China is successfully positioning itself as a reliable partner amid uncertainty, while the United States administration's policies have had a net negative effect for US power and influence in Asia, according to the Lowy Institute.

China is also well-placed to withstand the coercive US economic policies, according to the key findings in a report by the Australia-based think tank.

The 2025 edition of the Asia Power Index, a major publication of the institute that tracks the changing distribution of power in Asia, ranked 27 countries and territories in terms of their capacity to shape their external environment.

Its analysis covered seven years of data and used 131 indicators in fields ranging from economic capability and relationships to diplomatic and cultural influence.

The index again ranked the United States highest in terms of "comprehensive power", with China in second place and India a distant third. However, the index gap between the US and China has narrowed.

While the US is "seeking to harness its latent economic power more directly, notably through the imposition of large tariffs on many countries, this has so far had a negative effect on US diplomatic influence in Asia", according to the report.

"We also found that other policies like, for example, cuts to US development assistance to the region, cuts to the US agency for global media, as well as policies that make it harder for people traveling from Asia to access the US, whether for travel or education, are all a net negative for US standing in the region," said Susannah Patton, project lead for the Asia Power Index, at the launch of the findings on Tuesday in Melbourne.

The report said that China "appears well prepared and confident in its responses to US economic coercive policies". It noted that Beijing "also successfully positioned itself to regional countries as a reliable partner opposing protectionism and unilateralism".

"The index reflects that China and the US … particularly in Asia are really peer powers these days," said Richard McGregor, a senior fellow for East Asia at the Lowy Institute.

China's ability to access multiple global markets beyond the US for its exports may also have contributed to its "robust and confident response to the imposition of US tariffs", according to the report.

Bec Strating, director of the La Trobe Centre for Global Security and a professor of international relations at La Trobe University in Melbourne, said the US' decline in standing in the region means opportunities for Australia.

"Australia and some other countries like Japan, New Zealand and the Philippines might be concerned about what the US' decline more generally might mean for some of the rules that uphold a regional order," Strating said.

Notably, the findings also highlighted how China has "nearly returned to pre-pandemic scores for its people exchanges and connectivity" with countries covered by the index.

"China's score for these sub-measures fell precipitously when travel to and from China was heavily restricted (due to the COVID-19 pandemic) between 2020 and 2022," according to the report.

However, this year the country "made strong gains in every indicator for people exchanges, including as a destination for tourism from Asia, a trend that will likely continue with the recent announcement of new visa-free pathways for travel from several countries in Asia, including Indonesia".

The index put Australia in sixth place for comprehensive power, with key findings pointing to the country's decline in economic and other resources relative to other countries, "meaning it will need to work harder with what it has to maintain influence in Asia".