Ten years on from the China–Australia Free Trade Agreement, tariffs are no longer the main issue. Geopolitical tensions, data governance and rising compliance costs now define the risks shaping economic ties.

Ten years ago, the China–Australia Free Trade Agreement (ChAFTA) was seen as a tariff story: lower duties, more trade, mutual gains. And it delivered. Bilateral trade expanded sharply over the decade. But the uncomfortable truth is that the easy tariff dividends have largely been banked. What now defines the Australia–China economic relationship is not tariffs, but risk – and not a single risk, but what I call a new risk triangle made up of three forces: geopolitical uncertainty, data governance, and compliance costs.

Geopolitical uncertainty

Investment decisions that once looked purely commercial are now filtered through a national security lens. Australia’s 2018 decision to exclude Huawei from the 5G network is an instructive case: it was framed less around narrow technical vulnerabilities than around risk, alignment, and trust in a contested strategic environment.

Since then, this logic has widened – especially in sectors that sit at the intersection of critical supply chains, technologies, and infrastructure. Foreign investment screening is no longer only about competition, jobs, and capital inflows. It is increasingly about whether ownership structures, technology pathways, and supply chains align with allied strategic objectives.

In October 2025, Australia and the United States signed a bilateral framework on critical minerals designed explicitly to strengthen allied supply chains and reduce strategic exposure. In practice, the message to investors is clear: in sensitive areas, as one of my interviewees put it bluntly, “national security now trumps purely commercial considerations.”

For Chinese firms, the uncertainty is structural and multi-directional. The Darwin Port saga illustrates why. Landbridge Group’s 99-year lease in 2015 was widely understood at the time as a commercial transaction. A decade later, both major Australian parties have pledged to buy the port back on national security grounds. China’s ambassador has publicly warned of consequences; Australian strategists argue the move is overdue.

Whatever one’s view, the case points to a deeper reality: when the investor is Chinese, even assets that serve host-country interests can face continuing political risk long after the contract is signed.

This is not only an Australia story. Global capital is increasingly ’re-sorted’ by alignment. McKinsey research suggests the geopolitical distance of greenfield FDI announcements has fallen markedly in recent years – capital is flowing more within blocs and less across strategic fault lines.

Data governance

The second side of the triangle is less visible but increasingly consequential: who writes the rules for how data is collected, stored, and used in cross-border commerce.

This is not just ‘data in the cloud’ – social platforms, AI models, and digital services. It is also data in steel: connected electric vehicles, smart devices, industrial equipment, and – soon – humanoid robotics.

Australia is already confronting these issues through the EV transition. Chinese brands entering the Australian market have had to engage with privacy and consumer expectations. BYD, for example, has publicly stated that Australian customer personal information is stored on Australian servers in compliance with local privacy requirements, and it has invested heavily in local retail and servicing capacity. The broader lesson is that market access in advanced economies increasingly depends on governance credibility as much as price-performance.

If that sounds abstract, look at where China is heading next. During the 2026 Spring Festival Gala, humanoid robots from multiple Chinese firms performed highly choreographed routines alongside human performers. As these systems move toward deployment – in manufacturing, logistics, and aged care – Australia will face the same governance questions it now confronts with connected vehicles: where is the data stored, who controls the models and update pipelines, and under whose regulatory framework do these systems operate?

Compliance costs

The third side of the triangle is the most underappreciated – and the most operational. For Chinese firms in Australia, compliance is not a one-off legal hurdle. It is a multi-layered, continuously evolving operating environment shaped by tax obligations, workplace regulation, privacy and cyber expectations, and fast-hardening environmental, social and governance (ESG) requirements that increasingly function as conditions of approval rather than soft disclosure exercises.

Two features make this especially challenging. First, compliance is cumulative. It is built through systems, staff, reporting lines, audit practices, supplier due diligence, and board-level governance. Firms that treat Australia as a short-term sales market often underinvest in these foundations – and then pay later. Second, there is a timing mismatch. Rapid international expansion can push a firm into new regulatory categories before its internal governance has adapted. Growth itself becomes a source of regulatory exposure. A company may cross revenue or reporting thresholds quickly, while still operating with governance structures designed for a much smaller footprint.

In consumer-facing sectors such as EVs, firms have discovered that the real challenge is not selling cars. It is building financing relationships with Australian banks, navigating strata rules for apartment charger installations, running local service and parts networks, and maintaining public trust in data handling and safety. In an era where geopolitical headwinds make every Chinese investment more visible and more scrutinised, the firms that build deep local roots will be the ones most able to absorb political turbulence. Social licence becomes the shock absorber.

What this means for ChAFTA 2.0

Facing these new risks, for the next decade, ChAFTA 2.0 should function less like a traditional tariff-and-market-access agreement and more like an operating system – a framework for managing the flows that define the modern economy: data, green industrial inputs, and AI-embedded products.

Three domains are urgent.

First, data flows and digital governance. As Chinese EVs, platforms, and industrial systems expand into Australia, we need clearer bilateral understandings that balance openness with security – rather than ad hoc restrictions that amplify uncertainty for both sides.

Second, green trade and supply chains. The energy transition has created a new interdependence, and ChAFTA 2.0 should put practical rules around green supply chains – carbon accounting, ESG-related disclosure baselines, and pathways for mutual recognition where standards are genuinely comparable.

Third, AI and emerging-technology safety. The next wave of products entering Australian markets will be AI-embedded: autonomous driving stacks, industrial AI, and, eventually, service robotics. Australia needs workable frameworks for algorithmic transparency, safety certification, auditing, and liability – before these products arrive at scale, not after.

The goal is not to restore a frictionless past. It is to build what I call resilient symbiosis: a relationship that can absorb shocks, manage disagreement, and still create value for both sides. The firms that thrive will be those that understand Beijing’s industrial ambition, Washington’s security logic, and Canberra’s regulatory evolution – and can navigate all three simultaneously.

This article draws on __Beyond the Tariff: A Decade of ChAFTA and the New Rules of Engagement__, a report by the UTS Australia–China Relations Institute based on 40 in-depth business interviews.