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Originally published 14 October 2022.

Rumours that President Xi Jinping was under house arrest amid a military coup in China—apparently driven by Falun Gong–linked social media accounts known for spreading factually problematic information—spread widely in late September. The available facts told most analysts that a coup probably hadn’t occurred, so it wasn’t surprising when Xi resurfaced on 27 September. That said, analysts shouldn’t be quick to deny that Xi’s position in power is more precarious than it might appear. No one knows for sure the degree to which his position is absolute. And neither, perhaps, does Xi himself. He may have positioned himself as ‘dictator for life’, but the forces of control are dynamic and he has survived in part because he doesn’t make that assumption himself.

Ahead of the 20th National Party Congress, kicking off on Sunday, we have been reminded that from the Chinese Communist Party’s perspective, power isn’t inevitable. We saw ramped-up prosecutions, continued calls for loyalty and warnings of colour revolutions. None of this is necessarily a sign of weakness or strength. The constant cycle of crisis or potential crisis is something the Chinese Communist Party also derives power from. It is a means for mobilising the party and the public, and for justifying intensified security measures and crackdowns. The threats are not imaginary.

A good rule of thumb for assessing political rumours from China is to consider them based on the balance of probabilities. If we’re going to talk about Xi’s power, it’s best to use the structure of power as a framework and shape the questions from there. As suggested to me by my colleague Peter Mattis, there are five main elements to being the foremost leader in the People’s Republic of China: gun, paper, pen, knife and blood.

The ‘gun’ is the People’s Liberation Army. The PLA is the party’s armed wing—not the country’s army—and is the guarantor of the party’s power. As Mao Zedong famously wrote, ‘Political power grows out of the barrel of a gun.’

The ‘paper’ is handled by the central paper-pushers in the General Office of the Central Committee and the Organisation Department, which play an important role in the party’s management of itself.

The ‘pen’ is the propaganda apparatus. The gun defeats enemies, but the pen, as Mao noted, unites the people (under the leadership of the party) and attacks and destroys the enemy. It also defines and interprets party orthodoxy.

The ‘knife’ is the internal security apparatus (the Ministry of State Security and Ministry of Public Security) responsible for social and political control.

And finally, the ‘blood’, representing the core families of the party. They hold massive wealth, much of which sits outside of China, and command their own loyalists by extension.

Mao controlled these elements as he rose to power and as he stayed in power after the forming of the PRC. As chronicled in Gao Hua’s meticulous study of Mao’s seizure of power, he began with his base in the Red Army and steadily moved to control how the central party machinery functioned and the propaganda organs. Xi has gone after each of these areas, it would appear with great success.

Early in his tenure, Xi began an anti-corruption campaign targeting the PLA. Two former vice-chairmen of the Central Military Commission were singled out for particular scrutiny: General Xu Caihou, who died of cancer in 2015 a year after being put under investigation, and General Guo Boxiong, who was sentenced to life in prison. Another PLA officer, General Gu Junshan, former deputy director of the PLA General Logistics Department (since rebranded as the Logistic Support Department), was given a suspended death sentence.

As analyst Kevin McCauley wrote in 2015, much of the early anti-corruption campaign and personnel changes focused on logistics and political officers responsible for money, personnel, materiel and construction projects. The significance of these posts is even more crucial in a political context, because the party’s ability to rely on the PLA to mobilise in a crisis requires political loyalty as well as preparedness for military action.

At the same time, Xi put himself in charge of huge PLA reforms with the establishment of the Leading Small Group on Deepening Reform of National Defence and the Military in 2014. He oversaw the establishment of the PLA Ground Force headquarters, the PLA Rocket Force and the PLA Strategic Support Force in 2015, and directed a major PLA restructure that began in 2016.

Xi was quick to focus on ensuring that the propaganda apparatus was on his side. Propaganda controls party dogma and helps Xi to project an image of strength, domestically and internationally. Huang Kunming, a Xi ally, was appointed head of the Central Propaganda Department, under the CCP’s Central Committee, in 2017. During Xi’s tenure, the department has tightened its control over media, with the State Administration of Press, Publication, Radio, Film and Television being moved from the State Council to the Central Propaganda Department’s control in 2018. This strengthened Xi’s ability to define how the party’s theory about achieving national rejuvenation suggested Beijing’s direction in light of real-world events.

Like every party general secretary, Xi has his supporters in key positions, like the person running the CCP General Office. He also has enough control of the party discipline and anti-corruption organisations to use them against political opponents—as he clearly did in July with the sentencing of white-glove financiers for his political opponents and in September with the sentencing of a number of officials linked to the Ministry of Public Security.

To control the knife, Xi launched a rectification campaign against the political–legal apparatus last year. One of the most senior officials taken down in the anti-corruption campaign, Zhou Yongkang, had most recently been head of the Central Political and Legal Affairs Commission, an area of the party-state apparatus that had resisted Xi’s efforts to politicise everything. Xi had either neutralised people or put his own in places of political power. Zhao Kezhi, who held the post of minister of public security, was recently replaced by Xi ally Wang Xiaohong. Zhao had earlier been replaced by Wang in the concurrent role of party secretary in the Ministry of Public Security.

Xi has generated the most resistance from the CCP’s elite families. The question here is whether the old power-broker system continues to function and has enough influence to unseat someone like Xi. It’s possible that the system has changed so fundamentally that the party elders can no longer act as a check on Xi.

The video message of Song Ping, the elderly representative of a significant PLA faction, is one of the most dramatic signs that the party’s bloodlines may be opposed in the current moment. (It is worth noting that signs of such dissatisfaction go back years.) As commentator Dimon Liu pointed out in June, criticisms of Xi by individuals writing from within the PRC have been published. None of those people are known to have been arrested, which is only possible if they are being protected by someone powerful in the PRC.

Yet, despite his consolidation of power, Xi has clearly made some mistakes.

The dynamic zero-Covid policy has created widespread dissatisfaction and left a trail of economic damage. Its disruptions have encouraged companies to think more directly about diversifying supply chains and forced new conversations about quality of life.

Xi’s decision to enter a ‘no limits’ partnership with Russia on the eve of its invasion of Ukraine put the PRC on the other side of an issue that has united the US and Europe. Although European countries are grappling with the energy crisis brought about by their dependence on Russian gas, new conversations are beginning about dependence on PRC supply chains.

Xi’s pressure campaign on Taiwan has closed off pathways for peaceful unification and encouraged the US to more explicitly state its support for Taipei. Last month, President Joe Biden for the fourth time stated that America would defend Taiwan if the PRC launched an unprovoked attack.

Xi also has doubled down on state-owned enterprises leading the economy, refusing to look at rebalancing the economy towards consumer demand. Now the headwinds are rising quickly and economic forecasts look increasingly grim.

So, the control solidified early on could be wearing down, and we are left to ask, by how much? At what point does dissatisfaction become opposition? Have generational change and Xi’s anti-corruption drive disrupted the familial and patronage networks that gave party elders power in the past?

For the CCP, the party congress is not when and where major political and personnel decisions are made. It is the platform the party uses to formalise and announce what already has been decided in backrooms. It isn’t always clear what those decisions might be until they become known to the world. It’s even possible that a palace coup and political manoeuvre forcing Xi out could go unmarked until the party congress provides the opportunity to tell the world.

In uncertain times when the rules have been cast out, regional specialists should be more open to possible discontinuities. As former director of US Central Intelligence Robert Gates noted, ‘Area experts, country experts, are sometimes the very last to see a revolutionary change coming, because the history of most countries is a history of continuity. In discontinuity, they find too many reasons why that won’t happen.’

The history of the CCP is littered with political crises, the most dangerous of which involved  questions of leadership succession and economic policy. Even if the coup rumours were a false alarm generated by wishful thinking, the current dynamics should have us systematically assessing potential discontinuities because of the potential for another crisis to emerge that tests the resilience of the CCP. Xi’s behaviour shows that he knows that the struggle for power is never over. We should take note of this in our own thinking.

On 9 December 2022, Indian and Chinese troops clashed in the Yangtse area along the India–China border. The confrontation in the Tawang region was the most serious skirmish between the two sides since their deadly clash in the Galwan Valley in 2020.

ASPI has released a new visual project that analyses satellite imagery of the key areas and geolocates military, infrastructure and transport positions to show new developments over the past 12 months.

This project contextualises India–China border tensions by examining the terrain in which the clash took place and provides analysis of developments that threaten the status quo along the border—a major flashpoint in the region. We find that the recent provocative moves by Chinese troops to test the readiness of border outposts and erode the status quo have set a dangerous precedent.

Tawang is strategically significant Indian territory wedged between China and Bhutan. The region’s border with China is a part of the de facto but unsettled India–China border, known as the Line of Actual Control, or LAC.

Within Tawang, the Yangtse plateau is important for both the Indian and Chinese militaries. With its peak at over 5,700 metres above sea level, the plateau enables visibility of much of the region. Crucially, India’s control of the ridgeline that makes up the LAC allows it to prevent Chinese overwatch of roads leading to the Sela Pass—a critical mountain pass that provides the only access in and out of Tawang. India is constructing an all-weather tunnel through the pass, due to be completed in 2023. However, all traffic in and out of the region along the road will still be visible from the Yangtse plateau.

Our analysis reveals that rapid infrastructure development by China along the border in this region means that it can now access key locations on the Yangtse plateau more easily than it could just one year ago.

India’s defences on the plateau consist of a network of six frontline outposts along the LAC. They are supplied by a forward base about 1.5 kilometres from the LAC that appears to be approximately battalion sized. In addition to this forward base, there are more significant basings of Indian forces in valleys below the plateau.

Although Indian forces occupy a commanding position along the ridgeline, it is not impregnable.

The access roads leading from the larger Indian bases are extremely steep dirt tracks. Satellite imagery shows that these roads are already suffering from erosion and landslides due to their steep grade, environmental conditions and relatively poor construction.

While China’s positions are lower on the plateau, it has invested more heavily than the Indian military in building new roads and other infrastructure over the past year.

Several key access roads have been upgraded and a sealed road has been constructed that leads from Tangwu New Village to within 150 metres of the LAC ridgeline, enhancing China’s ability to send People’s Liberation Army troops directly to the LAC. There is also a small PLA camp at the end of this road.

It was the construction of this new road that enabled Chinese troops to surge upwards to Indian positions during the 9 December skirmish.

The skirmish that took place between Chinese and Indian troops on the Yangtse plateau stems from this new infrastructure development.

Strategically, China has compensated for its tactical disadvantage with the ability to deploy land forces rapidly into the area. In small skirmishes, the PLA remains at a disadvantage because more Indian troops are situated on the commanding ridgeline that makes up the LAC. But in a more significant conflict, the durable transport infrastructure and associated surge capability that the PLA has developed could prove decisive, especially in contrast to the less reliable access roads that Indian troops would be required to use.

This intrusion, and subsequent clashes—which the Indian government claims the Chinese troops provoked—likely served to further normalise the presence of Chinese troops immediately adjacent to the LAC. This is a goal that the PLA appears to be working towards across the border and is part of China’s long-term strategy. By engaging in such an intrusion, the PLA is able to strategically position any ‘retreat’ to a higher location on the plateau.

Recent developments around Galwan and Pangong-Tso have shown that, where there is the political will, tense situations along the LAC can be disengaged with the involvement of both sides. In these areas, successful redeployment to positions back from the LAC has greatly reduced the risk of conflict.

Unfortunately, on the Yangtse plateau, the opposite is occurring. The recent provocative moves by Chinese troops to test the readiness of border outposts and erode the status quo have set a dangerous precedent.

China’s rapid infrastructure development along the border has created an escalation trap for India. It is difficult for India to respond to this new reality without being seen as escalating the situation. It is also difficult for it to unilaterally de-escalate without strategic concessions that would endanger its positions. India’s response has been to increase its vigilance and readiness along the border, including surveillance.

However, it is important to pursue non-military and multilateral measures in parallel to reduce the risk of accidental escalation and to position these incidents as a significant threat to peace and order in the Indo-Pacific. As part of this, India should seek and receive support from the international community to call out China’s provocative behaviour on the border.

Regional governments, including Australia’s, must pay greater attention to clashes on the India–China border. Continued escalation, including the potential of more serious clashes along the LAC, could become a major driver for broader tensions.

This new work by ASPI’s International Cyber Policy Centre builds on satellite analysis that it carried out in September 2021, focused on the Doklam region.

In October, the US introduced a ban on exports to China of cutting-edge semiconductor chips, the advanced equipment needed to manufacture them and semiconductor expertise. The export controls are Washington’s most serious attempt to undermine China’s military modernisation and the most damaging measures US President Joe Biden has taken against China.

Advanced semiconductors underpin everything from autonomous vehicles to hypersonic weapon systems. Chips are imperative to the defence industry and technologies of the future. By targeting this critical input, the Biden administration aims to freeze China’s semiconductor suite at 2022 levels and impede its military development.

China will probably struggle to maintain its rapid advances in artificial intelligence, quantum and cloud computing without access to US technology and expertise. Chipmakers like the Semiconductor Manufacturing International Corporation—China’s largest logic chip producer—will lose access to machine maintenance and equipment replacement under the new controls.

US chip equipment suppliers like Lam Research, Applied Materials and KLA Corporation have suspended sales and services to Chinese chipmakers, while ASML Holding, a Netherlands-based supplier, told its US staff to stop servicing Chinese customers until further notice.

The new controls exploit China’s weaknesses in developing talent and research. They require all US citizens, residents and green-card holders—including hundreds of ethnic Chinese educated and trained in the US—to seek permission from the US Department of Commerce to work in Chinese fabrication plants. Since such permission is unlikely to be granted, US citizens working at Chinese semiconductor companies will be forced to sacrifice their citizenship or their jobs. Most will have to give up their current jobs. Indeed, Yangtze Memory Technologies Corp has already asked core US staff to leave the company.

Despite the bleak short-term outlook, it is wrong to assume that US controls will hobble China for years. In the case of nuclear weapons, significant resources were poured into acquiring bomb technology once political leaders decided that they were essential for national defence. That effort inevitably starved other sectors, but more often than not successfully delivered nuclear weapons programs.

Now that advanced semiconductors are seen as essential to national defence, Beijing is adopting a ‘whole of the nation’ approach and investing national resources into the industry. Many engineers and computer scientists are likely to be assigned to semiconductor design and manufacture, assisted by espionage against US, South Korean, Taiwanese, Japanese and European chip firms.

The export controls won’t cripple the Chinese military. According to a recent RAND Corporation report, China’s military systems rely on older, less sophisticated chips made in China on which US export controls will have no effect. If China needs more advanced chips for AI-driven weapons systems, it can likely produce them, albeit at a very high cost. Many semiconductor industry experts agree that China has the technical capability to produce cutting-edge chips yet lacks the commercial capability to scale up production. This means that the US ban will have less effect on weapons systems, instead delaying the rollout of civilian applications such as autonomous vehicles.

Nor will US semiconductor firms emerge from the sanctions unscathed, given that many have China as their largest market. China accounts for 27% of sales at Intel, 31% at Lam Research and 33% at Applied Materials. Both Applied Materials and Nvidia expect the new export controls to cut US$400 million (6% and 7%, respectively) from next quarter’s sales. Lam Research—one of Yangtze Memory Technologies Corp’s largest suppliers—expects the controls to cut a whopping US$2.5 billion (15%) from 2023 sales.

These dramatic cuts come at a particularly difficult time for the US semiconductor industry, which is experiencing falling revenue and increased input costs. By one estimate, the damage US sanctions inflict on research and development and capital investment in the Western semiconductor industry ‘will exceed Washington’s modest subsidies for the chip industry by a factor of five or more’.

Tit-for-tat retaliation against the US is not an option for China, given its heavy reliance on foreign technology. Any reciprocal measure would inflict more damage on China itself. Punishing US companies with big exposure in China—like Nike or Apple—would harm the Chinese labour market since those firms employ many Chinese citizens. Other foreign supply chains and Chinese businesses supplying Nike and Apple would also suffer.

Imposing export controls on products China dominates, like rare earths or pharmaceutical ingredients, would accelerate the US movement to ‘reshore’, onshore and ‘friend-shore’ manufacturing of those products, as was the case with Japan in 2012.

Instead of overt retaliation, China will probably seek alternatives to US chip technology. But since alternatives are decades away, intellectual property theft and the nationalisation of foreign semiconductor firms could spike.

Whether US chip controls represent a stand-alone policy or foreshadow sanctions across a wider range of high-technology sectors is unclear. In the run-up to the 2024 US presidential election, many Republicans will call for harsher controls. At his recent meeting with Chinese President Xi Jinping at the G20 summit, Biden sought to tamp down US–China hostilities. But unless he resists calls from the US ‘China hawks’, Biden could find himself dragged into a second cold war.

As Australia’s foreign and defence ministers and the US secretaries of state and defence prepare to meet for the annual AUSMIN consultations, ASPI is releasing a volume of essays exploring the policy context and recommending Australian priorities for the talks. This is an abridged version of a chapter from the collection, which will be published this week.

It is probably inevitable that the defence dimensions of AUSMIN receive the most attention, especially given the ongoing war in Ukraine, the announcements on a pathway to nuclear-powered submarines and the defence strategic review due in March.

The emphasis on defence reflects the strategic context and the need to demonstrably affirm and strengthen the military alliance. However, the integration of foreign and defence policies and messaging is essential for the Australia–US alliance to perform effectively in this region, including in its most important contemporary task of managing China.

The foreign policy priorities of countries in the Indo-Pacific—from development to respect for sovereignty and the centrality of regional institutions—need to have due prominence not only in the AUSMIN joint statement, but also at the media conference and side events. To succeed bilaterally and regionally, AUSMIN will need to project the robust nature of the Australia–US alliance as well as the benefits it brings to the Indo-Pacific.

Setting the tone

AUSMINs are generally led by the respective foreign ministries. Notwithstanding the war in Ukraine and the AUKUS arrangement, this should still be the case.

Australian Foreign Minister Penny Wong and US Secretary of State Antony Blinken will want to ensure that the Australia–US partnership signals both strength and resolve, as well as a holistic and positive vision for the Indo-Pacific that reflects regional priorities, including sovereignty and economic development. They’ll aim to present a realistic view of the challenges facing the region, while emphasising stability and allaying concerns about a US–China conflict.

This all rests on clear signalling that the US is irreversibly committed to the Indo-Pacific, despite economic challenges at home, long-term support for Ukraine and concerns over Iran. US credentials need some repair after President Donald Trump’s piecemeal attendance at regional forums and the underwhelming delivery of President Barack Obama’s ‘pivot’ to Asia.

Any positive vision for this region must also weather an inevitable tide of propaganda and disinformation from Beijing, which will claim the US views the region solely through the lens of great-power confrontation and will dismiss Canberra as a US stooge. We need to work together to address Beijing’s false narratives, as we’ve had to do when explaining AUKUS to the region. Silence on our part only allows Chinese narratives to take deeper root.

The recent bilateral meetings in Bali with Chinese President Xi Jinping don’t alter the need to publicly address Chinese malign activity, including activity relating to the South China Sea, Taiwan and Xinjiang.

Leveraging Australia’s perspective

The Australian delegation comes to AUSMIN with certain geopolitical advantages. Australia is situated in and oriented fully towards the Indo-Pacific region in a way that the US, with its global reach and Euro-Atlantic alliances, is not. Australia’s undistracted focus on the Indo-Pacific lends knowledge, nuance and credibility to the viewpoints that Australian ministers present across the AUSMIN discussion table.

Played carefully, Canberra’s insider’s view of the Indo-Pacific could have synergistic effects on the soft-power advantages Washington still enjoys in the region, as shown by the US and Australia respectively ranking first and fifth for cultural influence in the Lowy Institute’s Asia Power Index 2021.

The change of government in Canberra also brings opportunity. Wong and Defence Minister Richard Marles approach their first AUSMIN able to show broad continuity with the robust China settings of the former government, but with room to try new things, such as on climate cooperation.

The case for strategic equilibrium

Wong has proposed ‘strategic equilibrium’ as the basis for Indo-Pacific order, blending realist elements such as alliances along with faith in the value of institutions and rules-based order, as these excerpts from her speeches in Kuala Lumpur and Singapore reveal:

[We seek] an order framed by a strategic equilibrium where countries are not forced to choose but can make their own sovereign choices, including about their alignments and partnerships.

[We seek a region] where disputes are guided by international law and norms, not by power and size … Achieving this requires a strategic equilibrium in the region.

If strategic equilibrium sounds vague, that’s probably somewhat deliberate—only a flexible concept with wide appeal can catalyse the diversity of countries we must engage across Southeast Asia and the Pacific. Those countries are sceptical of joining either formal alliances or values-based coalitions. They’ll be most receptive to a positive vision, backed by practical initiatives about which they have the sovereign choice whether and how to engage.

In addition, strategic equilibrium provides some helpful rhetorical distance from ‘free and open Indo-Pacific’ (FOIP)—the strategy masterminded by late Japanese Prime Minister Shinzo Abe and adopted by the US and others. This distance is important, as some countries in the region, encouraged by Chinese propaganda, misinterpret FOIP as a shibboleth for containment or democracy promotion.

While Australia has effectively had an Indo-Pacific strategy since the foreign policy white paper in 2017, we’ve tended to avoid the FOIP moniker by fiddling with adjectives. For instance, the last AUSMIN joint statement advocated an ‘open, inclusive, and resilient Indo-Pacific’. By adopting strategic equilibrium, Australia has a more elegant alternative lexicon.

Therefore, Wong should reference strategic equilibrium at AUSMIN. The aim isn’t to persuade the US to adopt or amplify the term. It could be included in the joint statement and raised at the media conference, which would juxtapose Australia’s positive vision for the region alongside the necessary and robust language calling out Chinese conduct. This communicates Australian agency and leadership to an Indo-Pacific audience.

A prominent role for strategic equilibrium also reinforces the principle that foreign and defence policies are two sides of the same coin. The post–Cold War turn towards soft power and non-traditional concepts of security loosened our grip on the fact that foreign policy and diplomacy are at heart about war and peace. While the term is Wong’s, strategic equilibrium rests comfortably alongside Marles’s call for ‘an effective balance of military power’ at the Shangri-La Dialogue in June. To be effective, Australian foreign and defence policies must also be in equilibrium. Achieving that balance will make Australia’s voice more credible and respected in the region.

An opportunity to engage on indigenous diplomacy

Wong could use AUSMIN to highlight Australia’s indigenous diplomacy agenda and propose avenues for practical cooperation with the US in the region.

Wong emphasised First Nations perspectives in Australian foreign policy in her statement to the UN General Assembly in September. The Department of Foreign Affairs and Trade’s indigenous diplomacy agenda pre-dates the current Labor government, but Wong is elevating it by creating a new office of First Nations engagement, headed by an ambassador for First Nations peoples. To be effective, it will require adequate resourcing and a sense of mission that acknowledges both areas of common experience and the differences between indigenous peoples here and around the world.

There’s a place for the US in indigenous diplomacy. New Zealand, Canada and Taiwan are among the other countries elevating indigenous priorities in their foreign policies, including through the Indigenous Peoples Economic and Trade Cooperation Arrangement launched in Ottawa. The US State Department has held some consultations with indigenous groups already, but seemingly only in a domestic context. Over time, this is another area on which the US, Australia and others could cooperate with Taiwan, reinforcing Taipei’s space in international forums without contradicting one-China policies.

While indigenous diplomacy has domestic dimensions, it also promises to become a channel for delivering Australian foreign policy objectives, especially in the Pacific. The US has diverse indigenous communities, which include the Pacific islanders on Hawaii and the other US territories in the Pacific. The US also has a special relationship through the Compact of Free Association with the Marshall Islands, Palau and the Federated States of Micronesia.

Wong could use AUSMIN to propose incorporating indigenous diplomacy into like-minded aid donor coordination meetings for the Pacific. In addition, Australia and the US could potentially both participate in an indigenous diplomacy side event at a Pacific forum.

Handling China and other thorny issues

Inevitably, China will be the organising principle behind the AUSMIN discussions because it’s the primary challenge facing both Australia and the US. Both countries’ approaches to China converge around what Prime Minister Anthony Albanese and Wong have called ‘cooperate where we can, disagree where we must, and act in the national interest’, which aligns broadly with the US’s three ‘Cs’ of competition, cooperation, confrontation.

The thorniest issues in the AUSMIN joint statement relate to China, including calling out regional assertiveness in places like the South China Sea and the violation of human rights in Xinjiang, Tibet and elsewhere in China. Taiwan will require the most careful handling, and any change in language on Taiwan, even the number of words in the relevant paragraph, will be unpicked at length by commentators. Last year’s communiqué contained strong supportive language on maintaining the status quo relating to Taiwan, and cross-strait tensions have only increased since. Robust language on all these topics is essential—any backsliding would be noted by China and the region.

However, as both governments will already be aware, a focus on China shouldn’t drown out the positive message to the Indo-Pacific that’s the hallmark of a successful AUSMIN. Similar logic applies to other concerns, such as Myanmar and North Korea. There’ll be questions about China at the media conference of course, where it would be sensible to ensure coordinated but not identical responses on foreign and defence policy. Wong could affirm Australia’s agency over its China policy by referring to acting consistently in the national interest, while citing the homegrown concept of strategic equilibrium as the basis of regional engagement.

Behind closed doors, there’ll be much agreement on the scale and urgency of the China challenge. Commentators may speculate that the US side will seek reassurances that the recent revival of top-level Australia–China meetings, and what seem to have been mistaken remarks by Albanese on Taiwan and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, don’t equate to potential softening of Australia’s China policy. A strong communiqué will help assuage any lingering concerns. But channels of communication between Canberra and Washington are so attuned these days that such reassurance would also have been communicated well ahead of AUSMIN, reserving the precious time in meetings to mull more sensitive topics, such as Chinese intentions and regional contingencies.

In private meetings with US counterparts, Wong and Marles should seek assurances that the US is committed to strategic competition with China over the long term. Countries across the Indo-Pacific dislike great-power competition on their doorstep, but many fear the US’s absence and inconsistency even more.

To compete, the US must be persuaded to work with Australia and other allies and partners to expound a positive vision for the region, including a persuasive pathway to prosperity. In this regard, the Australian delegation should reiterate that the US’s withdrawal from the Trans-Pacific Partnership has ongoing and negative strategic implications. That might seem like wasted breath, as the US returning to the pact lies outside the Overton window for the foreseeable future. But political winds change and political muscle memory fades—it pays to keep this at the forefront of minds. For now, Australia and the US should put more flesh on the bones of the available alternatives, such as the Indo-Pacific Economic Framework agreement.

The new leadership team selected by Chinese President Xi Jinping at the 20th national congress of the Chinese Communist Party failed to impress financial markets at home and abroad. In the week following the announcement of Xi’s new team, Hong Kong’s stock market declined by 8.3% and the Shanghai Composite Index, China’s largest stock exchange, dropped 4%, despite the Chinese government’s intervention to prop up prices. US-listed Chinese stocks plunged by 15%.

Investors have good reason to worry. Though financial markets had already priced in Xi’s third term, investors had hoped that he would appoint a team of more moderate, experienced officials capable of putting pragmatism above politics. Instead, Xi packed the Politburo and its standing committee with loyal allies and protégés.

China’s next premier will be Li Qiang, who was Xi’s chief of staff (2004–07), before later serving as governor of Zhejiang province (2013–16) and CCP secretary of Shanghai (2017–22). Li is widely credited with convincing Tesla to build its largest overseas factory in Shanghai—an achievement that has bolstered his business-friendly reputation. But, unlike every other premier since 1988, Li has no national-level administrative experience.

Ding Xuexiang, the next executive vice premier of the State Council, has even less leadership experience under his belt, having spent the last 10 years as Xi’s principal aide. In investors’ view, these officials lack the knowhow and independence to mount an effective response to the profound economic challenges China faces.

Xi stands to benefit from these low expectations, with any minor success appearing significant and burnishing his government’s credibility. Here, perhaps the lowest-hanging fruit is his zero-Covid policy, which has devastated the economy and contributed to an urban youth unemployment rate of nearly 20%.

At the party congress, Xi had little choice but to tout the policy as a major success, despite the devastation it has wrought. But with the meeting out of the way, and Xi starting his third term, the incentive to end the zero-Covid policy is strong. The boost to growth and employment—and to Li and Ding’s reputations—would be immediate.

Xi’s new economic team would also benefit from easing regulatory pressure on China’s technology sector. Since the Chinese government began tightening the regulatory screws, private tech companies such as Alibaba and Tencent have suffered, and foreign investors have fled China in droves. Goldman Sachs estimated last year that the crackdown had wiped out roughly US$3 trillion of the Chinese tech sector’s value.

Given that the tech crackdown is widely viewed as excessive and counterproductive, any letup by the government would send positive signals to investors about the future of China’s tech sector, the new leadership team’s pragmatism and the prospects for a return to robust economic growth.

But China’s new leaders can make the greatest impression on investors if they can prove that they can handle the country’s toughest economic challenge: an imploding real-estate sector. Property sales are likely to drop by as much as 30% this year. Several large developers, such as Evergrande and Shimao, have defaulted on their debt. With funding cut off, many building projects remain unfinished, leading some angry home-buyers to stop making mortgage payments.

This crisis will be the true test of the new economic team’s capabilities. Can they find a solution to widespread developer insolvency? Can they prevent the mass bankruptcy of local government financing vehicles, which took out massive bank loans using land as collateral? Can they find ways to ensure that new projects are not left unfinished? And can they stave off a housing-price collapse, as real-estate investment stops generating returns for the wealthy?

Even partial success here would bring a massive payoff. The real-estate sector powered China’s economy for two decades, contributing 17–29% of China’s GDP growth. Its revival could thus put the country back onto a positive growth path.

It’s far from clear that Xi’s new team is capable of devising effective solutions to the real-estate crisis; after all, their predecessors were not, despite being far more experienced. But even if they are, there is good reason to doubt that Xi will allow a change in policy. Simply put, whether the doomsayers are proved right or wrong depends—like virtually everything else in China nowadays—on the man at the top.