Australia’s AI Future Depends on Balancing Collaboration With Both China and the US

Australia’s AI Ambitions Depend on Collaboration with China

Artificial intelligence (AI) is changing multiple sectors, from healthcare and climate science to manufacturing and defense. Yet, Australia's AI development is caught in the tensions of the US–China tech rivalry. The country faces the challenge of advancing AI through international partnerships without compromising its technological independence.

The US–China AI Partnership and Its Fragmentation

The US and China have historically led global AI innovation, with research partnerships between them growing fourfold since 2010—more than twice the increase seen in any other country pair. Since 2016, a “dual-core” AI collaboration system has formed, though it is now under strain due to tightened visa restrictions, reduced research exchanges, and growing ideological divides.

Under recent US administrations, policies have increasingly aimed to separate US research from Chinese technology on national security grounds. These include stricter export controls on AI and semiconductors, vetting of bilateral projects, limits on visas for Chinese scholars, and restrictions on university partnerships. Australian researchers reliant on US funding face increased demands to disclose Chinese collaborations and align with US policy priorities, including national security and diversity mandates.

This fracture pressures Australian academics to choose sides, threatening academic freedom and stifling innovation. Longstanding research networks are unraveling, which risks severing valuable partnerships with experts in both global AI hubs.

Australia’s Position in the Global AI Ecosystem

As a smaller player, Australia depends heavily on ties with both the US and China. While its alliance with the US integrates it into Western research networks, economic and educational exchanges with China have expanded rapidly. Since 2005, Australia’s research links with China have grown faster than with the US, contributing significantly to high-impact AI work.

Despite this research strength, Australia struggles to translate it into economic competitiveness. The 2024 Stanford Global AI Power Rankings placed Australia 16th in AI vibrancy and 7th in responsible AI, but only 30th in economic competitiveness. Structural challenges limit the country’s ability to capitalize on AI opportunities, including those involving China.

Key Challenges Facing Australia’s AI Sector

• Infrastructure: Australian researchers lack large-scale domestic GPU clusters and rely on foreign cloud providers. This increases costs and raises data security concerns. The National Computational Infrastructure’s Australian Intelligence platform offers some support, but fragmented funding focuses on short-term projects instead of foundational research. Open-source AI models like China’s DeepSeek could improve access, but security concerns have led to bans on platforms such as DeepSeek and TikTok in sensitive contexts.
• Data Governance: Strict privacy regulations protect individuals but limit cross-sector data sharing. Australia's small, homogenous population restricts dataset diversity, especially in specialized medical research. Cybersecurity concerns further complicate data sharing with partners like China.
• Human Capital: To meet growing demand, Australia must increase its AI workforce fivefold by 2030. However, competitive salaries abroad and restrictive visa policies encourage brain drain to the US and China. Tightened visa rules and oversight of defense-related research threaten to weaken the AI talent pipeline and deter scientists with Chinese connections.
• Policy and Investment: Reduced STEM grants involving Chinese partners and a lack of targeted funding for AI or digital infrastructure in the latest federal budget hinder progress. Continued dependence on multinational cloud providers increases costs and regulatory risks.

Balancing Act: Collaboration Without Compromise

Decoupling from China may seem straightforward, but Australia’s AI progress relies on partnerships with both the US and China. Over-aligning with the US risks locking Australia into US-controlled data systems, while favoring China could alienate its closest security ally. Avoiding engagement altogether would leave Australia trailing behind in AI innovation.

Australia should adopt a segmented approach to AI research:

• Subject sensitive areas such as defense, critical infrastructure, and dual-use technologies to national security vetting.
• Keep collaboration open in less sensitive fields like agriculture, climate science, and health, supported by transparent agreements on data use, intellectual property, and exit strategies.

Expanding the National AI Capability Plan into a federated, home-grown cloud infrastructure network is vital. Immigration policies must attract and retain top AI talent while encouraging international partnerships.

Finally, Australia can play a role in shaping global AI governance by promoting open-science consortia and ethical AI frameworks. Establishing shared standards for transparency, data ethics, and algorithmic accountability can protect Australian researchers from the risks of bloc-based decoupling.

By combining US strengths in foundational AI research with China’s scale, cost efficiency, and diverse datasets, Australia can position itself at the forefront of AI development without sacrificing its sovereignty.