination to step back from its aggression and Ukraine is seemingly preparing to launch a large-scale counter-offensive against Russian forces in a bid to retake territory in the east and south for which it has been preparing for months now. While Moscow has given no indication of backing down, perhaps assuming that it has time on its side and waiting for the Western consensus on backing Ukraine to collapse, Ukrainian forces feel that the weaponry delivered by the West over the past few months is likely to give them the momentum needed to shape battlefield realities in their favour. China is also unlikely to be viewed as an honest broker, given its ties with Russia that are increasingly becoming tighter. And despite repeated statements that the “sovereignty, independence and territorial integrity of all  countries must be effectively upheld,” Beijing has not only refused to acknowledge Russia’s violation of Ukrainian sovereignty, but has continued to privilege its partnership with Moscow. Though Xi’s visit to Moscow in March did not result in any concrete help to Russia, it did signal to the West that  the China-Russia entente can shape the global balance of power in ways that can be deleterious to Western interests. More than anything else, Chinese posturing in the Ukraine conflict is aimed at the West. In its position paper, Beijing talks about the need to abandon a “Cold War mentality” and argues that “the legitimate security interests and concerns of all countries must be taken seriously and addressed properly,” making it clear that it largely agrees with Moscow’s perspective that it was the West that created the conditions for this war with the expansion of the North Atlantic Treaty Organization (Nato). China has also been critical of Western sanctions on Russia, arguing that “relevant countries should stop abusing unilateral sanctions and ‘long-arm jurisdiction’ against other countries, so as to do their share in de-escalating the Ukraine crisis.” Both of these issues are germane for the long-term trajectory of China’s role on the global stage amid deepening tensions with the US. For China, clearly, this crisis is more about itself than it is about Russia. As China comes out of its covid- induced isolation, it would like to have a stable international environment for a sustained economic recovery. But it is also using an opportunity to emerge as a key global interlocutor by venturing into diplomatic arenas it has been shy of in the past, taking advantage of the West’s recent inward orientation. This effort was exemplified by its attempt to bring Iran and Saudi Arabia together in the highly volatile Middle East. China’s attempt at emerging as a global peace-maker is about presenting a diplomatic challenge to the US on the global stage. Beijing may not have much of an impact on the eventual outcome of the Ukraine crisis, but it is signalling that it is no longer shy of showcasing its growing diplomatic heft.

In China-brokered talks, the two oil-rich and rival states of Iran and Saudi Arabia have agreed to restore diplomatic relations after a seven-year split. Although the two sides need much confidence-building, their rapprochement carries the potential to change the regional geopolitical landscape at the cost of concerns for policy hawks in the US and Israel. The longstanding Iranian–Saudi sectarian and geopolitical rivalry has been a major source of tension and conflict in the Persian Gulf region. Traditionally, whereas Iran has sought to project itself as the guardian of Shia Islam, Saudi Arabia has claimed the leadership of Sunni Islam. Both have also competed for regional geopolitical supremacy. They have been involved, in opposition to one another, in some of the conflict-ridden flashpoints in the region, including Iraq, Syria, Lebanon and Yemen. Fearing Iran’s nuclear program and regarding the country as a regional threat, the traditionally US-backed Saudi Arabia has opened backdoor diplomatic channels with Iran’s other US-allied regional foe, Israel, and supported the normalisation of relations between some of its partners in the Gulf Cooperation Council (the United Arab Emirates and Bahrain, in particular) with the Jewish state in an anti-Iran front. In response, Iran has forged close ties with Russia and China. The Saudi execution of a prominent Shia cleric and Iranians’ storming of the Saudi embassy in Tehran resulted in Riyadh cutting ties with Tehran in early 2016. However, the regional picture has lately changed for the two protagonists. Despite being under severe American sanctions and beset by public protests since September 2022, the Iranian Islamic regime has managed to maintain its regional influence in the Levant—the area stretching from Iraq to Lebanon—as well as Yemen and has made a show of its military strength by supplying Russia with deadly drones in the Ukraine conflict. Saudi Arabia hasn’t been able either to rebuff the Iranian influence or to maintain its historical trust of the US as a very reliable ally, especially in the wake of America’s inability to rein in Iran and to avoid defeat in Afghanistan. It has increasingly found it in its interest to diversify its foreign relations, forging closer relations with the very powers with which Iran has established camaraderie, most importantly China. The kingdom’s young de facto ruler Mohammad bin Salman has viewed this diversification as not only signalling his dissatisfaction with Washington’s criticism of his alleged human rights violations, but also aiding him with realising his vision to make Saudi Arabia a regional superpower by 2030. For this, he wants to reduce the country’s dependence on hydrocarbon as a source of wealth; expand its economy, trade and inflow of investment and high-tech industry; and change its social and cultural landscape, though not its authoritarian politics. He has found the Chinese model more appealing in this respect. Beijing could not be more pleased with the Iranian–Saudi rapprochement under its diplomatic auspices. It constitutes a major step, along with the recent peace proposal for Ukraine, in Beijing’s global diplomatic offensives to raise China’s credentials as a peacemaker through a policy of non-interference in the internal affairs of other states on the world stage. The underlying message is to present the US as an interventionist ‘warmonger’ power. In addition, it paves the way for China’s deeper and wider economic and trade ties in a region from which it imports some 40% of its annual oil needs. These developments can only be unsettling for the US and Israel, both of which regard any regional easing on Iran, especially with China’s support, as contrary to their interests. The US wants to maintain maximum pressure on the Iranian regime over its nuclear program, regional influence and handling of recent domestic unrest, headed by Iranian women against theocratic restrictions and declining standards of living. It is also not keen to see Saudi Arabia tilt towards the very powers that the US seeks to contain. Israel regards Iran’s Islamic regime as an existential threat and has vowed to do whatever it takes to prevent it from becoming a military nuclear power. The two sides have been locked in a shadow war for some time. Israel has frequently attacked Iranian targets in Syria and Lebanon, assassinated several of the country’s nuclear scientists and raided its ships. In a more daring act, recently it directly attacked defence installations in Isfahan where Iranian nuclear facilities are located. In turn, Iran has targeted Israeli ships, intelligence and diplomatic personnel, and has promised to retaliate against any hostile Israeli action. Israel and Iran have at times come very close to serious blows. Any direct confrontation between them could have devastating consequences for the region and beyond. Having said that, it’s also important to be reminded that China has good cooperative diplomatic, security and intelligence relations with Israel. Can we expect Beijing to step in there as well to bring about a resolution of the Israeli–Palestinian conflict, where the US has failed? Most likely not, given Israel’s intransigence not to give up its occupation and America’s unwavering strategic backing of it.

Chinese leader Xi Jinping was unanimously “reelected” for another five-year term at the Two Sessions, and the Chinese government approved significant changes in the party-state structure to counter the US-led West’s dominance and promote economic and technological self-sufficiency. At the same time, China is engaging in diplomatic activism in the Middle East and elsewhere, forcing Israel to reconsider regional dynamics and prepare for a protracted state of “struggle” between the two superpowers.  In March 2023, Chinese leader Xi Jinping marked several highly successful events. Internally, he was “reelected” for a third term as President, and externally, he brokered a normalization agreement between Saudi Arabia and Iran – without any American involvement. These two developments coincided with the Two Sessions, China’s annual parliament meeting, where Xi passed far-reaching reforms aimed at increasing China’s economic and technological self-reliance in the face of Western adversaries. Judging by his remarks, it appears that under Xi China will continue its proactive foreign policy directed against the US-led global order. This in turn will test Israel’s ability to continue to maintain a balanced foreign policy vis-à-vis the two superpowers. Israel must now account for China’s growing influence in diplomatic and security theaters in the Middle East, as well as Beijing’s closer relations with Iran and Russia. To ensure its own security and economic interests, it must reconsider the regional dynamic while engaging in dialogue with the relevant actors. Finally, the escalation of tensions between the superpowers forces Jerusalem to prepare for extreme scenarios, most notably war in the Taiwan Strait. After a decade as president, Xi Jinping was unanimously reelected by the Chinese parliament for another five-year term. The vote – in which Xi was the sole candidate – was held as part of the annual Two Sessions, the Chinese legislature’s most important political gathering. The main event usually takes place over a seven-day period in March, when approximately 3,000 delegates from the National People’s Congress (NPC) – the legislative body – and some 2,000 delegates from the top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC), convene in Beijing. In the course of the gathering, the Premier delivers a work report, while the delegates pass legislation, make amendments to the country’s constitution, and approve appointments in various state bodies. This year’s events were especially significant because they occurred immediately following the 20th Congress of the Chinese Communist Party (CCP), held in October 2022. At that gathering, which takes place every five years, Xi was also appointed to a third term as general secretary of the CCP and Chairman of the Central Military Commission. Since the 1980s, every five years, the CCP has introduced widespread reforms in the structure of the party-state. Previous reforms included changes to the balance of power between the Party and the state in ways that conformed to the incoming leadership's priorities and vision, as well as domestic and foreign developments. This year, the NPC approved significant changes in the party-state structure, continuing the trend in which the CCP under Xi has been "swallowing up" the government, with the lines between the two becoming increasingly blurred. These changes reflect Xi's belief that only a strong and centralized party can deal with domestic and foreign challenges, particularly the United States, China's main strategic rival. Indeed, during a heavily-publicized meeting at the start of the Two Sessions between Xi and representatives of the Chinese business sector, the Chinese leader stunned the audience by launching a direct attack against Washington, which he blamed for "the unprecedented severe challenges" that China is facing, and for trying to "contain, blockade, and suppress" China. What made his remarks particularly noteworthy was that despite rising tensions between the superpowers in recent years, Xi avoided explicitly naming and shaming the United States, instead allowing Chinese diplomats to spar with Western hawks. As a matter of fact, an examination of Xi’s writings reveals that even early in his political life, he saw the West, and the United States in particular, through a Cold War prism. However, it was the trade war waged by the Trump administration, which later escalated into a comprehensive technological and geopolitical war, that reinforced for him the need for economic and technological independence. The Biden administration went even further in its efforts to prevent China from gaining access to critical technology, and unlike its predecessor, has been successful in securing allies’ support. The Chinese countermeasures can be found in its most recent reforms, which included increasing the powers of the Ministry of Science and Technology (MoST) through the establishment of a new decision making body, the Central Science and Technology Commission, which is likely to be headed by Xi himself. Some of the ministry's specialized functions were transferred to relevant government ministries as part of the restructuring. The changes will allow the ministry to focus on macro-management of competition in innovation and to foster local development of basic research, core technologies, and a solution to the problem of the "bottleneck" imposed by the West, such as restrictions on China's import of microchips and airplane engines. In addition, a new institution, the National Data Bureau, will be tasked with managing digital resources, under the auspices of the Chinese government’s top macroeconomic management agency, the National Development and Reform Commission (NDRC). This year's reforms likewise highlighted China's financial sector, with the establishment of the new National Financial Regulatory Administration (NFRA) and expanded powers for the China Securities Regulatory Commission (CSRC). It was also decided to cut 5 percent of the central government and party workforce. Beyond the economic rivalry with the United States, the ramifications of the war in Ukraine, and COVID-19 restrictions, Beijing faces a host of internal challenges: a skyrocketing debt-to-GDP ratio (at the end of 2022, it stood at 273 percent), a declining population, a real estate bubble, natural resource pollution, a slowdown in imports and exports, high savings levels among households, and income inequality. If the rivalry with the United States intensifies – for example, if China were to invade Taiwan – Beijing would have to anticipate the imposition of additional sanctions, similar to those that Russia has been struggling with for the past year. Yet until such time as the situation vis-à-vis the United States reaches a critical stage, if at all, and against the backdrop of increasing concern in the international business community about the direction China is heading under Xi, Beijing is attempting to project to the world “business as usual.” At the conclusion of the Two Sessions, the incoming prime minister, Li Qiang, appeared to be smiling as he told foreign reporters that the United States and China must cooperate, because “there are no winners in a conflict.” He also promised that he would ensure a competitive, market-oriented, and fair environment that would protect the rights of Chinese and foreign businesses. However, here too the Party’s “invisible hand” was evident when he added that “the role of the new government is to execute and implement the important decisions and plans laid out by the CPC Central Committee.” The new appointments of other senior positions reflected the same ambivalence that Li expressed in his remarks. On the one hand, the Congress decided to extend the terms of 24 of the 26 ministers and national commissions, among them the head of the China’s central bank, Yi Gang, and Finance Minister Liu Kun, even though they had reached retirement age. One of the two new appointees, on the other hand, is Minister of National Defense Li Shangfu, who has been sanctioned by the US since 2018 for purchasing Russian weapons. Unlike his predecessors, who had battle experience, Li is an aerospace engineer in training. He was the former director of the People's Liberation Army's (PLA) space and cyber programs, as well as the deputy commander of the PLA's Strategic Support Force, which was in charge of China's space, cyber, and electronic warfare capabilities. Aside from the obvious defiance toward the US, his appointment demonstrates the importance that China places on modernizing China's military technology, given the ever-increasing restrictions imposed on technological imports to China. Self-sufficiency should not be confused with isolationism. The agreement brokered by Beijing between Saudi Arabia and Iran on March 10 – while  the Two Sessions were in session – was the clearest indication that China intends to maintain its active foreign policy. Granted, China pushed through an open door, given the conflicting parties’ inherent need for an agreement to focus on their economies, and only time will tell whether the agreement will hold; nonetheless, this was the first time that Beijing has led any kind of mediation effort, let alone successfully, and the United States was not even in the room. In doing so, China has demonstrated that it can use its dominant economic and commercial position to advance diplomatic and security objectives, ostensibly as an "alternative" to the United States. China’s global ambitions are not limited to the Middle East. The Belt and Road Initiative (BRI), as stated in the government's work report, will celebrate its tenth anniversary in October. What began as a central-southeast Asian initiative has evolved into a global network of "silk roads" emanating from China and extending into space, with hundreds of massive infrastructure projects worth over $1 trillion in 146 countries. The BRI has had to deal with a number of implementation and funding challenges over the years, so it has been scaled back. At the same time, Chinese officials emphasize that it will remain a focal point of Beijing's foreign policy, with the emphasis shifting to smaller but more strategic projects such as bolstering global supply chains and cooperating in the digital domain, as well as healthcare, public policy, renewable energy, and people-to-people and diplomatic ties. Xi has unveiled other ambitious projects in recent years, most notably the Global Development Initiative (GDI), which is tasked with promoting the United Nations' goals for sustainable development, and the Global Security Initiative (GSI). At the conclusion of the Two Sessions, Xi announced the Global Civilization Initiative (GCI), the details of which remain unknown. As with the BRI, any success story that can be classified as development or security will be attributed to them, even if it occurred years before these initiatives. This is what happened with the Saudi-Iranian agreement or the Chinese peace initiative to end the Ukrainian war, both of which Beijing hailed as shining examples of the GSI in action. In practice, these initiatives reflect Beijing's desire to reshape the global order to reflect its interests and values, while undermining the United States-led West's dominance in its spheres of influence. For example, Xi described the GCI as "a new form of human civilization" that "shatters the myth that modernization is equal to Westernization. The bottom line is that the Two Sessions and the extension of Xi’s term of office indicate that China will continue to push itself to the forefront of the international stage. The next five years will be defined by a stronger push for self-sufficiency, financial stability, and technological advancement. At the same time, China will not close itself off to the rest of the world. On the contrary, China will not back down from "a struggle" against what Xi refers to as the West's and the United States' "attempts to blackmail, contain, and blockade" it. This spirit was evident during the first press conference given by China's new foreign minister, Qin Gang, who warned that "if the United States does not hit the brakes, but continues to speed down the wrong path...there will surely be conflict and confrontation." While Western doors are closing in on China, Beijing will continue to see Israel as a backdoor for securing core technologies that will help it achieve self-reliance, rendering Israel obsolete in the long run. This is evident in the recent influx of Chinese commercial delegations to Israel, following Beijing's lifting of travel restrictions. Simultaneously, the US-Israel Strategic High-Level Dialogue on Technology, launched during President Joe Biden's July visit to Jerusalem, will examine Israeli-Chinese cooperation, particularly in the less regulated hi-tech sector and academia. The agreement reached between Saudi Arabia and Iran, as well as Xi's recent visit to Russia, during which the parties agreed to "increase contacts over security issues in the Persian Gulf," indicates that China's diplomatic activism in the Middle East will only grow. The evolving situation in which China and the US both play key roles in regional geopolitics – against the backdrop of increased competition between the two countries and the war in Ukraine – forces Israel to reconsider regional dynamics. In order to prevent Iran from acquiring military nuclear power in peaceful means, Jerusalem must deepen its dialogue with Washington, Beijing, Moscow, and its Arab partners in the Negev Forum on regional security and economic interests. Finally, if a conflict between China and the United States is truly "inevitable," Israel must prepare for the worst-case scenario, in which two superpowers go to war in the Taiwan Strait, and consider the implications for its relations with Beijing.

With relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. Five years ago, then president Donald Trump launched a tariff-fueled trade war with China designed to reduce the bilateral trade deficit. His successor, President Joe Biden, then added a decoupling focus by restricting high-tech exports and curtailing professional and financial links. Both wanted to reduce imports of manufactured goods and bring home more jobs. How should one judge the effectiveness of their policies? Back then, and even more so today, the logic of Trump’s fixation on trade deficits made little sense. But security concerns have now become the rationale for reducing America’s trade relations with China and undercutting China’s growth potential. Against these yardsticks, the results are mixed but on balance unconvincing, given the costs in the form of inflationary pressures, repressed export growth, and a projected decline in global output. But U.S. politicians from both parties strongly support these restrictive measures because the costs are not obvious to their constituents, while the benefits from appearing to be tough on China resonate well with voters. Rising trade deficits The recent U.S. Census Bureau data indicate that the politically sensitive U.S. merchandise trade deficit with China was larger in 2022 than when Trump became president, while America’s overall trade deficit hit an all-time high of $1.18 trillion. This reinforces the views of nearly all the economists surveyed at the launching of Trump’s trade war: that the tariffs would not reduce U.S. trade deficits and the costs would be paid largely by Americans. For the Trump administration, the wild card was the “phase one” purchase agreement, which called for an increase of $200 billion in China’s imports from the United States. But state-to-state purchase agreements have no logical basis when global trade is largely shaped by the market-driven decisions of firms and consumers and subject to unpredictable events such as the coronavirus pandemic. Economic principles tell us that how much a country saves and spends determines its trade balance. The combination of Trump’s large tax cuts and Biden’s huge expenditure initiatives has led to soaring budget deficits, which are mirrored in record trade deficits. All this has little to do with China. Yet the Biden administration still insists that China honor the purchase agreement and links the removal of tariffs to its fulfillment. Asking China to honor an agreement that made no sense to begin with as a condition for dropping another equally ineffective policy defies logic. Trade diversification but increasing import dependence on other countries But this focus on bilateral trade numbers overlooks the sharp decline in China’s share of trade with the United States. Whereas China accounted for 47 percent of the U.S. trade deficit in 2017, it accounted for only 32 percent last year, with most of this decline offset by the increasing shares of other East Asian economies. Europe’s share of America’s overall trade deficit also declined from 21 percent to 18 percent. Only Canada and Mexico, via the United States-Mexico-Canada Agreement (USMCA), were able to increase their share from 11 to 18 percent. More insights can be gleaned from looking at the components of trade. Although the value of U.S. imports from China was essentially the same in 2022 as it was in 2017, total U.S. imports increased by about $900 billion during this period. As a result, China’s share of the total, made up largely of manufactured goods, fell from 22 to 17 percent. This decline, however, did not reduce America’s dependency on imports of manufactured goods. The share of imports relative to overall expenditures on manufactured goods rose steadily to 34 percent in 2022 from 23 percent two decades ago. The decline in China’s share of U.S. imports of manufactured goods was more than offset by imports from other countries, notably Mexico and Vietnam. These two developing countries, more than others, were able to import heavily from the United States based on their locational advantages and free trade agreements. Vietnam and China share a border and are linked by the ASEAN-China trade agreement, while Mexico and the United States also share a border and are linked by the USMCA trade agreement. Less noticed, however, is the behind-the-scenes role that China plays in supplying the components and materials for these other countries’ exports to the United States. Most of Vietnam’s increased exports were in product lines where U.S. imports from China fell, such as computer accessories and telecommunication equipment. China’s exports to Vietnam have more than doubled since 2017, and its trade surplus nearly tripled by 2022. China’s exports to Mexico increased by nearly 30 percent last year, on top of a 50 percent increase in 2021. China may be exporting less to the United States directly, but it is now indirectly exporting more. This explains why China’s share of global manufacturing production has continued to increase from 26 percent in 2017 to 31 percent in 2021. As for U.S. exports, the total averaged about $1.5 trillion from 2017 to 2020 but then jumped to $1.9 trillion in 2022. But this increase was not in manufactured goods but in exports of energy products and chemicals to Europe, spurred by the Ukraine crisis. The trade war did little to expand U.S. exports to China, the share of which fell from 8.4 percent in 2017 to 7.5 percent in 2022. Costs and benefits of decoupling According to one study, U.S. firms were handicapped by tariff-related higher costs of their imported inputs, and coupled with China’s retaliatory tariffs, this resulted in U.S. exports to China being 23 percent lower than they would have been in the absence of the trade war. The consequence is that America’s trade war policies generated very little growth in exports of manufactured products, despite the priority given to those policies by both the Trump and Biden administrations. If the purpose of the U.S. punitive actions toward China was to weaken China economically, there is no clear evidence of that happening. By developing alternative export markets and tapping pandemic-driven demand in the West for manufactured goods, China pushed its share of global exports to record levels in recent years. Meanwhile, China’s imports as a share of its GDP have been declining steadily, from a high of 28 percent in the early 2000s to 17 percent in 2022. One could argue that the world has become more dependent on China in trade while China has become less dependent on the world. The benefits of decoupling—if any—should be weighed against the costs imposed on U.S. consumers and producers and damage done to the export competitiveness of U.S. firms. To counter such tendencies, the Biden administration is promoting domestic manufacturing with subsidies in the Inflation Reduction Act. Such actions can be justified for strategic reasons, but the rationale is weakened by protectionist Buy America conditions. U.S. policymakers often counter by pointing to China’s use of subsidies to promote strategic industries, but Chinese firms were keen to import key technologies and components to ensure that their products were globally competitive on cost and performance grounds. The recent semiconductor and other U.S. restrictions on China’s access to high-tech products are also problematic because these products are “dual use,” with a much larger commercial market relative to military applications. Such restrictions hurt the many U.S. firms that derive significant revenues from selling to China and may contravene World Trade Organization guidelines. The costs of trade-related distortionary policies can be substantial. One oft-cited study estimates that taxpayers end up paying about $250,000 for each job saved in typical Buy America programs. At a broader level, a recent International Monetary Fund study estimates that a combination of U.S. trade and technological decoupling measures could reduce global GDP by some 7 to 12 percent. Ultimately, the problem lies in the lack of clarity on U.S. policy objectives. What does it mean to undercut China, and how will the United States know if it has succeeded? With U.S.-China relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. The reality is that the United States and China have no choice but to continue trading with each other. But with security overriding commercial considerations, the economic interdependence built up over decades is now being reversed, leaving everyone worse off.

​Although the dollar continues to be the dominant global currency, Russia and China could dent this dominance. In the aftermath of global financial exclusion, Russia has had to make some strategic adaptations. The West’s sanctions had crippling consequences, and the Kremlin scrambled to find alternatives. In light of these developments, China became an important ally, and the Yuan—its currency—has taken on a more prominent role. It is telling that in Russia, the yuan has surpassed the United States Dollar (USD) in trading volume, a feat achieved a year after the Ukraine conflict, which triggered a series of sanctions against Moscow. As Russia and China band together, one wonders what other shifts will take place and how they will shape the future. Change is afoot, and the Russian market bears witness. The month of February saw a watershed moment as the yuan surged past the dollar in monthly trading volume for the first time. The momentum continued into March as the gap between the two currencies widened, showcasing the growing sway of the yuan. It’s an impressive feat, considering that the yuan’s trading volume on the Russian market was once quite insignificant. The winds of change blew through Russia’s financial system as the year progressed. Additional sanctions had taken their toll on the few remaining banks that still held power to make cross-border transactions in the currencies of countries that had been deemed “unfriendly” by the Kremlin. One such bank was Raiffeisen Bank International AG, whose Russian branch played a significant role in facilitating international payments within the country. However, the lender found itself under the watchful eye of both European and US authorities, which only added to the pressure. These events spurred the Kremlin and Russian companies to shift their foreign-trade transactions to currencies of countries that had not imposed sanctions.Converging coalitionsThe bond between Russia and China is growing stronger, with both nations seeking to bolster their positions on the global stage. Their alliance has spread across various spheres: military, economic, and political. With relations between Russia and the West crumbling, China has emerged as a key partner for Russia, providing it with the necessary support to counter economic and political pressure. On the other hand, China is keen on expanding its global reach, especially in the Eurasian region, and sees Russia as an important ally in this regard. President Xi Jinping’s recent visit to Moscow and his pledge to expand cooperation are likely to take this partnership to greater heights. Trade and investment ties are set to grow stronger, with both nations seeking to reduce their dependence on Western economies. Russia’s focus on infrastructure development and mega projects is also likely to benefit from China’s expertise in these areas. Energy is another significant area of collaboration, with Russia being a leading exporter of oil and gas and China being the world’s largest importer of these resources. Technology is also an essential domain, with both countries investing heavily in research and development to remain competitive in the global economy. While the alliance between Russia and China will likely have far-reaching geopolitical consequences, it is a complicated relationship with both nations pursuing their interests, even as they work towards common goals. As a result of Western sanctions, Russia has shifted its foreign trade transactions away from the dollar and euro to currencies of non-restricted countries. By doing so, the Kremlin and Russian companies hope to decrease their dependence on the Western financial system and explore new avenues for conducting their trade and economic activities. This shift in strategy reflects Russia’s determination to maintain its economic stability despite restrictions on its access to the global financial system. It also underlines the growing importance of alternative currencies in global trade as countries strive to minimise the impact of sanctions and safeguard their economic interests.Structural overhaulsThe Russian Finance Ministry was not immune to the winds of change either. Earlier this year, it made the switch from the dollar to the yuan for its market operations. It even went a step further by devising a new structure for the national wealth fund, earmarking 60 percent of its assets for the yuan. The Bank of Russia joined the chorus, urging its people and businesses to consider moving their assets to the rouble or other currencies considered “friendly.” This would help mitigate the risk of having their funds blocked or frozen. As the world undergoes a seismic geopolitical shift, it seems Russia is moving in tandem, searching for ways to secure its economic future. However, the dollar still reigns supreme in the Russian market. Even with all the changes taking place, it remains the most widely used currency, ceding its throne only occasionally to the yuan. This underscores the enduring dominance of the dollar, which has played a significant role in Russia’s financial landscape for years. However, as the world continues to evolve, one wonders how long it can hold on to its crown.

Mongolia’s prime minister, Luvsannamsrain Oyun-Erdene, recently expressed his country’s fear that the world is heading towards a new cold war as the relations between Russia and China and the west – particularly Nato – have taken a turn for the worse. “It’s like a divorce,” he said. “When the parents divorce, the children are the ones who get hurt the most.” The country sits landlocked between Russia and China and is fearful of antagonising either. It gets much of its power from Russia, and China buys much of its exports – mainly agricultural goods and minerals such as copper. By pursuing a nimble foreign and trade policy since it transitioned to a multiparty democracy in the early 1990s, Mongolia has established a stable economy, receiving a thumbs up from the World Bank in its latest country report: With vast agricultural, livestock and mineral resources, and an educated population, Mongolia’s development prospects look promising in the long-term assuming the continuation of structural reforms. But the war in Ukraine has brought home to Mongolia just how carefully it must now navigate its foreign and trade policies to remain independent.Smooth transition to democracyFrom 1921 to 1990, Mongolia was effectively part of the Soviet bloc, although not part of the Soviet Union itself. The country’s centralised command economy was almost entirely dependent on Moscow for survival. The collapse of communism in the early 1990s resulted in what proved to be a smooth transition. The then leader, Jambyn Batmönkh, refused to even consider quelling pro-democracy demonstrations, instead saying: “Any force shall not be used. There is no need to utilise the police or involve the military … Actually, these demonstrators, participants, and protesters are our children.” His resignation in 1990 and the emergence of Ardchilsan Kholboo (Mongolian Democratic Union) paved the way for the development of a multiparty democracy. The June 1993 presidential election in Mongolia, which was ruled as free and fair by the International Foundation for Electoral Systems, saw the incumbent president, Ochirbat Punsalmaa – who had been appointed after a ballot by members of the existing Presidium of the People’s Great Khural (the national assembly) – elected for a four-year term. A new constitution was adopted, with a three-part structure under the speaker of the parliament, the prime minister and the president and, while there have been instances of political corruption, Freedom House gives the country a high rating for both political rights and civil liberties. All of which cannot disguise that the fledgling democracy remained wedged between (at the time chaotic) Russia and an increasingly assertive and authoritarian China. The obvious policy for Mongolia to pursue was to attempt to balance the two great powers in the region. Initially, Mongolia’s foreign policy relied heavily on “omni-enmeshment”. This basically meant building relationships with as many partners as possible, both regionally and globally – including, significantly, the US. But since 2000, Mongolia has embraced the policy concept of “balance-of-power” to reduce the country’s reliance on any one nation. To this end, they have partnered with strategic states in Asia, such as Japan and India, and rekindled military ties with Russia by entering a “strategic partnership” and conducting joint military exercises, while still maintaining a strong relationship with China. Mongolia has also strengthened bilateral security relations with the US. Mongolia’s relationship with China is complicated by the fact that a significant part of what was traditionally Mongolia is now an “autonomous region” of China (Inner Mongolia), with a population of ethnic Mongolians larger than that of Mongolia itself. This, and the activities of secessionist groups in the province, is a persistent point of conflict between China and Mongolia.Third neighboursBut Mongolia sees its independence increasingly threatened as Russia and China grow closer. Since the demise of the Soviet Union, Mongolia has adopted a strategy of maintaining strong ties with “third neighbours” – countries that embrace democratic values but also practice market economics, including the US (it was a term first articulated with connection to Mongolian foreign policy in August 1990 by then US secretary of state James Baker). The US and Mongolia formalised their relations as a Strategic Partnership in 2019 and in 2022 – clearly with one eye on Ukraine – the two countries announced they were deepening the partnership “in all areas of mutual interest”, including an “open skies” agreement which would guarantee scheduled nonstop passenger flights between the two countries. The US – with other third-neighbour allies – also takes part in the annual Khaan Quest military exercises.Dangerous timesThe war in Ukraine has brought the precarious geopolitical situation in Ukraine into sharp focus. The latest joint declaration from the US-Mongolia Strategic Partnership stressed that “disputes should be resolved by peaceful means and with respect for the United Nations Charter and international law, including the principles of sovereignty and respect for the independence and territorial integrity of states, and without the threat or use of force”. It added: “To this end, both nations expressed concern over the suffering of the Ukrainian people.” Mongolia has abstained from the UN votes condemning Russia’s invasion of Ukraine, while also refusing to criticise the sanctions imposed on Russia by the west, despite the fact that they have affected Mongolia – for example, sanctions against Russian banks have made it difficult to pay for its imports from Russia. And, for all its efforts to forge ties around the globe, Mongolia remains heavily dependent on both Russia and China. The prospect of a new cold war setting the west against the Beijing-Moscow axis is a major concern for Mongolia. As Elbegdorj Tsakhia, a former prime minister and president of Mongolia – now a member of The Elders group of global leaders – told Time magazine in April 2021: “I feel that we have just one neighbour. China, Russia, have become like one country, surrounding Mongolia … Every day, we face very tough challenges to keep our democracy alive. Mongolia is fighting for its survival.”

At the end of March, the negotiations that started in June 2021 on the accession of the United Kingdom to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) were successfully concluded, reflecting radical changes in British trade priorities after Brexit. More broadly, this move by London undoubtedly confirms the special importance that the Indo-Pacific region has acquired in the concept of "Global Britain" and in its subsequent relevant updates. The signing ceremony is scheduled for July 2023, for which the trade ministers of the participating countries and the United Kingdom will meet in Auckland (New Zealand). As a result of London's accession, this bloc will surpass the EU in terms of the combined population of its constituent countries. However, unlike the European Union, which the United Kingdom, on the contrary, left, the CPTPP does not have - to the satisfaction of British Eurosceptics - its own court like the EU Court of Justice, or a supranational budget. The union operates as a multinational trade agreement. An important obstacle that hindered reaching an agreement more quickly was London's refusal to weaken national food standards. But in the end, Ottawa (Canada) backed down on calls for London to lift the ban on importing beef with growth hormones. Beijing has also applied for membership in the CPTPP following London (the Chinese application is dated September 16, 2021, but negotiations have not yet begun). However, with London's accession as a full member of the agreement, China's chances of joining the bloc look somewhat weaker, as London is likely to obtain veto power on this issue. It is possible that they will use this veto under the pretext of ensuring higher trade standards within the agreement (including issues related to ecology and food safety). In any case, as It is known, the current British Prime Minister Rishi Sunak refers to China as a "systemic challenge", which London intends to respond to with "dynamic pragmatism." Currently, the CPTPP includes 11 states (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), none of which are European. These countries collectively account for 13% of global GDP. The new partnership replaced the Trans-Pacific Partnership agreement of 2016 with 12 participants, after former US President Donald Trump withdrew the US from the agreement in 2017. In 2020, the 11 countries of the CPTPP accounted for 8.4% of goods and services exported from the United Kingdom. In turn, 6.8% of imports to the United Kingdom came from these countries. The terms of the Trans-Pacific Partnership eliminate unnecessary barriers to mutual trade of services by opening financial markets and reducing obstacles to cross-border investment, facilitating data exchange, increasing business mobility, and ensuring regulatory transparency. All of this will support the British government's plans to turn the country into a global technology and service hub, strengthen semiconductor and critical mineral supply chains to produce electric vehicles and wind turbines.London already has trade agreements with most members of this trading bloc, but now these relationships can deepen, and 99% of British goods exported to the bloc countries will be subject to zero import tariffs. Tariffs on imports of Peruvian bananas, Vietnamese rice, crab sticks from Singapore, and Malaysian palm oil into the UK will be reduced (this is a controversial issue that has sparked discussion in the UK, as the production of palm oil, as ecologists point out, leads to deforestation of tropical forests). At the same time, according to assessments by the British government itself, joining the CPTPP is expected to add no more than 0.08% per year to the country's economic growth in the long term (while the slowdown in growth due to Brexit is estimated at 4%). Many politicians and trade experts rightfully point out that participation in the Trans-Pacific Partnership is not capable of compensating for the economic losses that the UK is experiencing due to its departure from the EU. Moreover, due to differences in its rules and standards from European regulations, Britain's accession will prevent it from returning to the European Union in case of a change of priorities. In other words, this agreement is like driving an additional wedge into the relationship between London and Brussels, which are just starting to improve. It is worth remembering in this regard that it was Liz Truss, a former trade minister in Boris Johnson's cabinet and one of the main advocates of independence from the EU, who submitted the British application to join the CPTPP. So far, for London, it is not so much a direct economic, but rather a strategic and symbolic acquisition, firstly due to the rapid growth (according to some estimates, up to 65% by 2030) in the number of middle-class consumers in a dynamically developing region, committed to innovation, and secondly, because of the fact that in the foreseeable future, mid-ranking trading powers such as Thailand and South Korea, which have already submitted applications, are planning to join the Trans-Pacific Partnership. Membership in the TPP is becoming more important for Britain due to the unattainability of a large trade agreement with the United States and the crisis in the World Trade Organization, which is currently unable to firmly enforce the rules of global trade. The matter is not limited to trade alone as London's foreign policy is clearly shifting towards the Indo-Pacific region. In this sense, Australia and Japan, concerned about economic pressure from China and its military ambitions, see Great Britain as a natural ally in opposing Beijing. It is assumed that stronger economic ties will lead to the strengthening of geostrategic alliances. Due to the high dependence of countries such as Chile on Beijing, which is the largest trading partner and main investor for Chileans, Britain's participation in the CPTPP, according to London's opinion, will contribute to the establishment of necessary connections that are seen by Britain's partners in the region as an attractive alternative to ties with China.

The meeting of Russian President Vladimir Putin and Chinese leader Xi Jinping in Moscow helped both give the impression of a united front, but underlying tensions were also discernible. What did the summit achieve for each side?With the pomp of a state visit, Russian President Vladimir Putin and Chinese leader Xi Jinping shined a spotlight on their ­growing strategic alignment, which is aimed at upending the U.S.-led, rules-based international order in favor of a multipolar world. Long on symbolism, short on concrete substance, the summit nevertheless served both leaders’ purposes. Putin welcomed the demonstration that Russia was not, and could not be, isolated on the world stage, as it deepened relations with one of the world’s two superpowers. By showcasing burgeoning commercial ties and unveiling plans to expand them, Putin conveyed confidence that Russia can remain resilient in the face of harsh Western sanctions.      Meanwhile, Xi’s decision to make Moscow his first foreign visit of his third term as president underscored his strong commitment to Russia and to Putin personally. He used the summit to underscore China’s determination to pursue its national interests in defiance of mounting U.S. economic and diplomatic pressure—making the point that China will not abandon its strategic partner in pushing back against U.S. pretensions to global leadership. That was a crucial message for his increasingly nationalistic domestic audience, as well as for the Global South, where the U.S.-led liberal order is under stress. At the same time, Xi subtly let it be known that China is the dominant partner. Putin had little choice but to accept Xi’s proposal that Russia use the yuan, not the ruble, in trade with the Global South to diminish the role of the U.S. dollar in world trade. Xi also gratuitously endorsed Putin for reelection in 2024, even though the Russian president has not declared his intention to run. And at the joint press availability at the end of the summit, Xi was much more restrained in his description of bilateral relations than was Putin, who was eager to lay out all the areas in which the two countries would enhance cooperation in the years ahead. That left the clear impression that Russia needed China much more than China needed Russia.What does the summit mean for the war in Ukraine?Nothing at the summit suggested that the underlying dynamic in the war was about to change. As expected, Beijing continued to provide Moscow with strong diplomatic support, echoing the latter’s narrative blaming the North Atlantic Treaty Organization (NATO) for the conflict. Despite Washington’s fears, however, Xi gave no indication that China was ready to provide lethal military aid that might radically improve Russia’s chances on the battlefield. Putin noted that China’s recently released 12-point peace plan could serve as a basis for negotiations, but neither he nor Xi suggested any practical steps that might give substance to what is largely a list of bromides about respecting sovereignty, avoiding escalation, and seeking a diplomatic solution. The reality is that China benefits from the military stalemate. Russia’s aggression distracts U.S. attention and resources from the Indo-Pacific region, while Western sanctions compel Russia to turn to China as an economic lifeline. China exploits Russia’s predicament to gain access to critical natural resources, especially oil and gas, at discounted prices.  In line with this calculus, Xi provided Putin with sufficient moral and material support so that he could continue the fight, but much less than needed to give Russia the advantage. At the same time, the Chinese continued to drive hard commercial bargains. Notably, no deal was announced to build a second Power of Siberia gas pipeline, which Putin has described as “the deal of the century.” Rather, it was simply noted that further details needed to be negotiated, as China explores alternatives.What does it reveal about the underlying tensions between China and Russia?Except for a brief period after the Communist takeover of China in 1949, China and Russia have been rivals, not partners. Until the end of the Cold War, Russia was by far the superior power.   The dynamic changed dramatically after 1991. Then, the two countries’ economies were roughly the same size. Now, China’s economy is ten times larger, and the gap continues to widen.  Moreover, China now casts a much larger shadow on the global stage: it has overtaken Russia in the development of advanced technology and its conventional military is comparable to Russia’s, even as it is moving toward nuclear parity with both Russia and the United States. What once could have been seen as a roughly equal partnership has evolved to the point where Russia is decidedly the junior partner. Despite the rhetoric of comprehensive partnership and avowals from Putin and Xi that relations have never been better, this asymmetry in power and ambition is in itself a source of friction, in addition to the civilizational clashes, racial prejudices, territorial grievances, and geopolitical competition that have strained relations in the past. But these sources of tension are currently far outweighed by the shared challenge from the United States. Washington’s current policy of dual containment only reinforces their strategic alignment and pushes the tensions further into the background.

The significant rise in defence and security ties between India and Australia has led to an ease in dealing with their responsibilities in multilateral regional forums. The institutionalisation of cooperation has also become more strategic.  The geostrategic positioning of India and Australia on the Indian and Pacific Oceans has helped with the convergence of interests, enabling relations to expand and steadily deepen. Unlike in earlier times when New Delhi and Canberra were searching for equal grounds for cooperation, the concept of the Indo-Pacific has made this easier, enhancing the conviction that greater engagement was an inevitability of their geographic circumstances. It made them partners to jointly take responsibility for maintaining a free, open, inclusive and peaceful Indo-Pacific, which demands a noticeable tilt towards defence and security cooperation. India has long aspired to be the key protagonist in the Indian Ocean; Australia has wanted to more naturally belong to the region. Moreover, Australia’s foreign policy over the years has emphasised playing a constructive role in the region with enhanced regional engagement. Though China looms large in each nation’s strategic calculation, the issues that unite both countries go beyond China and include the multifaceted challenges of maritime security, piracy, armed robbery, smuggling of small arms, protracted internal conflict, illegal, unprotected, and unregulated (IUU) fishing, cyber security, climate change, and ocean-born trade security. The India-Australia Comprehensive Strategic Partnership (2020), upgraded from the bilateral strategic partnership of 2009, is an effort to broaden the scope of their defence and security relationship by finding new initiatives, methods, and mechanisms to sustain mutual security interests. These have been bolstered to-date through cooperation in the AUSINDEX, Kakadu, Pitch Black, Milan, and Malabar military exercises, and with further collaboration in the Indian Ocean Naval Symposium, 2+2 ministerial dialogues, Joint Working Group for research on enhancing defence industry, mutual logistics, and intelligence support and sharing agreements. These have included, for example, the Mutual Logistics Support Agreement and officer exchange programs. In addition, Australia’s invitation to India to join Exercise Talisman Sabre, the most important military exercise between Australia and the United States, will set another milestone for cooperation. Both countries further engage in humanitarian matters, energy security, and marine and space research. Their commitment to Humanitarian Assistance and Disaster Relief in Afghanistan and within the Quadrilateral Security Dialogue in vaccine distribution, for example, highly has been successful. In energy security, both have agreed to focus on UN Sustainable Development Goals and work on new and renewable technology in solar and wind energy. One potential area for cooperation – being maritime powers – will be wave energy for sustainable and resilient energy sources. The Indo-Pacific Oceans Initiative, in which India and Australia are deeply involved, will work on a whole array of issues involving marine ecology; security of maritime borders; pollutants, like marine plastics; IUU fishing; and marine research for conservation purposes. In addition, India and Australia have updated the Memorandum of Understanding in space programs, technology advancement, and joint space programs. Australia will also be supporting India in tracking the Gaganyaan mission – India’s first space-manned mission – at Cocos Keeling Island. Currently, India and Australia are at a crucial juncture. The election of the new government in Australia in 2022 is likely to aid the strong relationship between the two nations. But the turn for India to head the G20 is also expected to facilitate greater cooperation, particularly in economic and trade liberalisation and potential reform of economic regimes such as the World Trade Organization. In April 2022, India and Australia signed their first Free Trade Agreement (FTA), the India-Australia Economic Cooperation and Trade Agreement. The fast pace at which their trade took off – from US$13.6 billion in 2007 to US$24.3 billion in 2020 – shows the many benefits of diversifying their trade. In addition, the elimination of tariffs for nearly 90 percent of Indian exports will further boost the Indian economy. The question is whether India will continue to engage its economy regionally in multilateral economic bodies. While it declined to join the Regional Comprehensive Economic Partnership, India has begun a process of seeking bilateral FTAs with most member countries. What Australia and India can achieve bilaterally to make the comprehensive strategic partnership effective is to engage in dialogue with regional littoral countries on defence and security. This engagement will help with confidence-building and familiarity among partners. However, the advantage of this type of institutionalisation of the Indo-Pacific depends upon the degree to which states seek interaction. The littoral states, in this sense, should be included within the Indo-Pacific complex as much as possible. The emerging paradigm of inclusivity and pluralism within a free, open, and peaceful Indo-Pacific will bring together the littoral and less powerful countries of the region and empower them to join and engage with others; that is, those who otherwise do not have a voice or clout in international political platforms. Along these lines, the Indian Security and Growth for all (SAGAR) initiative seeks to enhance cooperation through information sharing, capacity building, coastline surveillance, and infrastructure building. The India-Australia-Indonesia trilateral dialogue is another attempt to enhance cooperation in the same direction. Although it was presumed in India that the Labor government in Australia might be more inclined toward China, it was understood that this did not mean a policy and behavioral turnaround. Instead, Canberra’s focus will include a mix of continuity and change. Australia has come a long way in its institutionalisation of the Indo-Pacific, and its ability to diversify its interests by engaging with the littoral countries deserves special attention. To be sure, China’s increased aggression in the South China Sea and it’s diplomatic handling of Australia’s COVID-19 inquiry have been influential here. But the process has also been captive to such institutionalisation as mentioned above. Australia’s involvement with Quad and its participation in the military exercises with India and other Quad countries in the Indian Ocean will continue to strain its relations with China. In addition, the Russia-Ukraine war will likely continue to drive foreign policy activism and cooperation among like-minded countries, of which Australia figures prominently. The takeaway here is that regular interaction between the two countries on various defence-related activities has worked to enhance mutual respect and understanding of shared values. This interaction has broader implications. Both nations can support each other in addressing issues of mutual concern internationally. Their engagement in trilateral groupings like the India-Australia-Indonesia and India-Japan-Australia dialogues, as well as joint engagement in the Supply Chains Resilience Initiative and the Quad with the United States and Japan, represent successful examples of bilateral and multilateral trust and relationship-building. One significant outcome of these growing partnerships will be to revive and strengthen the Indian Ocean Rim Association in awareness generation, capacity-building, and consensus-building. Lastly, all the above initiatives are government efforts to enhance partnerships. The involvement and regular interaction of academia, think tanks, civil society, and the media have been equally important and will continue to play an important role in boosting these relationships.