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Beijing’s push to pressure BHP, the world’s biggest miner, into trading in yuan has rattled markets but barely registered with geopolitical analysts. Many have missed what this really is: a return to form for China and a bold move to hasten the decline of the global dominance of the US dollar.
Since the global opening up to China in the 1970s and the formal recognition under Australian Prime Minister Gough Whitlam in 1972, Australia’s economic relationship with China has evolved from a pragmatic partnership grounded in mutual benefit to one characterised by deep interdependence, strategic caution and political tension.
Over the past four decades, China’s rise from a developing nation to the world’s second-largest economy has transformed the global order, and few nations have felt this shift more acutely than Australia.
What began as a resource-driven trade relationship in the 1980s has matured into a comprehensive economic linkage that underpinned Australia’s prosperity in the 21st century.
China rapidly accelerated its position, becoming Australia’s largest trading partner, absorbing vast quantities of iron ore, coal and agricultural produce while providing a market for education, tourism and services. The resulting boom has rapidly reshaped Australia’s economic landscape, shielding it from the worst effects of the Global Financial Crisis and fuelling an unprecedented era of growth.
This reshaping of the Australian economy coincided with the waves of neoliberal globalisation that has, like many comparable nations, seen the hollowing out of Australia’s industrial base and economic complexity.
Yet this prosperity has always existed within a complex web of political and strategic contradictions. Australia’s alliance with the United States, its liberal democratic values, and its commitment to a rules-based international order have often stood in uneasy contrast to the authoritarian character and strategic ambitions of the Chinese Communist Party.
As China’s assertiveness grew under Xi Jinping through a combination of economic coercion, regional militarisation and political influence operations, Australia found itself at the intersection of economic dependency and strategic vulnerability. Policy decisions such as the exclusion of Huawei from 5G networks, the call for an independent inquiry into COVID-19’s origins, and the introduction of foreign interference legislation each prompted sharp Chinese retaliation, exposing the fragility of the bilateral relationship.
In the era of accelerating great power competition, Australia’s economic engagement with China has become a test case in balancing prosperity with sovereignty. Canberra now faces the intricate task of sustaining trade flows while diversifying markets, strengthening resilience in critical industries, and aligning with partners through frameworks such as AUKUS and the Quad.
The challenge lies not in decoupling from China – an unrealistic prospect – but in managing interdependence in a way that mitigates strategic risk without undermining economic vitality. Ultimately, Australia’s experience illustrates the central dilemma of middle powers in a contested Indo-Pacific: how to navigate the shifting tides of global power while safeguarding national interests, democratic integrity and long-term economic security.
Highlighting this challenge is the parallel rise of the Chinese-led global institutions, including the Shanghai Cooperation Organisation, and the Brazil, Russia, India, China, South Africa (BRICS) group designed to provide an “alternate” ecosystem for nations and rogue states traditionally outside of the global “rules-based order” to convene and conspire to usurp the post-Second World War economic, political and strategic order.
The latest such example of this global ambition has been China’s efforts to coerce the world’s largest mining company, BHP, via bans on iron ore imports in an effort to secure settlement rates for iron ore in the Chinese currency, the yuan, adding yet another wound in the post-Second World War, US dollar-dominated global trading system.
A return to form
Beijing’s ambition to drive the de-dollarisation of the global order reflects a calculated effort to weaken the United States’ financial hegemony and to elevate China’s economic influence commensurate with its strategic power.
The global dominance of the US dollar grants Washington extraordinary leverage, allowing it to enforce sanctions, influence international capital flows and control access to the world’s financial plumbing. For Beijing, this represents both a structural vulnerability and a constraint on its geopolitical ambitions. Its response has been to promote a gradual reordering of global finance around a multipolar system in which the renminbi (RMB) plays a far more prominent role.
This campaign has unfolded through several deliberate initiatives. China has encouraged greater use of the RMB in cross-border trade, established offshore clearing centres in financial hubs from London to Singapore, and promoted the Belt and Road Initiative as a means of exporting RMB-denominated finance and infrastructure investment.
It has also founded parallel financial institutions, such as the Asian Infrastructure Investment Bank and the New Development Bank, to provide alternatives to Western-dominated lending frameworks. At the technological frontier, Beijing has advanced its central bank digital currency, the e-CNY as a tool to bypass the US-centred SWIFT payment network and facilitate settlements insulated from Western oversight or sanctions.
More recently, China’s ambitions have turned towards the commodities sector, long the foundation of its trade relationship with resource exporters such as Australia. Beijing has applied pressure on major suppliers, including BHP to settle iron ore sales in yuan rather than US dollars. Such moves are designed to internationalise the renminbi, reduce China’s exposure to dollar volatility, and signal that access to its vast market with expectations of financial alignment.
Highlighting this broader trend is ABC’s Marina Yue Zhang, who said, “At first glance, this looks like a simple dispute over price. But step back, and a picture begins to emerge of something possibly far more deliberate. If true, this ban represents a pressure test from China – one that goes beyond trade and speaks directly to the future of Australia’s economy and the shape of global resource politics.”
Concerns about this ban were echoed by Australian Prime Minister Anthony Albanese, who said, “I want to see Australian iron ore be able to be exported into China without hindrance. That is important. It makes a major contribution to China’s economy, but also to Australia’s.”
For Australia, the implications are profound: iron ore exports are a cornerstone of national income and a key source of fiscal resilience, yet accepting RMB settlements could expose producers to greater political and currency risk while symbolically endorsing China’s broader de-dollarisation agenda.
These efforts sit within a wider pattern of economic coercion. Beijing has repeatedly used trade restrictions and informal sanctions – targeting Australian wine, barley, coal and seafood to punish perceived political slights and deter policy independence.
Yue Zhang added, “For Canberra, it may have carried an unsettling sense of déjà vu: harking back to the 2020–21 trade dispute, when Beijing targeted Australian exports including wine, barley, and coal. The difference now is that iron ore matters more than any of those products combined. Nearly 60 per cent of Australia’s exports to China in the year to May 2024 were iron ore. Losing access to that trade would strike at the heart of Australia’s economy.”
While such coercion imposes real costs, it has also prompted global supply chain diversification and deepened alignment among like-minded democracies. In this sense, China’s drive to rewire global finance and assert economic dominance underscores both its strategic ambition and the inherent tension of wielding interdependence as a weapon in an increasingly contested international order.
Nevertheless Australia has been slow to diversify from its over-dependence on Beijing, leaving itself dangerously exposed to the moods of the world’s rising superpower, something that Yue Zhang reinforced, adding, “Australia and China rely on each other, but not in equal amounts. Australia is critically dependent on China for revenue. China, in the short term, still depends heavily on Australian ore. BHP alone supplies around 13 per cent of China’s imports – impossible for either side to replace overnight.”
Meanwhile, Beijing is actively seeking to offset its dependence on Australian iron ore through strategic investments across Africa, mainly what has been dubbed a “Pilbara killer” in Guinea, central Asia and Russia, a move reflected by Tom Price of Panmure Liberum speaking to mining.com, where he posited a particularly concerning question, “Would China have done this a decade ago, when it heavily depended on imports? No way.”
This move ultimately reflects a more bold and assertive China that is clearly feeling like it has the wind at its back, and this comes before Australia attempts to break its near monopoly on rare-earth elements and the associated refining.
Final thoughts
Australia stands at a crossroads.
For too long, we’ve coasted on the comfort of alliances, luck and short-term politics, but the world around us has changed fast. The Indo-Pacific is now the most hotly contested region on earth and the storm is breaking on our doorstep.
China, India, Japan, South Korea, Vietnam and others are surging ahead, flexing their economic, political and military power. The question is no longer if competition will reach us – it already has.
That’s why Australia and its policymakers must face an inescapable truth: defending the nation and our interests must come first. Not tinkering with HECS repayments. Not indulging in symbolic climate gestures or endless welfare expansion.
Defence, resilience and national strength must take priority, because without security, nothing else endures.
If we’re serious about safeguarding our future, both government and the public must confront some uncomfortable realities. Australia can no longer rely solely on the US alliance or assume others will guarantee our safety. We need the capability – industrial, technological, economic and military – to act independently when required and decisively when necessary.
That means a national reset: rebuilding advanced manufacturing, securing critical supply chains, investing in science, energy and defence innovation, and ensuring our armed forces have the tools and capacity to deter threats before they reach our shores.
Prosperity and security are two sides of the same coin and both depend on sovereign strength.
For decades, Canberra has prioritised short-term political wins over long-term national purpose. That era must end. We need a bold, clearly articulated strategy that unites government, industry and the public behind a shared vision of Australian resilience and independence.
The time for incrementalism is over. Australia can either step up as a shaper of the Indo-Pacific’s future or fade into irrelevance as stronger nations dictate the region’s fate. The choice is ours, but hesitation is a luxury we no longer have.
If we want to thrive in this century, we must build a sovereign, capable and confident Australia, one that defends itself, protects its interests and defines its own destiny.
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