China’s latest squeeze on Australia may be largely symbolic, meant as a warning shot for Canberra and other middle powers in the age of US-China rivalry, observers said. In the latest in a series of moves, China’s National Development and Reform Commission said on Thursday it would “indefinitely suspend” all activities under the China-Australia Strategic Economic Dialogue, a forum launched in 2014 and last convened in 2017. The economic planning agency said it made the decision because Canberra’s “Cold War mindset and ideological discrimination” had disrupted cooperation. The decision follows restrictions on a wide range of Australian imports, from lobsters to wine and timber. Australia has also cancelled deals struck between the state of Victoria and China over Beijing’s Belt and Road Initiative , a massive infrastructure programme. China has yet to use the nuclear option – cutting the iron ore trade – but observers said Beijing was making clear that it was running out of patience. Australia has been vocal in its criticism of China in recent years and is part of a growing US-led network of countries confronting Beijing. Xie Maosong, a senior research at the China Institute for Innovation and Development Strategy at the Chinese Academy of Sciences, said Beijing was sending a message not only to Canberra but also other Western capitals that were still weighing their options. “Unlike other countries that have conflicts with China, Australia’s motives are ideological, and they think they can separate economic cooperation from ideological confrontation,” Xie said. “Countries like Britain, Germany, France and Japan need to understand from Australia’s lesson that they should not pick the US’ side in the China-US rivalry.” Australia will maintain its Taiwan policy, Prime Minister Scott Morrison says Ties between Beijing and Canberra became strained in 2018 when Australia become the first country to publicly ban Chinese tech giant Huawei Technologies from building the nation’s 5G network. Relations worsened last year after Canberra called for an independent investigation into the origins of the coronavirus outbreak. Suggestions from officials in Canberra that Australia could be involved in joint response to a war over Taiwan added fuel to the fire. Australia is also reviewing whether it should cancel the 99-year lease on the strategically important Darwin port signed between a Chinese company and the Northern Territory government in 2015. Amid the acrimony, trade between China and Australia has plummeted by 40 per cent for almost all industries. But iron ore, a vital component in the production of steel and key to China’s infrastructure spending spree to shore up the post-pandemic economic recovery, remains the only import that is still keeping the bilateral trade afloat. “Neither side wants to use this card. We are basically holding each other’s neck,” said a diplomatic source who requested anonymity because of the sensitivity of the matter. Song Luzheng, an international relations researcher at Fudan University, said the latest move showed that Beijing was running out of economic options to punish Australia. “Halting the economic and strategic dialogue means that bilateral conflicts have reached an irreconcilable point. China is nearing the end of its inventory of economic cards, and the next steps are to move to using the diplomatic cards,” Song said, saying possible measures included banning Australians officials from entering Hong Kong or more extreme responses such as expelling diplomats. China-Australia tensions ratchet up unease in Beijing about surging iron ore prices Joerg Wuttke, president of the European Union Chamber of Commerce in China, said the impact of China’s decision had been felt in the wider market. “Even if it’s symbolic, it sent messages into the market, as you can see yesterday iron ore prices went up and coal prices went up. In a way it has a market impact right away,” Wuttke said. “But it [was] raised in order to pacify the domestic crowd, that we have done something, which is not a good direction.” Additional reporting by Rachel Zhang and Wendy Wu