‘Cold War mindset’: Beijing suspends key government dialogue with Australia

China has taken the first formal step towards severing government ties with Australia after more than a year of incremental trade strikes, veiled threats from the Chinese embassy and escalating attacks by Chinese state media.

Beijing sent a message to Australia on Thursday that all dialogue at the political level will be cut off for years after the superpower’s top economic planner suspended the China-Australia Strategic Economic Dialogue.

China’s President Xi Jinping, Prime Minister Scott Morrison and Victorian Premier Daniel Andrews.Credit: The Age

The decision to indefinitely suspend what was once a key communication channel came two weeks after China’s Foreign Ministry said it would “respond firmly and forcefully” if the Morrison government did not reverse its decision to cancel Victoria’s Belt and Road agreement.

The rare public proclamation published on Beijing’s National Development and Reform Commission website and promoted widely by Chinese state media said Australia had launched measures to disrupt normal exchanges and co-operation “out of a Cold War mindset and ideological discrimination”.

Chinese importers of Australian fruit, meat and honey have already dropped and decreased orders in anticipation of further deterioration in diplomatic relations. Thursday’s proclamation by the National Development and Reform Commission will result in many of those fears being realised as the Australian government urges industries to diversify away from Australia’s largest trading partner.

Trade Minister Dan Tehan said the decision was disappointing.

“The Strategic Economic Dialogue, which was last held in 2017, is an important forum for Australia and China to work through issues relevant to our economic partnership,” he said. “We remain open to holding the dialogue and engaging at the ministerial level.”

Australia-China Business Council president David Olsson said the suspension marked “a new low in the relationship, one that is of deep concern to the business community.

“Business and consumers in China take their cues from Beijing and there is no disguising the parlous state of the political relationship with Australia,” he said. “No one wins in this equation.”

The Australian dollar fell quickly on the news, dropping 0.4 per cent to US77.16¢ after earlier trading at US77.58¢.

Credit: Matt Golding

The Australia-China dispute comes as the G7 group of nations meeting in London called on China to respect fundamental freedoms. Beijing has been accused by the Biden administration and some members of the European Union of human rights abuses, economic coercion and military threats against Taiwan.

In a briefing on Thursday, Danny Russell, a US assistant secretary of state for East Asia in the Obama administration, said “the relationship between the United States and China is in a shambles” as the politics on both sides increasingly favoured hardliners.

“And it ain’t swinging like a pendulum. It’s a lot more like a downward spiral,” he said.

Australian Defence Minister Peter Dutton and Home Affairs Department secretary Mike Pezzullo have in the past fortnight warned of a potential conflict with China.

The decision by the National Development and Reform Commission will make the task of repairing already strained diplomatic relations between China and Australia even more difficult. It will formally block contact between key trade and economic officials below the ministerial level. All ministerial contact between Australia and China has already been frozen for more than a year.

“Based on the current attitude of the Australian Commonwealth government toward China-Australia co-operation, the National Development and Reform Commission of the People’s Republic of China decides to indefinitely suspend all activities under the framework of the China-Australia Strategic Economic Dialogue,” the commission said in the statement.

The federal government was expecting a reaction to its decision on Victoria’s Belt and Road deal, according to government sources who were not cleared to speak on the record. Internally, Canberra recognises that Beijing is sending a message that political dialogue will not return any time soon.

Herve Lemahieu, director of the Lowy Institute’s power and diplomacy program, said if nothing else happened over the next two to three days, then Beijing’s move was “more a whimper than a bang,” as the suspended communications forum was “obviously a moribund vehicle” for political dialogue.

“It has symbolic value,” he said.

“It’s signalling effect is that the current state of play in our relations with Beijing is the new normal.”

Jeffrey Wilson from the Perth USAsia Centre said China had run out of exports to sanction.

“Basically, it shows China has run out of ammunition,” he said. “By going ‘thermonuclear’ on trade in 2020, they now have no substantive ways to punish Australia any more, and have to scrap around for impact-free acts of pure symbolism.”

The dialogue was established in 2014 in Beijing as a forum for the Australian treasurer, trade minister and the chairman of China’s National Development and Reform Commission to discuss investment and trade deals.

The relationship has deteriorated sharply since then. Australia’s world-leading decision to ban Huawei from the 5G network in 2018 and introduce foreign interference laws angered Beijing. That animosity deepened last year after disputes over the origin of the coronavirus pandemic, human rights, national security and the Victorian Belt and Road deal led to trade strikes against $20 billion worth of Australian exports.

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