For decades, China’s market of 1.4 billion people and extraordinary economic growth gave Australian exporters seemingly endless opportunities. The prevailing assumption was that China’s growing middle class would:

build more infrastructure requiring steel

build more infrastructure requiring steel

consume more electricity using coal

consume more electricity using coal

and send their children overseas for education.

and send their children overseas for education.

But China has been transitioning rapidly from the manufacturing powerhouse of the early 2000s. It became an innovation powerhouse in the mid-2010s and established global brands in the past five years. The assumption that Western products and brands would retain an enduring advantage has become outdated.

Australia, as a main beneficiary of China’s growth, needs a strategy for what comes next.

China’s rapid transition

A key driver of China’s rapid transition is the mix of top-down long-term industrial policy and a highly competitive domestic market.

Top-down policy from the Chinese government provides direction and certainty for companies and investors.

They focus on new technologies to decarbonise the economy through renewables, or become a high-tech leader in artificial intelligence (AI), robotics or medicine. Innovation is driven by mostly private companies that make decisions quickly, compete aggressively and collaborate across sectors.

The scale of this effort is considerable. China invested 61% more in research and development in 2025 than it did five years earlier. In 2024, its........

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