By Robbin Laird and Ken Maxwell
For the past several years, Western policymakers have comforted themselves with a story: that economic interdependence with China would eventually civilize the relationship, that trade would do the work diplomacy could not, and that rising Chinese power would express itself the way past rising powers did, through fleets, flags, and borders redrawn by force. We did not write our new book, The Australian, Brazilian, and Chinese Dynamic: An Inquiry into the Evolving Global Order, to confirm that story. We wrote it because that story is wrong, and because getting it wrong is expensive for every resource-exporting democracy, not just the two we studied most closely.
China is not building an empire the way empires have historically been built. What China has built instead is quieter and, in some ways, more durable: a structure of dependence assembled out of ore refineries, container terminals, shipping contracts, and processing monopolies, an architecture engineered so that the cost of defying Beijing rises steadily over time, while the cost of accommodation quietly disappears into the ordinary texture of doing business. We call this China’s informal empire. It does not need to conquer anyone. It only needs patience, and enough control over the chokepoints of trade that most nations find resistance an increasingly difficult case to make to their own citizens.
To understand how this actually works not as theory but as lived national experience, we built the book around a close comparison: Australia and Brazil. Two democracies. Two resource-rich, commodity-exporting economies in the Southern Hemisphere. Two nations that share a great deal structurally, and that nonetheless arrived at different points on the spectrum between resistance and accommodation. That is not a verdict on either country’s character or wisdom. It is a case study in how differently the same architecture of dependence can play out depending on the specific commodities involved, the alliances already in place, and decades of prior investment that neither country’s current leadership fully controls. Every middle power holding commodities China needs should read both halves of this story as a mirror of its own possible future.
Retiring a Useless Term
Before making that comparison honestly, we had to clear away a piece of vocabulary that has outlived its usefulness: the “Global South.” It is one of the most overworked and analytically misleading phrases in international commentary, a term that implies a coherent bloc of the historically marginalized standing in solidarity against Western dominance, when in practice it has become a rhetorical costume that great powers put on when it suits them.
Australia and Brazil are, in our framework, the genuine article: nations shaped by histories of colonial extraction, still structurally dependent on commodity exports, still exposed to the pricing power of whoever happens to be buying their ore or their soybeans this decade. China, Russia, and increasingly India are something else, established or rising great powers with imperial histories, permanent seats at the table of global institutions, and, in China’s and Russia’s cases, an active project of rewriting the borders and rules of the current order. Calling all of these actors members of the same “Global South” doesn’t clarify anything. It flattens the world into a false symmetry in which a soybean exporter and a nuclear-armed permanent member of the UN Security Council are treated as fellow travelers. They are not. And that confusion is not accidental. It is one of the softer instruments in the informal empire’s toolkit, useful precisely because it discourages countries like Australia and Brazil from recognizing how much they actually have in common as targets of the same strategy.
The Architecture of Dependence
Strip away the diplomatic language, and China’s strategy toward resource economies rests on a single insight: control the processing stage, not just the resource. Extraction is not where the leverage lives. Refining is.
Take rare earths. China accounts for roughly two-thirds of global extraction, but it controls more than four-fifths of global refining capacity and it has already shown a willingness to weaponize that gap, restricting exports of gallium and germanium, inputs critical to both advanced manufacturing and defense production. Or take lithium, where Australia produces a substantial share of the world’s raw supply and yet finds the economic value of that resource largely trapped until the ore is routed through Chinese refineries. Owning the mine turns out to matter far less than owning what the ore becomes. That is the entire logic of vertical integration, and it applies with equal force to any commodity exporter, regardless of which government happens to be in Brasília or Canberra in a given year.
Layer onto this a physical logistics grid, a Chinese-financed deep-water port in Peru designed to anchor a transcontinental corridor linking Pacific and Atlantic trade, clustered Chinese-linked operations at both entrances to the Panama Canal, and a pattern emerges: infrastructure quietly engineered so that certain trade flows become, over time, not just convenient but effectively mandatory.
There is also a darker layer beneath the formal one. In Brazil, low container-inspection rates and the opacity of vertically integrated port operations have created conditions exploited by transnational criminal organizations like the Primeiro Comando da Capital, which move illicit goods alongside legitimate agricultural exports. This is not a Brazilian failure of governance so much as a structural byproduct of a logistics system designed elsewhere, for someone else’s benefit. It echoes an eighteenth-century Brazilian colonial economy documented in the Arte de Furtar — “The Art of Stealing” — in which condoned illegal trade was not a lapse but an embedded feature of an externally imposed system, one that kept local elites dependent on, and loyal to, an outside power. The Methuen Treaty tells a version of the same story: privileged access secured through informal channels, dependency dressed up as commerce. China did not invent this pattern. It has rebuilt it at a scale no eighteenth-century empire could have imagined, and it is a pattern that has been imposed on resource economies from the outside for centuries, Brazil’s experience of it today has deep roots that predate any recent policy choice.
Brazil: A Deep Integration, Not a Simple Choice
The scale of Brazil’s integration with China is genuinely difficult to overstate: bilateral trade exceeded $181 billion in 2023. By 2024, China was absorbing 73 percent of Brazil’s soybean exports and more than 71 percent of its iron ore. That same year, oil became Brazil’s single largest export product, with 44 percent of shipments bound for China.
It is important to be honest about how this came to be. Brazil did not simply decide, one morning, to subordinate its economy to Chinese demand. The Cerrado, a vast interior savanna once considered too acidic for serious agriculture, was transformed over decades, through enormous technological and infrastructural investment, into one of the most productive farming regions on earth, at a moment when Chinese demand for soy and protein was surging and few other buyers could absorb volumes at that scale. Brazilian companies like Vale, JBS, and CBMM, the latter controlling roughly 97 percent of the world’s niobium supply, are genuinely formidable global players in their own right. Brazil’s integration with China reflects real comparative advantages in agriculture and mining, developed and pursued in good faith as a legitimate development strategy, not merely a surrender of sovereignty.
The cost of that trajectory, though, deserves equally honest treatment. We track a documented process we call territorial reprimarization, growth concentrating in commodity-export regions while the industrial core contracts. Manufacturing’s share of Brazilian GDP fell from 25.6 percent in 2000 to 20.8 percent in 2022, and a trade surplus in manufactured goods has become a substantial deficit. Chinese investment in Brazilian EV manufacturing is often framed domestically as a sign of progress; we think it deserves a closer look, since early-mover advantages captured by Chinese firms can make it harder for Brazil to build that same industrial capacity independently down the road.
None of this makes Brazil’s diplomatic positioning —including its stance on the Ukraine peace framework, its criticism of dollar dominance, or its reversal on Huawei’s role in 5G simply a matter of principled nonalignment, as it is often described in Brasília. But nor is it simply capitulation. It reflects the genuine and difficult position of a country whose leading agricultural and mining constituencies depend heavily on Chinese demand, operating within a democratic system that has to answer to those constituencies at the ballot box.
This is the Middle Power Trap we describe in the book: not a single bad decision by any one government, but an accumulation of individually rational choices, made under real economic pressure, that collectively narrow a country’s future room to maneuver. It is a trap that could close around any commodity-dependent democracy, including Australia, in sectors where it does not currently hold the leverage it holds in iron ore.
Australia: A Different Set of Cards
Australia’s experience offers an instructive counterpoint — not because Australian policymakers were wiser or more resolute, but because Australia happened to be holding a different hand.
In 2020, Canberra called for an independent investigation into the origins of COVID-19. Beijing’s answer was swift and severe: sweeping restrictions on Australian barley, wine, coal, beef, lobster, copper, and timber, calibrated to inflict maximum economic pain and force a political retraction. Australia weathered the pressure. Exporters redirected shipments, coal cargoes changed course mid-voyage, winemakers rebuilt distribution across the UK, India, and Southeast Asia. Canberra pursued what we call managed dualism: deepening security commitments through AUKUS, the Quad, and Five Eyes, while maintaining pragmatic commercial engagement with Beijing wherever trade remained open.
But intellectual honesty requires naming the structural advantage underneath that success. Iron ore, the one commodity conspicuously absent from Beijing’s sanctions list, supplies a significant share of the raw material behind China’s own construction and military-industrial base. That is not a market Beijing can walk away from without inflicting serious damage on itself. Australia’s leverage came, in large part, from geology it did not choose and decades of prior alliance investment made by governments long since out of office. Brazil’s principal exports, soy, iron ore sold into a more diversified but still China-dependent chain, and now oil, have not, so far, handed it a comparably irreducible chokehold on any single Chinese sector. That is a difference in the cards each country was dealt, not a difference in resolve.
Why This Is Everyone’s Test, Not Just Theirs
It would be a mistake to read this as a story about which of two countries got it right. It is a story about the terms on which every resource-exporting democracy will eventually be tested, and those terms are set almost entirely by factors, geology, existing alliances, the specific commodity mix a country happens to export, that no single election or administration can quickly change. The global transition to green energy is about to sharply increase demand for cobalt, lithium, and rare earths, precisely the minerals whose processing capacity sits concentrated inside China’s informal empire. Every middle power holding those resources is walking toward the same set of hard choices that Australia and Brazil have already begun navigating, and most will not have Australia’s particular structural luck.
There is also a handicap specific to democracies that deserves more attention than it gets, and it applies equally in Brasília and Canberra. Elected governments operate on three-to-four-year cycles and face constant pressure to deliver visible economic results now. The infrastructure of the informal empire, a deep-water port, a dominant refining position, takes fifteen years or more to build. By the time any elected government fully recognizes how far the walls have closed in, the concrete, quite literally, is already dry. That is not a verdict on any particular leader’s judgment. It is a mismatch between the electoral clock and the imperial one, and every democracy exporting raw materials shares it.
The Verdict
Australia and Brazil are not opposite case studies in virtue and vice. They are two data points on the same curve, shaped by the same architecture of dependence and separated mainly by which commodities each happened to hold, and what alliance and industrial investments prior generations had already made by the time the test arrived. Australia’s advantage rests on a geological accident and an alliance structure that must be continuously maintained not a permanent or portable guarantee against more calibrated future pressure aimed at sectors where it holds no such leverage. Brazil’s position is not fixed either. Rebuilding manufacturing capacity and diversifying its trade relationships would require the kind of sustained, multi-decade investment that democratic electoral cycles make genuinely difficult to sustain, in Brazil or anywhere else.
What both cases make unmistakably clear is that the informal empire does not operate through conquest. It operates through the patient accumulation of structural leverage, in ports, in refineries, in trade contracts signed years before anyone notices the pattern, that can erode the sovereignty of any nation not paying close enough attention, regardless of that nation’s intentions or resolve. The room for strategic ambiguity that middle powers once enjoyed is closing for all of them. The question every resource-exporting democracy now faces, Brazil and Australia very much included, but far from alone, is not whether it will eventually be tested. It is whether it will have built, well before that test arrives, the structural leverage and the political room to choose its own answer.
The Australian, Brazilian, and Chinese Dynamic: An Inquiry into the Evolving Global Order, co-authored with Kenneth Maxwell, is out this week.