Australia’s mining empire under threat from China

China’s US$120 billion global push into critical minerals is heightening risks to Australia’s export dominance, as Beijing moves to diversify supply chains and reduce reliance on Australian resources.

A new report from Climate Energy Finance has warned that surging outbound investment into mining and processing assets across Africa and South America is reshaping global trade flows and eroding Australia’s long-held edge in key commodities including lithium and iron ore.

The report finds China has deployed more than US$120 billion ($168 billion) into upstream mining and processing projects since 2023, securing supply chains and building in-country refining capacity across partner nations.

Flagship developments such as the Simandou iron ore project in Guinea – set to become one of the world’s largest high-grade sources – highlight Beijing’s strategy to reduce its reliance on Australian exports, posing a growing structural challenge to Australia’s resources sector.

China recently announced plans to scrap tariffs on imports from 53 African countries from 1 May, in a bid to help create new opportunities for Africa’s development.

Meanwhile, Australia’s limited progress in onshore processing leaves it increasingly exposed. Despite world-class reserves of critical minerals, the country remains heavily reliant on a “dig-and-ship” model, with minimal value-adding capacity and a shrinking manufacturing base.

A 2025 KPMG report revealed Chinese outbound foreign direct investment (OFDI) into Australia had collapsed by 85 per cent since 2018, making up just 1.5 per cent of total inbound OFDI in 2024, at US$882 million – a fraction of the US$16 billion peak in 2008 – even as two-way Australia-China trade reached an all-time record of A$300 billion in 2025.

The report warned this structural gap risks deepening as China scales integrated supply chains globally, increasing pressure on Australia to accelerate its shift toward higher-value industrial activity.

Warning signs are already emerging, seen particularly in China’s domestic lithium output overtaking Australia’s, while Chinese investment into Australia’s critical minerals has sharply declined.

The closure of the Albemarle lithium hydroxide plant in Western Australia and a wave of threatened shutdowns across metals processing highlight mounting strain on the nation’s value-added mining sector.

However, CEF’s authors say Australia still has a window to reposition itself. By leveraging initiatives like the A$81 billion Future Made in Australia program, expanding onshore processing, and carefully managing partnerships with China, the country could convert its resource wealth into industrial capacity, capture higher-value exports, and secure a stronger role in the emerging global green economy.

Tim Buckley, CEF director and former MD of Citigroup, said Australia is sitting on some of the world’s most strategically valuable resources at precisely the moment the global economy is reorganising around them.

“But sitting on them is all we are doing. China is investing at extraordinary scale and speed to build out the global mining and processing capacity, supply chain integration and partner nation relationships that will define who wins and who loses in the zero-emissions economy,” Buckley said.

“Australia has a closing window to leverage its resource endowment, emerging renewables advantage and relationship with key Asian trade partners, including China, to transform and capitalise on the massive investment, employment and export opportunities that would result from our nation embracing a genuine green industrial future.”
CEF net zero transformation analyst Matt Pollard added that the path is clear but requires decisive action.

“The same model China has used to build green industrial capacity across the global south is available to Australia, but a significant strategic shift of how Australia views its national interest and economic security must occur for Australia to realise this immense opportunity,” he said.

“Two-way trade with China reached a record A$300 billion in 2025, and Australia’s economy remains deeply complementary to and broadly aligned to benefit from China’s green industrial strategy.

However, this complementarity is an asset that Australia has long undervalued, underrecognised, and underleveraged.”

Associate Professor Marina Yue Zhang from the Australia–China Relations Institute emphasised the strategic stakes.

“The race to net zero is not only a race for technological innovation, but also for minerals, metals, processing capacity, and industrial control. As the report finds, China’s outbound investment strategy has moved well beyond simple resource extraction towards a more integrated model linking resource acquisition with processing, infrastructure, manufacturing, and long-term industrial partnerships.”

She said the policy implication for resource-rich countries such as Australia is clear.

“The challenge is not blanket exclusion, but the development of clearer policy settings and national objectives so that foreign investment, including from China, can be assessed according to whether it supports domestic value-adding, industrial capability, and long-term national interests.”