The political economy of Australia–China relations

Abstract

A major shift in the paradigm undergirding relations between Australia and China has become clear in the early 2020s, with geopolitical concerns trumping economic considerations. Canberra has implemented a range of new policies in response to the risks it perceives in Australia’s economic relations with China, the Chinese Communist Party’s efforts to exert political influence in Australia, the expanding capabilities and presence of the People’s Liberation Army, and Beijing’s economic and diplomatic gains in Southeast Asia and the Southwest Pacific. China’s policies towards Australia have become more coercive in economic as well as diplomatic terms. However, Australia has withstood Beijing’s punitive trade measures without suffering significant economic damage. China’s more assertive regional posture has prompted far-reaching changes to Australia’s defence- and alliance-policy settings, including new capability acquisitions and strategic initiatives such as AUKUS. In this Adelphi book, Euan Graham argues that Australia has provided an imperfect but nevertheless useful exemplar of how governments may respond effectively to multifarious security challenges from China. In particular, the Australian case shows how measures to address domestic vulnerabilities may serve as the foundation for a successful China policy at the international level.

Notes

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2 Australian Government, Department of Foreign Affairs and Trade, ‘Australia’s Exports to China, 2001 to 2011’, p. 2, https://www.dfat.gov.au/sites/default/files/australias-exports-to-china-2001-2011.pdf.

3 Clive Williams, ‘Does Australia Have a “One China”, “Two Chinas” or “One China, One Taiwan” Policy—or All Three?’, ASPI Strategist, 2 August 2021, https://www.aspistrategist.org.au/does-australia-have-a-one-china-two-chinas-or-one-china-one-taiwan-policy-or-all-three/; Australian Government, Department of Foreign Affairs and Trade, ‘Australia’s Trade in Goods and Services 2021–22’, https://www.dfat.gov.au/trade/trade-and-investment-data-information-and-publications/trade-statistics/trade-in-goods-and-services/australias-trade-goods-and-services-2021–22; and Australian Government, Department of Foreign Affairs and Trade, ‘China Country Brief’, https://www.dfat.gov.au/geo/china/china-country-brief.

4 John Lee, ‘How China Overreached in Australia’, Hudson Institute, 29 August 2021, https://www.hudson.org/research/17228-how-china-overreached-in-australia#.

5 Xu Xiujun and Lin Kaiwen, ‘The Strategic Positioning and Realistic Choice of Sino-Australia[n] Relations’, Journal of Suzhou University of Science and Technology, vol. 37, no. 5, May 2020, pp. 35–41, http://61.181.120.82:8081/kcms/detail/detail.aspx?filename = SZTD202005008&dbcode = CJFQ&dbname = CJFD2020.

6 Mark Thomson, ‘Trade, Investment and Australia’s National Security … or How I Learned to Stop Worrying and Love Chinese Money’, ASPI Strategic Insights, no. 56, 18 April 2012, https://www.aspi.org.au/report/strategic-insights-56-trade-investment-and-australias-national-securityor-how-i-learnedstop?__cf_chl_jschl_tk__=pmd_Xt0yut7mSf0kaGpqORqvHc9lSl8c6fkp3BevwyhgL7Y-1634783872-0-gqNtZGzNApCjcnBszQj9.

7 Alex Turnbull, ‘China Singling Out Australian Coal Is a Sign of Their Influence on Global Energy Markets’, Guardian, 12 October 2021, https://www.theguardian.com/commentisfree/2021/oct/12/china-singling-out-australian-coal-demonstrates-their-influence-on-global-energy-markets.

8 ‘China Continues to Receive Largest Share of New Zealand Exports: Statistics’, Xinhua, 26 July 2021, http://www.xinhuanet.com/english/asiapacific/2021-07/26/c_1310086422.htm.

9 Australian Government, Department of Foreign Affairs and Trade, ‘Trade and Investment at a Glance 2021’, https://www.dfat.gov.au/publications/trade-and-investment/trade-and-investment-glance-2021#exports.

10 National Bureau of Statistics of China, ‘Statistical Communiqué of the People’s Republic of China on the 2019 National Economic and Social Development’, 28 February 2020, http://www.stats.gov.cn/english/PressRelease/202002/t20200228_1728917.html.

11 Muyu Xu and Gavin Maguire, ‘China Coal Supplies to Tighten This Winter on Import Curbs, Strong Demand’, Reuters, 14 October 2020, https://www.reuters.com/article/us-china-coal-australia-graphic-idUSKBN26Z121.

12 Lee, ‘How China Overreached in Australia’.

13 Clare Jim, ‘Analysis: Evergrande Woes to Take Toll on China Property Sale and Drive M&A’, Reuters, 24 September 2021, https://www.reuters.com/world/asia-pacific/evergrande-woes-take-toll-china-property-sale-drive-ma-2021-09-24/.

14 Allan Gyngell, Fear of Abandonment: Australia in the World Since 1942 (Melbourne: La Trobe University Press, 2021), p. 352.

15 East Asian Bureau of Economic Research and China Centre for International Economic Exchanges, ‘Partnership for Change: Australia– China Joint Economic Report’, August 2016, https://press-files.anu. edu.au/downloads/press/n2068/pdf/book.pdf.

16 Mark Kenny, ‘Chinese President Xi Jinping Urges Australia to Embrace “Harmonious” Partnership with Beijing’, Sydney Morning Herald, 18 November 2014, https://www.smh.com.au/politics/federal/chinese-president-xi-jinping-urges-australia-to-embrace-harmonious-partnership-with-beijing-20141117-11ohwq.htm; and ‘Full Text of Chinese President Xi Jinping’s Address to Australia’s Parliament’, Straits Times, 19 November 2014, https://www.straitstimes.com/asia/australianz/full-text-of-chinese-president-xi-jinpings-address-to-australias-parliament.

17 Peter Drysdale, ‘Australia’s Return to Prosperity Depends on Mending China Ties’, East Asia Forum, 20 May 2020, https://www.eastasiaforum.org/2020/05/20/australias-return-to-prosperity-depends-on-mending-china-ties-2/.

18 Malcolm Turnbull, A Bigger Picture (Melbourne: Hardie Grant Books, 2020), p. 426.

19 ‘Australia, China Urged to Ease Tensions’, SBS News, 14 October 2021, https://www.sbs.com.au/news/australia-china-urged-to-ease-tensions/38f2f057-5834-4038-bb09-4b5bc39502a5; and Daniel Hurst, ‘Labor’s Joel Fitzgibbon Accuses Coalition of Starting “Economic War with China”’, Guardian, 8 October 2020, https://www.theguardian.com/australia-news/2020/oct/08/labors-joel-fitzgibbon-accuses-coalition-of-starting-economic-war-with-china.

20 ‘Australia, China Urged to Ease Tensions’.

21 Jeffrey Wilson, ‘“NATO for Trade”: A Bad Answer to a Good Question?’, Hinrich Foundation, 13 July 2021, https://www.hinrichfoundation.com/research/article/sustainable/nato-for-trade/.

22 Cynthia Kim and Hyunjoo Jin, ‘With China Dream Shattered Over Missile Land Deal, Lotte Faces Costly Overhaul’, Reuters, 24 October 2017, https://www.reuters.com/article/us-lotte-china-analysis-idUSKBN1CT35Y.

23 Turnbull, A Bigger Picture, p. 430.

24 Andrew Tillett, ‘China Consumer Backlash Looms Over Morrison’s Coronavirus Probe’, Australian Financial Review, 26 April 2020, https://www.afr.com/politics/federal/china-consumer-backlash-looms-over-morrison-s-coronavirus-probe-20200423-p54mpl.

25 Graeme Dobell, ‘China and Australia Face Off in Irate and Icy Pandemic Diplomacy’, ASPI Strategist, 4 May 2020, https://www.aspistrategist.org.au/china-and-australia-face-off-in-irate-and-icy-pandemic-diplomacy/.

26 Peter Hartcher, ‘“Just Not Going to Happen”: US Warns China Over Australian Trade Stoush’, Sydney Morning Herald, 16 March 2021, https://www.smh.com.au/world/north-america/just-not-going-to-happen-us-warns-china-over-australian-trade-stoush-20210316-p57b4l.html; and Weizhen Tan, ‘China Restricted Imports from Australia. Now Australia Is Selling Elsewhere’, CNBC, 2 June 2021, https://www.cnbc.com/2021/06/03/australia-finds-new-markets-for-coal-barley-amid-china-trade-fight.html.

27 Jeffrey Wilson, ‘Adapting Australia to an Era of Geoeconomic Competition’, Perth USAsia Centre, January 2021, https://perthusasia.edu.au/getattachment/Our-Work/Geoeconomics-Report/PU-184-Geoecon-210526-WEB.pdf.aspx?lang = en-AU.

28 Hudson Lockett and Primrose Riordan, ‘China Coal Futures Drop on Threat of State Intervention in Energy Crisis’, Financial Times, 20 October 2021, https://www.ft.com/content/041b24fb-e8bd-44dd-b546-5a5ff9c9f564.

29 Lee, ‘How China Overreached in Australia’.

30 Denny Roy, ‘Xi Jinping’s Top Five Foreign Policy Mistakes’, Pacific Forum PacNet, no. 49, 22 October 2021, https://pacforum.org/publication/pacnet-49-xi-jinpings-top-five-foreign-policy-mistakes.

31 Tan, ‘China Restricted Imports from Australia. Now Australia Is Selling Elsewhere’.

32 Agence France-Presse, ‘Smuggling Australian Rock Lobsters into China a National Security Threat, Hong Kong Customs Chief Says’, Guardian, 22 October 2021, https://www.theguardian.com/world/2021/oct/22/smuggling-australian-rock-lobsters-into-china-a-national-security-threat-hong-kong-customs-chief-says.

33 Jeffrey Wilson, ‘Australia Shows the World What Decoupling from China Looks Like’, 9 November 2021, Foreign Policy, https://foreignpolicy.com/2021/11/09/australia-china-decoupling-trade-sanctions-coronavirus-geopolitics/.

34 Colin Heseltine, ‘We Must Restore Normality to Our China Relationship’, Australian, 5 November 2021, https://www.theaustralian.com.au/inquirer/we-must-restore-normality-to-our-vital-relationship-with-china/news-story/682faf4ad1120642b489746a157688c0.

35 Stephen Dziedzic, ‘Chinese Official Declares Beijing Has Targeted Australian Goods as Economic Punishment’, ABC News, 7 July 2021, https://www.abc.net.au/news/2021-07-07/australia-china-trade-tensions-official-economic-punishment/100273964.

36 Wilson, ‘Adapting Australia to an Era of Geoeconomic Competition’, p. 10.

37 Terry Macalister, ‘Rio’s Deal with Chinalco Collapses’, Guardian, 4 June 2009, https://www.theguardian.com/business/2009/jun/04/rio-tinto-chinalco-investment.

38 Peter Hartcher, ‘“Let Me Buy Rio Tinto”: China’s Brazen Bid to Buy Our Companies’, Sydney Morning Herald, 11 September 2018, https://www.smh.com.au/national/let-me-buy-rio-tinto-china-s-brazen-bid-to-buy-our-companies-20180910-p502rz.html.

39 Naaman Zhou, ‘More than 80% of Australians Mistakenly Believe Chinese Investors Are Driving Up House Prices’, Guardian, 8 July 2021, https://www.theguardian.com/australia-news/2021/jul/08/more-than-80-of-australians-mistakenly-believe-chinese-investors-are-driving-up-house-prices.

40 Dan Hu, ‘China–Australia Relations Doomed’, University of Western Australia News, 17 December 2020, https://www.uwa.edu.au/news/article/2020/december/china-australia-relations-doomed.

41 Michael Smith, ‘Chinese Investment in Australia Plunges 70 Per Cent’, Australian Financial Review, 22 April 2022, https://www.afr.com/world/asia/chinese-investment-in-australia-plunges-70-per-cent-20220421-p5af59.

42 ‘Chinese Company Landbridge to Operate Darwin Port Under $506 m 99-year Lease Deal’, ABC News, 13 October 2015, https://www.abc.net.au/news/2015-10-13/chinese-company-landbridge-wins-99-year-darwin-port-lease/6850870.

43 Geoff Wade, ‘Landbridge, Darwin and the PRC’, ASPI Strategist, 9 November 2015, https://www.aspistrategist.org.au/landbridge-darwin-and-the-prc/.

44 ‘“Let Us Know Next Time”: How the World’s Most Powerful Man Slammed Australia Over Darwin Port Sale’, NT News, 19 November 2015, https://www.ntnews.com.au/business/let-us-know-next-time-how-the-worlds-most-powerful-man-slammed-australia-over-darwin-port-sale/news-story/79197882757c204eb761e5539532d5d2.

45 David Uren, ‘Former Trade Minister Andrew Robb Takes Role with Chinese Company Behind Lease of Darwin Port’, Australian, 30 October 2016, https://www.theaustralian.com.au/nation/politics/former-trade-minister-andrew-robb–takes-role-with-chinese-company-behind-lease-of-darwin-port/news-story/307aa3fa44c9188da7c28069aff18331.

46 Helen Davidson, ‘Darwin Port Deal with Chinese Group Poses No Threat, Says Defence Official’, Guardian, 15 December 2015, https://www.theguardian.com/australia-news/2015/dec/15/darwin-port-deal-with-chinese-group-poses-no-threat-says-defence-official.

47 Christopher Walsh, ‘How and Why Did the Northern Territory Lease the Darwin Port to China, and at What Risk?’, ABC News, 13 March 2019, https://www.abc.net.au/news/2019-03-12/why-did-northern-territory-sell-darwin-port-to-china-what-risk/10755720.

48 Jano Gibson, ‘Chinese-owned Company Landbridge Rejects “Myths and Mistruths” About Darwin Port Lease’, ABC News, 28 August 2022, https://www.abc.net.au/news/2022-08-29/darwin-port-nt-landbridge-rejects-chinese-influence-claims/101379670.

49 Angus Grigg and Angela Macdonald-Smith, ‘China’s State Grid Demands Equal Treatment in $10 Billion Ausgrid Auction’, Australian Financial Review, 31 March 2016, https://www.afr.com/companies/energy/chinas-state-grid-demands-equal-treatment-in-10b-ausgrid-auction-20160331-gnupy1.

50 Turnbull, A Bigger Picture, p. 425.

51 Peter Hartcher, ‘Revealed: Why the Sale of Ausgrid to Chinese Buyers Was Vetoed’, Sydney Morning Herald, 28 May 2018, https://www.smh.com.au/opinion/revealed-why-the-sale-of-ausgrid-to-chinese-buyers-was-vetoed-20180528-p4zhxh.html.

52 Brian Fung and Ellen Nakashima, ‘Huawei Reportedly Gets the Green Light to Participate in Britain’s 5G Rollout, a Would-be Setback for the U.S.’, Washington Post, 25 April 2019, https://www.washingtonpost.com/technology/2019/04/25/huawei-gets-green-light-participate-britains-g-rollout-reversal-us/.

53 Turnbull, A Bigger Picture, p. 435.

54 Tim Biggs and Jennifer Duke, ‘China’s Huawei, ZTE Banned from 5G Network’, Sydney Morning Herald, 23 August 2018, https://www.smh.com.au/technology/government-implies-5g-china-ban-in-new-security-advice-20180823-p4zz77.html.

55 Turnbull, A Bigger Picture, p. 435.

56 Samantha Hoffman and Elsa Kania, ‘Huawei and the Ambiguity of China’s Intelligence and Counter-espionage Laws’, ASPI Strategist, 13 September 2018, https://www.aspistrategist.org.au/huawei-and-the-ambiguity-of-chinas-intelligence-and-counter-espionage-laws/.

57 Michael Slezak and Ariel Bogle, ‘Huawei Banned from 5G Mobile Infrastructure Rollout in Australia’, ABC News, 23 August 2018, https://www.abc.net.au/news/2018-08-23/huawei-banned-from-providing-5g-mobile-technology-australia/10155438.

58 Peter Hartcher, ‘Huawei? No Way! Why Australia Banned the World’s Biggest Telecoms Firm’, Sydney Morning Herald, 21 May 2021, https://www.smh.com.au/national/huawei-no-way-why-australia-banned-the-world-s-biggest-telecoms-firm-20210503-p57oc9.html.

59 Maggie Lu-YueYang, ‘Australia Blocks China’s Huawei from Broadband Tender’, Reuters, 26 March 2012, https://www.reuters.com/article/us-australia-huawei-nbn-idUSBRE82P0GA20120326.

60 Turnbull, A Bigger Picture, p. 434.

61 Ibid.

62 Hartcher, ‘Huawei? No Way! Why Australia Banned the World’s Biggest Telecoms Firm’.

63 Turnbull, A Bigger Picture, p. 434.

64 Jordan Robertson and Jamie Tarabay, ‘Chinese Spies Accused of Using Huawei in Secret Australia Telecom Hack’, Bloomberg, 16 December 2021, https://www.bloomberg.com/news/articles/2021-12-16/chinese-spies-accused-of-using-huawei-in-secret-australian-telecom-hack.

65 Hartcher, ‘Huawei? No Way! Why Australia Banned the World’s Biggest Telecoms Firm’.

66 ‘Huawei Faces Ban from UK 5G Network, with Experts Warning of Chinese Spying’, ABC News, 5 July 2020, https://www.abc.net.au/news/2020-07-06/huawei-faces-uk-ban-with-experts-warning-of-chinese-spying/12424608.

67 Wilson, ‘Adapting Australia to an Era of Geoeconomic Competition’, p. 32.

68 Ibid.

69 Clark Packard, ‘Trump’s Real Trade War Is Being Waged on the WTO’, Foreign Policy, 9 January 2020, https://foreignpolicy.com/2020/01/09/trumps-real-trade-war-is-being-waged-on-the-wto/.

70 Lidia Kelly, ‘Australia Takes Wine Dispute with China to WTO’, Reuters, 19 June 2021, https://www.reuters.com/world/asia-pacific/australia-takes-wine-dispute-with-china-wto-2021-06-19/.

71 Stephen Dziedzic, ‘Australia Attacks China’s Policy of Economic Punishment at the WTO, Accuses It of Contravening Rules’, ABC News, 21 October 2021, https://www.abc.net.au/news/2021-10-21/australia-wto-blasts-china-economic-punishment-retaliation/100555410.

72 Samantha Hawley and Jack Hawke, ‘Scott Morrison Says G7 Leaders Back Australia’s Stand Over China’, ABC News, 13 June 2021, https://www.abc.net.au/news/2021-06-14/morrison-g7-leaders-back-australia-stand-on-china/100212798.

73 Wilson, ‘Adapting Australia to an Era of Geoeconomic Competition’, p. 32; and ‘Australia Uses WTO Forum to Blast China’s Trade Tactics’, Radio New Zealand, 21 October 2021.

74 Wilson, ‘Australia Shows the World What Decoupling from China Looks Like’.

75 Daphne Psaledakis and Simon Lewis, ‘U.S. Will Not Leave Australia Alone to Face China Coercion – Blinken’, Reuters, 13 May 2021, https://www.reuters.com/world/asia-pacific/us-will-not-leave-australia-alone-face-china-coercion-blinken-2021-05-13/.

76 Sue-Lin Tan, ‘US Exports to China Grow at “Expense” of Australia After Beijing’s Trade Ban’, South China Morning Post, 19 May 2021, https://www.scmp.com/economy/global-economy/article/3133952/us-exports-china-grow-expense-australia-after-beijings-trade.

77 Grace Ho, ‘US Will Not Join Regional Trade Pact CPTPP, but Pursue Specific Tie-ups with Allies: US Commerce Secretary’, Straits Times, 17 November 2021, https://www.straitstimes.com/singapore/politics/us-will-not-join-asian-trade-pact-cptpp-but-pursue-specific-tie-ups-with-allies.

78 Jonas Parello-Plesner, ‘An “Economic Article 5” to Counter China’, Wall Street Journal, 11 February 2021, https://www.wsj.com/articles/an-economic-article-5-to-counter-china-11613084046.

79 Will Glasgow, ‘Australia Leads Widespread Criticism of China at the WTO’, Australian, 21 October 2021, https://www.theaustralian.com.au/nation/politics/australia-calls-out-chinas-bad-behaviour-at-the-wto/news-story/2ccf3b8b68434fa07e5927da1d07987f.

80 Wilson, ‘Adapting Australia to an Era of Geoeconomic Competition’, p. 19.

81 Australian Government, Department of Foreign Affairs and Trade, ‘Indonesia–Australia Comprehensive Economic Partnership Agreement’, https://www.dfat.gov.au/trade/agreements/in-force/iacepa/Pages/indonesia-australia-comprehensive-economic-partnership-agreement.

82 Minister for Trade, Tourism and Investment, the Hon Dan Tehan MP, ‘Historic Trade Deal with India’, 2 April 2022, https://www.trademinister.gov.au/minister/dan-tehan/media-release/historic-trade-deal-india.

83 James Rogers et al., ‘Breaking the China Supply Chain: How the “Five Eyes” Can Decouple from Strategic Dependency’, Henry Jackson Society, May 2020, https://henryjacksonsociety.org/wp-content/uploads/2020/05/Breaking-the-China-Chain.pdf.

84 Gareth Hutchens, ‘Australia Loses Another Oil Refinery, Leaving Our Fuel Supply Vulnerable to Regional Crises’, ABC News, 11 February 2021, https://www.abc.net.au/news/2021-02-11/australia-loses-another-oil-refinery-risking-fuel-supply/13139648.

85 Wilson, ‘Adapting Australia to an Era of Geoeconomic Competition’, p. 26.