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executive summary: This article examines how Beijing's economic sanctions on Australia have encouraged Canberra to double down on its balancing strategy toward China. main argumentWith the relationship already under pressure, political discord between Australia and China was exacerbated in April 2020 by Australia's call for an independent investigation into the origins of the Covid-19 virus. In response, Beijing has since targeted several Australian industries with economic sanctions, using economic coercion to express its hostility toward Canberra's actions. Far from causing Australia to acquiesce to Beijing's preferences, however, China's economic coercion has perversely empowered Canberra and given it confidence to shore up the country's influence in the Indo-Pacific area and balance against China on both conventional and new fronts. At the same time, the source of this confidence may not be sustainable, and balancing should not be the only feature of Australia's policy toward China or preclude efforts to reset the relationship. policy implications• China is not a strategic competitor to Australia, and Australia's strategic interests cannot be achieved without a functioning, constructive relationship with China. Diplomacy, reassurances, and cooperation must also accompany other efforts to balance China. • To attain a bilateral relationship with China that benefits Australia's overall national interest, the Australian government should carefully manage the diplomatic signals it sends to guide China's expectations of Australia, and it should at the same time manage its own expectations of China. • Australian policymakers should improve their understanding of the psychological makeup of Chinese leaders and their strategic culture to help avoid misconceptions and misunderstandings in China's motives and foreign policies and to better interpret signals from Beijing aimed at thawing the relationship.