By Kirsty Needham
SYDNEY (Reuters) - The release of an Australian journalist after three years in a Chinese prison should improve the atmosphere for a visit by Australia's prime minister but won't shift its policies aimed at hedging against China's military build-up, analysts said.
Prime Minister Anthony Albanese said there was no deal struck to release journalist Cheng Lei, who arrived home on Wednesday.
However, Australian officials had raised Cheng's detention on national security charges as China pushed to lock in an official visit by Albanese this year, the first by an Australian leader since 2016.
Albanese confirmed he would visit Beijing after meeting Chinese Premier Li Qiang at a regional summit in Indonesia last month. A date has not been set.
The release of the business television anchor was "a sweetener for the Albanese visit", said senior fellow for East Asia at the Lowy Institute foreign policy think tank, Richard McGregor.
"China always engages in elaborate diplomatic table setting for visits like this," he said.
The visit will be a major step for relations between the trading partners that soured when Beijing placed restrictions on Australian exports in 2020, and detained Cheng, coinciding with an Australian call for an inquiry into the origins of COVID-19.
Asia Society Australia's Executive Director of Policy Richard Maude said there would be no "direct quid pro quo" for her release.
"It would be reasonable to expect China's diplomats to be dusting off their long list of asks of Australia. Among these are that Australia step back from participating in what Beijing regards as a U.S.-led effort to contain China," said Maude, who is leading a review of Australia's intelligence agencies, and is an adviser on a government shakeup of its defence force.
"This won't happen," he said.
Australia will continue to hedge against the risks posed by China's conduct, including its pressure on self-ruled Taiwan and aggression in the South China Sea, he said.
China has in recent weeks repeatedly said it poses no threat to Australia, coinciding with an uptick in Australian participation in military exercises with its allies, from amphibious drills in the Philippines to navy exercises with Japan, the U.S. and India off Australia's east coast, seen as a deterrent to any plan by China to attack Taiwan.
Australia has also said it plans a navy patrol with the Philippines in the South China Sea, where tension with China is rising.
'BENEFITS OF ENGAGEMENT'
While political dialogue is back on track, and most - but not all - Chinese restrictions on Australian exports lifted, China and Australia were entering a "riskier" phase of their relationship, McGregor said.
"This is all while Australia is full speed ahead with AUKUS, doing patrols in the West Philippines sea with Japan and the U.S., and continuing to build up the military camps in northern Australia," he said.
China has said the so-called AUKUS agreement between Australia, the United Kingdom and the United States on defence technology, announced in 2021, has raised doubts about Australia's reliability as an economic partner.
For Australia, stabilising relations with China plays well in Southeast Asia, where leaders are concerned about tensions, McGregor said.
It also helped China, facing economic problems and higher commodity prices, to mend relations with a major supplier of iron ore, coal, gas and wheat, he said.
Analysts said China was likely to push for a more liberal approach to foreign investment in Australia's emerging critical minerals industry, and for support to join a Pacific-wide trade pact.
But Australia is unlikely to shift on policies such as national security screening of foreign investment, and will still urge exporters to diversify markets to reduce reliance on its biggest customer.
"There are areas where we will disagree, there are areas where we will cooperate," Foreign Minister Penny Wong told reporters, adding that Cheng's release showed the upside of the government push to stabilise ties with China since it was elected in 2022.
"You've seen some of the benefits of engagement."
A former trade minister, Craig Emerson (NYSE:EMR), who led an Australian delegation at talks in Beijing last month, said both sides were reaching out to each other.
"There hasn't been any provocative language from either side for a considerable period of time and that provides the ballast for warming in the relationship," Emerson said.
Scott Morrison, prime minister when ties deteriorated in 2020, said in a speech in Taipei that Beijing hadn't walked away from its grievances with Australia, including "laws about foreign investment, espionage and national security".
"While their removal of some illegal trade sanctions is welcome, this is something that should be expected, not commended, and certainly not haggled for," he said.