Security, trade in focus as Australia PM Albanese heads to China

By Kirsty Needham

SYDNEY (Reuters) -Australian Prime Minister Anthony Albanese leaves for Shanghai on Saturday on an official visit to China where regional security tensions and efforts to grow economic ties are likely to dominate talks.

Australia's exports to China, its largest trading partner, span agriculture and energy but are dominated by iron ore, and Albanese will travel with executives from mining giants Rio Tinto, BHP and Fortescue and hold business events in three cities over six days.

"The relationship in China means jobs in Australia, it's as simple as that," Albanese told reporters on Friday.

Albanese's second visit to Beijing, where he will meet President Xi Jinping, comes after Canberra stepped up screening of Chinese investment in critical minerals and as U.S. President Donald Trump rattles the global economy with sweeping import tariffs.

Albanese is yet to meet Trump, after scheduled talks at the G7 were cancelled when the U.S. president left early. The United States, Australia's major security ally, is reviewing the AUKUS nuclear submarine partnership amid concern selling submarines to Australia could weaken U.S. deterrence to China.

Foreign Minister Penny Wong warned in a speech in Malaysia on Thursday that China continues to project military power regionally with an objective to change the balance of power, saying Beijing's nuclear and conventional military build-up was "worrying".

AUKUS contributed to "collective deterrence in our region," she said.

Richard Maude, an Asia Society non-resident fellow and former Australian intelligence chief, said Albanese needed to expand the economic relationship with China but also "get through the visit in a way that makes clear to Australia's close partners and to the Australian public that Australia is talking clearly and frankly to China about aspects of China's behaviour that concern us".

The Chinese navy held live-fire exercises in the Tasman Sea between Australia and New Zealand with no advance warning in February, and there have been tense encounters between Australian and Chinese military aircraft in the disputed South China Sea.

While Beijing is keen to move ties forward, its proposals for cooperation on artificial intelligence, for example, have already met with a cool response, said Maude, who wrote Australia's 2017 foreign policy white paper.

Australia's two-way trade with China was worth A$312 billion last year, or a quarter of all Australian trade.

Ties have stabilised since 2020 when China imposed unofficial bans on A$20 billion in Australian exports.

Direct engagement with Chinese leaders was important for Australia's security, Albanese told reporters on Friday.

"We cooperate where we can and we disagree where we must, and we're able to have those honest conversations about some of the disagreements that are there," he said.

Treasurer Jim Chalmers has said economic ties with China are a priority, but also complex.

Australia's increased screening of Chinese investment in critical minerals, renewable energy and key infrastructure is likely to be raised by Beijing, company executives told Reuters, although on Tuesday Chalmers said Australia would not ease its scrutiny.

"The government understands it is not in Australia's national interest to further increase China's stranglehold on the critical minerals supply chain," said Maude.

Geoff Raby, a former Australian ambassador to China, said China would probably raise its ambition to join the 11-member regional trade pact, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which Australia chairs.

"The most harmful thing is to adopt policies that force China to become more isolationist or which encourage those domestic forces in China who favour more inward-looking policies," Raby said.

Albanese will meet businesses in Shanghai on Monday, before travelling to Beijing for an annual leaders' dialogue with Premier Li Qiang, and a company roundtable, and then head to the southwestern Chinese city of Chengdu.

(Reporting by Kirsty Needham in Sydney; Editing by Kate Mayberry)