China's move to indefinitely suspend its economic accord with Australia was meant as a warning shot for Canberra and other middle powers in the age of intense US-China rivalry, meaning that the former country was running out of patience, say observers.
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, reported South China Morning Post (SCMP).
The Chinese agency said that the decision was made because of Australia's "Cold War mindset and ideological discrimination" that had disrupted cooperation.
This decision comes a few weeks after Australia scrapped the controversial Belt and Road (BRI) agreement with China citing the deal as against its national interest.
China has yet to move on to its nuclear option, that is to cut the iron ore trade, but observers have said that Beijing was making clear that it was running out of patience, SCMP reported.
These moves are likely to further exacerbate Sino-Australian tensions, which started after Canberra demanded an independent investigation into the origins of COVID-19 last year.
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"Unlike other countries that have conflicts with China, Australia's motives are ideological, and they think they can separate economic cooperation from ideological confrontation," said Xie Maosong, a senior research at the China Institute for Innovation and Development Strategy at the Chinese Academy of Sciences.
Meanwhile, suggestions from officials in Canberra that Australia could be involved in a joint response to war over Taiwan has further heightened tensions.
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.
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, while highlighting the possibility of more extreme responses.
China's state-dominated steel sector is concerned about surging prices, urging the government to help with market "malfunctions" and improve policies in the futures market, reported SCMP.
Beijing's top diplomat, who is in Canberra currently, had blamed Australia for deteriorating ties between the nations, accusing it of economic coercion and "provocations" in a wide-ranging speech that painted Beijing as a victim.
Canberra has been locked in an ongoing trade war with Beijing for several months as China has slapped sanctions on various Australian products.