China’s new social contract

Europe’s view of China has evolved rapidly in recent decades. What began as a broad lack of knowledge about the country gave way to curiosity about its history and culture. China’s economic rise further piqued Europeans’ interest, particularly after the country’s 2001 accession to the World Trade Organization. Over time, Europe became reliant on cheap Chinese goods and China’s burgeoning market became increasingly lucrative, especially for German automakers.

In the last few years, however, the European Union has viewed China largely through the lens of strategic competition. It has accused the Chinese of engaging in unfair trade practices, arguing that state-owned and state-supported firms enjoy excessive advantages in strategic sectors. It has sounded the alarm over China’s dominance over supply chains and its control of critical minerals. And it has expressed concern about China’s increased geopolitical ambition.

It was with this background in mind that I arrived in Beijing recently, on a trip organised by the Communist Party of China. And what struck me above all was not evidence of China’s global rise, but rather the country’s internal dynamics—in particular, the shifting provisions of the social contract that underpins the party’s rule.

For decades, China’s social contract amounted to a straightforward bargain: the state delivers strong economic growth—with the associated opportunities—and the people accept curbs on their civil liberties and political freedom. This contract emerged under Deng Xiaoping, who initiated China’s ‘reform and opening up’, and whose gospel of wealth—‘to get rich is glorious’—shaped China’s meteoric rise.

But China’s economy has suffered a series of blows in recent years. The Covid-19 pandemic—and the draconian lockdowns the government imposed in response—caused growth to fall sharply, as it did elsewhere in the world. China’s economy, however, never fully recovered. Instead, it endured a real-estate crisis, a sharp decline in foreign investment and falling consumer and business confidence, owing partly to unpredictable, ideology-driven macroeconomic and regulatory policies.

The party is taking steps to accelerate economic recovery. After third-quarter data revealed that growth had again fallen short of the government’s 5 percent target, China’s leaders signaled a shift, for the first time in 14 years, from a prudent monetary policy to a moderately loose one, and suggested that 2025 will bring a more proactive fiscal policy. This approach aims to boost domestic demand, which has been sluggish; but exports—not least to Europe—remain essential to keep the economy afloat.

Even if China overcomes its immediate challenges, however, its economy has developed past the point where double-digit growth can form the basis of the social contract. This is not lost on Chinese President Xi Jinping—the self-proclaimed ‘pilot at the helm’ (a thinly-veiled reference to the ‘Great Helmsman’, Mao Zedong)—who has increasingly sought to shift the foundations of his regime’s legitimacy from growth to security. Now, China’s government is promising to ensure citizens’ wellbeing, such as by protecting the environment, and to foster common prosperity, for example by strengthening support for rural workers flocking to cities.

This approach is not only central to Xi’s so-called Chinese Dream of national rejuvenation; it also supports China’s bid to enhance its international standing by positioning itself as a global climate leader. At this year’s United Nations Climate Change Conference, China’s leaders touted the US$24.5 billion in climate finance that, according to its own opaque calculations, it has delivered to developing countries since 2016.

Green investment is also happening at home. China accounts for about two-thirds of the solar and wind projects under construction worldwide, and the country reached its 2030 target for installed renewable-energy capacity six years ahead of schedule. To be sure, China was also responsible for 95 percent of the world’s new coal-power construction last year. But, while the party is under pressure to deliver sufficient energy to support its growing economy, its incentive for climate action should not be underestimated.

Beyond geopolitical considerations, China’s climate leadership is a response to the demands of the country’s citizens, who have grown increasingly anxious about the environmental damage that accompanied rapid development. Air pollution is responsible for around 2 million deaths in China each year, and the water supply is both limited and polluted. When Xi speaks of ‘blue skies, green fields, and clean water’, he is doing so for foreign and Chinese audiences alike.

Chinese also expect their leaders to deliver on their promise of economic security. Since Xi introduced the idea of common prosperity in 2021, inequality in China—especially between regions—has increased. This helps to explain why so many people are eager to leave their less prosperous rural hometowns in search of opportunities in China’s dynamic cities. With the urbanisation rate expected to approach 70 percent over the next five years, supporting the wellbeing of city residents will be a key challenge for Xi’s government.

Seeing all of this firsthand—catching glimpses of people’s shifting expectations and the government’s priorities—enriched my understanding of China and reminded me why engagement remains crucial. At a time of heightened competition and growing antagonism between China and the West, there can be no more important pursuit.

How to fill gaps in AUKUS communication efforts

Gaps in AUKUS communication strategies limit public understanding of its benefits and allow malign actors, such as China and Russia, to sway public opinion.

A roundtable held by ASPI’s Washington office on 3 December served as a forum to address these gaps. It involved experts from academia, government and think tanks, and was the first in a series of roundtables aiming to improve AUKUS messaging strategies and public understanding through open and inclusive dialogue.

The question at the heart of this discussion was: ‘What are the most significant obstacles each AUKUS partner nation faces in effectively communicating the program’s public benefits, and how can these be addressed to build stronger public support?’

Early on, the participants identified the need to align the narratives surrounding AUKUS into a story.

A challenge in writing this story is to define what importance AUKUS has for the public in the future. AUKUS is fundamentally a security partnership, but it presents an opportunity for partner nations to reshape their economies by revitalising their defence industries and integrating them with each others’.

This promise of economic stimulation needs to be at the centre of the story that is communicated to the public. Citizens must be shown how investment into the defence priorities of AUKUS will improve their lives. Beyond economic growth, AUKUS’s technological advancements could revolutionise defence technologies. This could deliver broader societal benefits similar to the internet and GPS, which were both military inventions.

There should be an understanding from AUKUS governments that multiple levels of messaging will be needed to help AUKUS maintain its political resilience. These include the international, national and local levels.

Subnational messaging through local politicians and community leaders will be essential to building support for AUKUS in their relevant constituencies. These local voices can fight perceptions that defence is a dirty industry. They can also better define the immediate benefit to their constituents, framing the growth of defence industries as a net positive for their regions as it facilitates economic development and positions them as centres of innovation.

These communication channels can counter misinformation and politicisation surrounding AUKUS by increasing the transparency of the initiative’s objectives. Public engagement will dispel false narratives before they arise and ensure that AUKUS objectives cannot be co-opted for political advantage. It is also important that each nation has its own approach to messaging around AUKUS that reflects the concerns of its population.

Canberra currently faces a greater scrutiny for its AUKUS spending because Australians are more knowledgeable on the program than those of other partner nations. The government must acknowledge the tradeoff between massive spending on AUKUS and spending on issues facing young Australians, such as a cost-of-living crisis.  To justify this spending, the Australian government must communicate beyond the security benefits of the program and highlight the economic benefit AUKUS will bring to Australia, particularly in the form of high-paying science and technology jobs.

Britain must highlight the technological benefits of AUKUS, particularly for rejuvenating and sustaining the nation’s submarine industry for decades to come. Brexit significantly hampered London’s approach to economic engagement and technological cooperation with the EU, and AUKUS can provide some economic reprieve. Subnational messaging will be important to celebrate economic and technological wins in the post-Brexit context.

In the United States, foreign policy is rarely a voting issue, but the economy almost always is. Subnational messaging can be used to present economic benefits of AUKUS with a focus on domestic issues, rather than those on the other side of the planet. In Washington, it will be important to drive home the point that AUKUS is a counter to China’s growing influence to justify congressional spending and maintain its status as a bipartisan issue.

AUKUS will bring about change and technological advancement, but we may have to wait for it. It is difficult to sell benefits that are not immediate, but a constant focus on the future is necessary to maintain support for AUKUS in all three nations.

The energy transition that couldn’t

Ideas, and the words we use to frame them, matter. For example, as the Cold War wound down, ‘the end of history’ suggested that the disintegration of Soviet communism would leave liberal democracy and market economies unchallengeable. That idea took hold among Western policymakers, leading them to believe they could afford to relax. Three decades later, ‘the end of history’, and the policies that followed from it, appears woefully misguided.

Today, it is ‘energy transition’ that has gained a hold over policymakers. While the term suggests the necessity of shifting from fossil fuels to renewables—a seemingly compelling idea that aligns with climate goals and technological innovation—it inaccurately describes what is happening (and will happen) and has led some governments to adopt costly, counterproductive policies. And it has pitted goals that should be complementary—addressing climate change and promoting energy security—against each other.

To be clear, energy transitions—moves away from one form of energy to another—have occurred throughout history, coinciding with economic changes that created demand for the new energy sources. After the Industrial Revolution began, the steam engine, the internal combustion engine and the rise of manufacturing economies impelled societies to shift from wood to coal and later to oil and gas.

Support for a transition away from fossil fuels reflects concerns about the actual and predicted costs of climate change and the evidence linking the warming of Earth’s atmosphere and oceans with the release of carbon dioxide and other greenhouse gases (especially methane) emitted by burning coal, oil and natural gas. The goal of the transition is to achieve net-zero emissions (ideally by 2050) by phasing out fossil fuels and replacing them with renewables, including solar, wind and nuclear power.

This is not occurring. Nor is de-fossilisation. Fossil fuels—oil, gas and coal—still supply over 80 percent of global energy. Since 2013, global oil and gas consumption has risen by 14 percent, owing to a 25 percent increase in developing economies. Coal consumption remains indispensable in powering China, India and other developing countries, and reached record highs in 2023. Renewables, while growing rapidly, are not displacing hydrocarbons, at least for now.

The reason is straightforward: energy demand is increasing at an annual rate of 2-3 percent, and technological advances such as hydraulic fracturing (fracking) have made hydrocarbons cheaper and more abundant. The United States, already the world’s biggest oil producer, will produce even more during Donald Trump’s coming presidency, and growing populations and economies in the Global South will sustain robust demand.

Emerging technologies, such as artificial intelligence, electrified transport, and hyperscale data centres, are also driving energy demand—which renewables alone cannot reliably meet, reinforcing the role of fossil fuels. Fossil fuels likewise remain indispensable for energy-intensive industries such as aviation, shipping and heavy manufacturing. Renewables, while effective for electricity generation, struggle to meet these sectors’ needs.

Regulatory considerations and politics have also contributed to foiling the energy transition by slowing the permitting process for both nuclear power and wind. And many countries have not overhauled their tax systems to steer consumers and businesses away from fossil fuels.

With the factors undermining the energy transition unlikely to disappear anytime soon, one option is to ignore the evidence and press ahead. This seems to be the preferred approach of many who gather at the annual United Nations climate change conferences. In Dubai in late 2023, attendees issued a final agreement (signed by close to 200 governments) explicitly calling for ‘transitioning away from fossil fuels in energy systems, in a just, orderly, and equitable manner, accelerating action in this critical decade.’

Europe has committed to do just that, setting ambitious targets for renewable energy and pricing carbon at levels that made energy and doing business more expensive. The European Green Deal, intended to decouple economic growth from resource use and make Europe the world’s first carbon-neutral continent by 2050, instead contributed to a fall in growth. The lack of investment in energy also left much of the continent dangerously dependent on Russian gas. In short, the premature embrace of the energy transition weakened economic performance and energy security alike.

As Thomas Kuhn famously argued in The Structure of Scientific Revolutions, dominant intellectual frameworks persist until their limitations become undeniable, paving the way for a new paradigm. The energy transition has reached that point. Its absence from the final draft of this year’s global climate conference in Baku is telling. A new paradigm is needed: energy coexistence.

Such a paradigm would accept that energy consumption will continue to rise for the foreseeable future, with fossil fuels and renewables both playing a larger role. It is a question not of either/or, but rather both/and—all of the above and more of all—in order to achieve increased security, resilience and affordability.

The paradigm of energy coexistence requires targeted investments and policy reforms. Modernising energy grids to accommodate diverse energy sources and increase efficiency is critical, as is scaling carbon-capture and storage technologies to mitigate emissions. Encouraging the development of renewables through fostering public-private partnerships and easing site restrictions would help. Switching from coal, which causes the highest emissions, to lower-emission gas and renewables should be a high priority as well.

Some will object that energy coexistence is a rejection of much-needed policies to address climate change. But addressing climate change cannot come at the cost of energy sufficiency or security. Nor will it, given the politics.

Building necessary support for tackling climate change is more likely to succeed if the policies are not viewed as hostile to all fossil fuels. A transition from the energy transition would be a good first step.

A doubtful military revolution: replacing choppers with multirotor electric aircraft

Supposedly, something big happened in the defence world on 12 December. Upstart startup Anduril announced a joint venture with Archer Aviation, one of the leading companies in the industry for making electric vertical take-off and landing (eVTOL) aircraft.

To eVTOL backers, the announcement pointed to replacement of many military helicopters by electrically powered, multi-rotor aircraft, which in cruise would fly as aeroplanes.

But we have every reason to be sceptical. The eVTOL craze has generated an awful lot of talk and minimal achievement even in its original, civilian market.

Archer said that its new defence division was targeting a ‘potential program of record’ from the Department of Defense (DoD). Never mind that there is no such thing: a program of record is not ‘potential’, because, by definition, it is an approved requirement backed by money.

The association with Anduril allowed Archer to raise money that it can use to fund the development of the Midnight, its civilian eVTOL product. Archer and its competitors are spending a lot of cash on building factories and testing prototypes, while working with the Federal Aviation Administration and other authorities to earn safety certification without which they cannot make revenue.

Bulls in the eVTOL business say that the sky is the limit. In a LinkedIn post, Mark Moore—eVTOL guru, long-time personal aviation advocate at NASA and now chief executive of Whisper Aero, developing electric aviation propulsion—notes that ‘Anduril’s deep pockets and DoD positioning enables Archer to have a clear path to impressive DoD products. … Archer will have a clear path to a dual-use military-civil market strategy that directly competes with helicopters in these markets.’

The eVTOL craze started with 2013 remark about Twitter by the entrepreneur Peter Thiel: ‘We wanted flying cars; instead they gave us 140 characters.’ But it was really got underway by Moore as co-founder of Uber Elevate and by the company’s 2016 report that was the first of many to predict that eVTOLs in their thousands would provide zero-emission point-to-point urban air travel at a price comparable with a ground limo.

Not so fast.

You can read eVTOL media all day without running across one awkward fact: after six years and billions spent, no eVTOL has performed a basic VTOL mission, flying 40km out, landing, taking off and returning, all while carrying a representative payload on one charge. The best available batteries are not up to the job.

Archer and Anduril mitigate this problem for defence users by switching to hybrid power, with both batteries and a turbo-generator onboard. But that adds complexity to a system that’s already complex, because the philosophy behind eVTOL aircraft is safety through redundancy. The Midnight ties the 95-year-old record for most engines installed on one aircraft, with 12 motor-prop units in tandem pairs on the wing. A Midnight should be able to lose two engines and land safely.

But six fixed-pitch lift-only rotors and six variable-pitch tilting rotors, generating high energy airflow streams that interact and change with airspeed and tilt angle, add up to a flight control challenge.

Crewed eVTOLs depend on a level of automation that goes beyond the common fly-by-wire technology through which pilots control modern aircraft. Pros from the traditional rotorcraft world point to the long time it takes to get certification for even a conventional helicopter with fly-by-wire. They doubt eVTOL leaders can achieve certification by their 2026-27 target dates.

Still, defence customers might accept a higher level of risk.

But, even so, what will a hybrid eVTOL bring to defence missions?

Designed for very short flights, the Midnight has a cruising speed, 240km/h, no better than that of a helicopter. Multi-rotor advocates claim higher efficiency than a helicopter in cruise, but any such benefits will be offset by a heavier propulsion system.

There are more technical reasons for doubting the military value of eVTOLs. The Midnight’s rotors are about 2 metres in diameter—but, even with 12 of them, the discs they form when rotating have well under half the area of the Airbus H135 helicopter, which has about the same gross weight (2900kg). Higher disc loading means more power is needed to hover (1 to 1.2MW for the Midnight, versus 940kW for the H135) and consequently a powerful, complex downwash field that will kick up much more debris. Who wants that in a military operation?

The Midnight spans 15 metres tip-to-tip, compared with the H135’s 10-metre rotor diameter. That is hardly an advantage in most tactical operations and distinctly not great for operating on warships.

Scaling multi-rotor eVTOL designs up, perhaps to act as airborne 2-tonne trucks, will exacerbate all these issues. Enlarging rotorcraft increases disk loading unless you change the configuration, which is why the CH-47 with its two 18.3-metre rotors rules the heavy-lift helicopter segment.

Going lighter and unmanned? Well, another company, Griffon Aerospace, is already there, with the neat and simple (only four motors) Valiant drone.

It’s early days, and neither sceptics nor boosters are infallible. Let’s see what the mystery ‘program of record’ turns out to be.

The way forward in Syria

The collapse of Syria’s Assad regime—with President Bashar al-Assad not even informing his closest associates before fleeing to Moscow—has left regional and international players scrambling to stabilise the country.

Of course, there have been numerous attempts to restore stability to Syria ever since the start of its civil war in 2011, after Assad brutally repressed peaceful Arab Spring demonstrations. Despite the many failures, United Nations Security Council Resolution 2254, adopted unanimously in December 2015, remains the cornerstone of international diplomatic efforts to resolve the Syrian conflict. It provides a clear roadmap for a Syrian-led political transition under a new constitution, with UN-supervised elections and measures to ensure inclusive governance.

True, there has been little progress on any of these fronts. The Constitutional Committee, the body charged with implementing Resolution 2254, exemplifies both the potential and the limitations of the UN process. Comprising representatives of the Assad regime, the opposition, and civil society, it was supposed to draft a new constitution that could serve as the foundation for a political settlement. But the committee has achieved little of substance after numerous rounds of meetings in Geneva, owing to obstruction by the regime’s delegation.

The regime faced no consequences for derailing the process, because the UN Security Council itself was deeply divided. Russia’s status as a permanent, veto-wielding member allowed it to shield Assad from more forceful international action, and its 2015 military intervention saved his regime and fundamentally altered the balance of power on the ground. While UN Special Envoy Geir Pedersen tried to break the impasse by enticing the regime with the prospect of sanctions relief, such proposals had no effect.

Now, suddenly, everything is different. While the first foreign dignitary to travel to Damascus after the fall of the regime was Turkish intelligence chief Ibrahim Kalin, the second (from what we know) was Pedersen. Moreover, many governments say they are in contact with the lead rebel group, Hayat Tahrir al-Sham (HTS), and its interim government. The fact that the United States, the United Kingdom, and others still officially designate HTS as a terrorist organisation has not been an issue.

Although much is up in the air, the 2015 UN roadmap remains the best option for ensuring inclusive governance, which is a precondition for stability in Syria. The question, however, is whether all domestic and regional players will go along with the process.

Israel has not hesitated to advance its forces beyond the Golan Heights, throwing out an arrangement that had prevailed since the 1973 Yom Kippur War (when even the minimal gains that it made in the area inflamed passions across the Arab world). It has also been carrying out preemptive air strikes against what is left of Syria’s military hardware and weapons facilities.

For Turkey, the biggest question is whether it can accept a Syrian governance framework that includes the Kurds. The Turkish government’s priority is to marginalise any elements associated with the Kurdistan Workers’ Party (PKK), which it regards as a terrorist group (as do the US and the European Union). Ideally, a new settlement in Syria could even help to defuse the Kurdish issue in Turkey itself.

One obvious risk is that remnants of the Islamic State (ISIS) will exploit the new uncertainty to strengthen their own position. But both HTS and various Kurdish groups have fought ISIS for years, and they will now be even more determined to resist it. A key strength of the UN process is the absence of favourable alternatives; were it to collapse, the outcome would be catastrophic for all concerned. The victorious rebels’ focus on building and maintaining state institutions shows that they are well aware of the dangers.

To succeed, the process must be carried out by Syrians for Syrians, but with external assistance. The humanitarian situation is dreadful and requires immediate attention. The EU and the US should make it clear to all relevant actors that they are ready to lift the economic sanctions on Syria in support of a political transition.

The stakes are especially high for Europe, whose politics are still haunted by the 2015 refugee crisis. Repeating that episode would be a nightmare. And Turkey, of course, has a vital interest in stability on its border. It has long hosted millions of Syrian refugees whom it would love to return home, and many are now expressing a readiness to go.

The process that lies ahead will be long and complicated, though. Syrian governance has never been a simple affair. If any of the key players starts pursuing their own agenda unilaterally, conditions could deteriorate rapidly. Nonetheless, the UN process represents the best way forward, giving the organisation a chance to show the world that it remains indispensable for situations such as these.

Lessons from Cyclone Tracy: preparing for a future of cascading disasters

On Christmas morning in 1974, Cyclone Tracy unleashed catastrophic destruction on Darwin, forever altering the city and Australia’s approach to disaster resilience. As the intensity of climate-driven catastrophes grows, the main lesson of Cyclone Tracy is clear: we must do more to prepare, and we must do it now.

With wind speeds surpassing 217 km/h, the Category 4 cyclone killed 66 people and injured hundreds. It obliterated more than 70 percent of Darwin’s buildings, displacing most of its population. Fifty years on, the lessons from Cyclone Tracy remain as urgent and relevant as ever, as Australia confronts a new era of escalating climate change and increasingly frequent extreme weather events.

ASPI’s new report commemorating Cyclone Tracy’s anniversary highlights the need for proactive, comprehensive disaster resilience in the face of rising climate risks. The aftermath of Tracy revealed deep vulnerabilities in Australia’s preparedness, from inadequate building codes to insufficient community awareness. This reshaped our approach to disaster management, laying the foundations for national disaster-response frameworks that continue to guide Australia.

The immediate aftermath of Cyclone Tracy brought Australia together in a way that was unprecedented in peacetime. The Australian Defence Force led a coordinated relief effort, showcasing the power of military, government and civilian agencies working in unison. The cyclone also prompted establishment of the Darwin Reconstruction Authority, a centralised body that drove the city’s rebuilding efforts and set a benchmark for future disaster recovery initiatives. These responses proved that a structured, collaborative approach to recovery can lead to resilience.

The reconstruction of Darwin not only transformed the city into a modern urban centre; it caused a shift in how Australia views the intersection of disaster response and urban planning. The introduction of stricter building codes, designed to withstand Category 5 cyclones, became a cornerstone of our disaster preparedness. The recovery also highlighted the importance of local leadership, community involvement and a whole-of-nation response to disasters.

While we’ve made progress since Cyclone Tracy, the growing threat of climate change means that disaster resilience today requires an even more multifaceted approach. Our report explores the need to look beyond building codes and infrastructure and include advancements in predictive technologies such as satellite monitoring and early warning systems. Equally important is empowering local communities, particularly those in vulnerable regions like northern Australia, to take proactive measures and adapt to changing conditions. We cannot afford to be reactive. We must be anticipatory in our approach to future disasters.

In this context, Cyclone Tracy offers not only a historical lesson but a clear call to action. The resilience of Darwin in the face of overwhelming destruction was impressive, but future threats demand that we take a more proactive, strategic approach. Australia’s National Disaster Risk Reduction Framework is a step in the right direction, but it must evolve to meet the demands of an increasingly volatile climate. The growing frequency of cascading disasters—whether bushfires, floods, or cyclones—requires even greater collaboration and resource-sharing between government, industry and the private sector.

The 50th anniversary of Cyclone Tracy must not only be a moment of reflection but a reminder that disaster resilience is a dynamic, ongoing process. Northern Australia is particularly vulnerable to cyclones, heatwaves and flooding, and it cannot afford complacency.

As climate risks continue to escalate, we need to invest in smarter, more resilient infrastructure, better systems of disaster response, and more informed, empowered communities. Traditional knowledge, particularly from Indigenous communities in northern Australia, must also be integrated into disaster planning, offering invaluable lessons on sustainable living and resource management.

The legacy of Cyclone Tracy is clear: resilience is not just about recovery, but about preparation. As Australia faces the challenges of climate change, we must build on the lessons of the past to ensure a safer, more resilient future. This anniversary is an opportunity to strengthen our commitment to disaster preparedness, ensuring that Australia remains a global leader in disaster resilience and recovery.

By taking Cyclone Tracy’s lessons and adapting them to today’s climate risks, Australia can create a more resilient future for all its communities, ensuring that no one faces disaster alone.

Taiwan rushes to build up its nascent drone industry

 

The drone message from the war in Ukraine has not been lost on Taiwan. Uncrewed aircraft and vessels, especially small, cheap ones, can be built and used in far greater numbers than even a much more powerful enemy can cope with—just what Taiwan needs as it eyes China’s massive forces across the strait.

The island has begun working hard on exploiting this transformation in military technology. An emerging theme is cooperation with the United States, which is keen to reduce its reliance on China’s massive drone industry.

Taiwan is painfully aware of China’s edge in mass-producing drones, which can cheaply surveil a battle zone, collect targeting data or even dive into and damage weapon systems that cost far more than they do. The island produces few drones, but Taiwanese officials still hope it can develop a substantial drone industry.

Many Taiwanese companies are already talented makers of tech hardware, such as silicon chips. The government thinks these talents can be redirected so that local firms can make loads of uncrewed air and sea craft that will radically improve Taiwan’s capacity for defence.

If Taiwan had a drone industry, it could make such weapons and sensor-carriers very cheaply. Moreover, it would not have to cajole other countries into supplying them, whereas it always must when seeking to import complex military equipment. In 2022, the government drone program was expanded to include private companies. Some of those companies are in joint ventures with US firms. The island is also buying US loitering munitions, conceptually similar to attack drones.

In mid-2022, Taiwan unveiled a cutting-edge drone research facility combining government and private-sector technologists in the southwest island. Nearby, the government broke ground late last year on a planned industrial park for drones. Taiwan also has hopes of becoming a big player in drone supply chains for the US and its allies. In his inauguration speech in May, President Lai Ching-te pledged to make Taiwan ‘the Asian hub of unmanned aerial vehicle supply chains for global democracies.’

However, Taiwan’s drone manufacturing is plagued with the same problems as its high-tech sector. It tends to be strong in making hardware, but it’s very weak in design and system integration, says Su Tzu-yun of Taiwan’s government-backed Institute for National Defense and Security Research.

Richard Weir, the vice president of global strategy and government relations for IMSAR, a US maker of sophisticated radars, adds that Taiwanese drone makers tend not to clearly identify missions, weapons and sensors for the drones before they’re designed. They must decide in advance whether a drone should have strike capabilities or just be used for signals intelligence, he says.

‘We see a lot of good drones being designed in Taiwan but a lack of clarity of how that drone will be utilised beyond carrying a small camera,’ says Weir. His company is working with several Taiwanese companies to produce drones that will assist with maritime domain awareness.

‘We get the sense that Taiwan’s industry is looking for support in creative approaches in addressing threats,’ Weir adds.

The US under the Biden administration has wanted to reduce its reliance on Chinese-made drones and their components; this indicated there was room for cooperation with Taiwan. In September, the US International Trade Administration organised a visit to Taiwan for a delegation of representatives from two dozen US companies that make drones and anti-drone technologies. They dined with top Taiwanese security officials and were connected with Taiwanese companies looking for partners and customers.

Rupert Hammond-Chambers, the president of the Virginia-based US-Taiwan Business Council, notes that Taiwanese drone design and integration can be greatly enhanced through cooperation with foreign companies. In 2024 alone, his council brought to Taiwan almost 60 drone-industry companies, he says.

This trend of US and Taiwanese companies working together in the drone sphere and supported by the US government will probably continue under the Trump administration, he adds.

‘I don’t see the incoming Trump administration as disruptive to this effort,’ Hammond-Chambers says.

‘Quite the contrary. I believe that a continued focus on supporting co-development of domestic platforms and systems will be a major focus of the incoming US government,’ he says.

He notes that developing Taiwan’s domestic drone industry improves Taiwan’s deterrence capabilities and supports a main Trump priority of creating China-free supply chains. Cutting-edge US drone technologies are unlikely to be integrated into Taiwan’s domestic drone sector and related supply chains, he adds. This means there’s not much chance of US technological secrets getting leaked to China.

‘Most of the support will be mature technologies that are proven and allow Taiwan to stand up new capabilities as quickly as possible,’ Hammond-Chambers concludes.

Australia’s army is suffering from a crisis of identity and confidence

The Australian Army does not have a social licence problem, it has self-confidence issue.

On balance, the community from which the Australian Army is drawn, and that it serves, values and implicitly permits the army’s existence. While we can argue the toss in terms of whether the army should be the first port of call for national disaster relief, it remains the fact Australian society looks to our army in times of peril.

But the army has not pushed back, and the list of society’s requirements continues to grow. We ask more and more of our army and, rightly or not, lash it when it stumbles. Truth is, the army has ceded too much territory in our national debate to woke politics. Our army has overcorrected on its course correction following the Brereton inquiry.

The army’s fundamental role is the application of lethal force in our name—to kill. The army does not go out of its way to remind Australians that this task is one we consciously place on its shoulders. So, we tend to forget about it.

Perhaps the army has an identity problem. Australian Bureau of Statistics data indicates the proportion of Australian citizens who were born overseas (first-generation Australians) or have a parent born overseas (second generation) has surpassed 50 per cent of our population. This has direct implications for the story our army tells. Anzac Day commemorations strike a chord with an ever-narrowing group. Society is shifting and our shared stories are no longer simply grandfather stories of World War II.

The new histories and composition of our community make it slightly more difficult to pinpoint an Australian brand of duty. The army must think differently about the society it serves and from which it draws.

The recruitment focus on school-leavers is too late. Given our cultural diversity, it is important to capture the interest of much younger children. The army might consider a primary school focus akin to the Constable Kenny Koala program, whereby Annie Army visits schools to spark early interest in a life of service.

Recent census data shows that in five years from 2016 the largest source of community growth was Nepal. Australia’s Nepalese community grew by 124 per cent. There is an opportunity for a real marriage of service, identity and cultural affinity here: a targeted recruitment effort to establish an Australian Army Gurkha Brigade.

The army continues to operate with a sense of restriction. Its recruitment efforts are tailored at fiscal benefits, social opportunities and travel. While these are commendable draw cards, the army is about so much more.

Our army needs to rediscover confidence before society to follow suit. It has owned mistakes made and committed to do better. Instead of cracking on, our army seems to find itself in a constant state of flight or fight, anxious to not make headlines. This reinforces challenges in recruitment and retention, too.

It is time for the army to reintroduce itself to Australia. We can easily capture army composition from headcounts or gender statistics, and from doctrine understand its mission, purpose and ethos. This tells us what the army is but not who. I think this is a significant distinction to overlook.

The Australian Army is a living, breathing entity. This is something Winston Churchill captured: ‘The army is not like a limited liability company, to be reconstructed, remodelled, liquidated, refloated from week to week as the money market fluctuates. It is not an inanimate thing, like a house, to be pulled down or enlarged or structurally altered at the caprice of the tenant or the owner; it is a living thing.’

It must act like one.

Of course, our army is both a profession and a bureaucracy. But in recent times the bureaucracy has outweighed profession. While both must feature, ideally in equilibrium, for a righteous and efficient Australian Army to exist we must rebalance the scales. The army should cultivate a sense of calling, of pride, of duty, among those who serve as well as the community served.

Instead, our army appears unconfident in its purpose—seeking too much direction from the society it serves, allowing its bureaucratic nature to take hold and frame service as a job. How odd it is to have such a stellar international reputation as a reliable and skilled boutique force respected by allies and enemies, only to be consumed by a crisis of confidence at home.

To return to Churchill, it is true that if an army ‘is bullied, it sulks; if it is unhappy, it pines; if it is harried, it gets feverish; if it is sufficiently disturbed, it will wither and dwindle and almost die; and when it comes to this last serious condition, it is only revived by lots of time and lots of money’.

Our army is sufficiently disturbed—disconnected—and lacks adequate self-confidence. Australia lacks time and money to throw at the problem but this does not excuse us from an honest discussion about our army. The army must be ready to respond with unashamed confidence in its vital purpose. A life of service and duty is to be celebrated, aspired to and revered for its contribution to the prosperity and security of our country.

Using open-source AI, sophisticated cyber ops will proliferate

Open-source AI models are on track to disrupt the cyber security paradigm. With the proliferation of such models—those whose parameters are freely accessible—sophisticated cyber operations will become available to a broader pool of hostile actors.

AI insiders and Australian policymakers have a starkly different sense of urgency around advancing AI capabilities. AI leaders like Dario Amodei, chief executive of Anthropic, and Sam Altman, chief executive of OpenAI, forecast that AI systems that surpass Nobel laureate-level expertise across multiple domains could emerge as early as 2026.

On the other hand, Australia’s Cyber Security Strategy, intended to guide us through to 2030, mentions AI only briefly, says innovation is ‘near impossible to predict’, and focuses on economic benefits over security risks.

Experts are alarmed because AI capability has been subject to scaling laws—the idea that capability climbs steadily and predictably, just as in Moore’s Law for semiconductors. Billions of dollars are pouring into leading labs. More talented engineers are writing ever-better code. Larger data centres are running more and faster chips to train new models with larger datasets.

The emergence of reasoning models, such as OpenAI’s o1, shows that giving a model time to think in operation, maybe for a minute or two, increases performance in complex tasks, and giving models more time to think increases performance further. Even if the chief executives’ timelines are optimistic, capability growth will likely be dramatic and expecting transformative AI this decade is reasonable.

The effect of the introduction of thinking time on performance, as assessed in three benchmarks. The o1 systems are built on the same model as gpt4o but benefit from thinking time. Source: Zijian Yang/Medium.

Detractors of AI capabilities downplay concern, arguing, for example, that high-quality data may run out before we reach risky capabilities or that developers will prevent powerful models falling into the wrong hands. Yet these arguments don’t stand up to scrutiny. Data bottlenecks are a real problem, but the best estimates place them relatively far in the future. The availability of open-source models, the weak cyber security of labs and the ease of jailbreaks (removing software restrictions) make it almost inevitable that powerful models will proliferate.

Some also argue we shouldn’t be concerned because powerful AI will help cyber-defenders just as much as attackers. But defenders will benefit only if they appreciate the magnitude of the problem and act accordingly. If we want that to happen, contrary to the Cyber Security Strategy, we must make reasonable predictions about AI capabilities and move urgently to keep ahead of the risks.

In the cyber security context, near-future AI models will be able to continuously probe systems for vulnerabilities, generate and test exploit code, adapt attacks based on defensive responses and automate social engineering at scale. That is, AI models will soon be able to do automatically and at scale many of the tasks currently performed by the top-talent that security agencies are keen to recruit.

Previously, sophisticated cyber weapons, such as Stuxnet, were developed by large teams of specialists working across multiple agencies over months or years. Attacks required detailed knowledge of complex systems and judgement about human factors. With a powerful open-source model, a bad actor could spin-up thousands of AI instances with PhD-equivalent capabilities across multiple domains, working continuously at machine speed. Operations of Stuxnet-level sophistication could be developed and deployed in days.

Today’s cyber strategic balance—based on limited availability of skilled human labour—would evaporate.

The good news is that the open-source AI models that partially drive these risks also create opportunities. Specifically, they give security researchers and Australia’s growing AI safety community access to tools that would otherwise be locked away in leading labs. The ability to fine-tune open-source models fosters innovation but also empowers bad actors.

The open-source ecosystem is just months behind the commercial frontier. Meta’s release of the open-source Llama 3.1 405B in July 2024 demonstrated capabilities matching GPT-4. Chinese startup DeepSeek released R1-Lite-Preview in late November 2024, two months after OpenAI’s release of o1-preview, and will open-source it shortly.

Assuming we can do nothing to stop the proliferation of highly capable models, the best path forward is to use them.

Australia’s growing AI safety community is a powerful, untapped resource. Both the AI safety and national security communities are trying to answer the same questions: how do you reliably direct AI capabilities, when you don’t understand how the systems work and you are unable to verify claims about how they were produced? These communities could cooperate in developing automated tools that serve both security and safety research, with goals such as testing models, generating adversarial examples and monitoring for signs of compromise.

Australia should take two immediate steps: tap into Australia’s AI safety community and establish an AI safety institute.

First, the national security community should reach out to Australia’s top AI safety technical talent in academia and civil society organisations, such as the Gradient Institute and Timaeus, as well as experts in open-source models such as Answer.AI and Harmony Intelligence. Working together can develop a work program that builds on the best open-source models to understand frontier AI capabilities, assess their risk and use those models to our national advantage.

Second, Australia needs to establish an AI safety institute as a mechanism for government, industry and academic collaboration. An open-source framing could give Australia a unique value proposition that builds domestic capability and gives us something valuable to offer our allies

China is buying less from developed countries, but not Australia

Australia’s exports to China have not returned to the peaks before the Chinese authorities started imposing discriminatory bans, but they are higher than five years ago, unlike China’s imports from every other major advanced economy.

Although there is no official campaign to curb access of western exporters to Chinese markets, there has been a marked shift in China’s imports away from advanced nations to favour the developing world. Australia is the stand-out exception.

Analysis by the Hinrich Foundation shows that the share of China’s imports coming from the G7 nations fell from 27 percent in 2017 to 22 percent in 2023. Japanese and German exports have been particularly hard-hit. The combined share from South Korea and Taiwan dropped from 18 percent to 14 percent.

China has been buying more from the ASEAN nations—their share of China’s imports has risen from 12 percent to just over 15 since 2017, while Russia’s share has doubled to 5 percent. Latin American and African nations have also increased their share of China’s imports.

Australia is an important source of supplies to China, accounting in 2023 for just over 6 percent of its imports, an increase from 5.5 percent in 2017. Australia last year supplied 64 percent of China’s iron ore and more than half its lithium.

There has been some softening of Australia’s exports to China during 2024, mainly reflecting weaker iron ore and lithium prices and a pause in the Chinese central bank’s gold purchases.

However, China’s share of Australia’s goods exports has revived from a low of 29 percent two years ago during China’s campaign of economic coercion to 36 percent now. Australia is thus more dependent on a single market than it has been since the late 1940s, when its biggest export customer was Britain.

Figures from the Department of Foreign Affairs and Trade show that in the six months to September, exports to China of coal were up 21 percent from a year earlier, bauxite shipments were up 39 percent and cotton sales were 41 percent higher. China has also returned to Australian wine and barley markets.

China’s share of Australian exports is still short of the levels above 40 percent reached between 2019 and 2021, however that was the result of unsustainably high iron ore prices which in mid-2021 touched a record US$220 a tonne. Iron ore is now down to US$105, with markets expecting further significant falls in 2025.

Chinese authorities remain keen to build their export markets globally, to help offset a weaker domestic economy.

The big shift in China’s export markets has been the rapid fall in sales to the United States. This has been driven by the US rather than by China.

In 2018, the US was taking 22 percent of China’s exports but by 2023, this had plunged to 14 percent. From a US perspective, the share of its imports supplied by China fell from 21 percent to 14 percent.

The tariffs imposed on Chinese goods during the first Trump administration and maintained under President Biden have had a big effect, but US companies have also made a conscious choice to source supplies that carry less geopolitical risk.

There has been a modest diversification of Australia’s imports away from China (and Hong Kong) following its coercive campaign against Australian exports. China’s share of Australia’s imports peaked at 30 percent in the latter half of 2020, but has dropped back to stabilise at about 25 percent since mid-2023.

That is almost double China’s 14 percent share of world exports and highlights Australia’s high dependence on Chinese manufactured goods.

With Christmas around the corner and the return of dialogue between the Australian and Chinese leaders, imports of Chinese goods are accelerating.

Mobile phones and other telephonic gear worth an amazing $1.1 billion were shipped from China into Australia in September, more than double the August tally. Imports of electrical goods, including solar panels and wind turbines, increased 62 percent while shipments of computers rose 27 percent, as did imports of prams, games and toys.

Australia has no obvious mechanism for lowering its trade dependence on China. The legislative charter of trade agency Austrade does not permit it to promote Australia as a market for other countries’ exports. There would, however, be the opportunity to import more Australia’s free-trade partners other than China. Austrade is restricted to promoting exports.

Australia has few alternative suppliers for many of our imports, particularly in telecommunications, computing and renewable energy generation.

There is no alternative market for our biggest export, iron ore, while China has no other source of iron ore of comparable scale. Supplies from the Simondou mine in Guinea, which is under construction, are more likely to replace high-cost Chinese iron ore mines, bringing down the world price, than Australian ore.

Both federal and state governments depend heavily on revenue from the resource sector. Last year, it delivered $55 billion in corporate tax payments (equivalent to the defence budget), and $31 billion more in royalty payments to the states.