Victoria’s Belt and Road deal with China axed under new powers

Chinese state-owned media is warning Australia’s move to scrap Victoria’s Belt and Road deal could lead to a ‘potential trade conflict’.

Treasurer Josh Frydenberg says the government will not bow down to threats of retaliation, after Beijing’s media mouthpiece warned Australia was facing “serious consequences” for tearing up Victoria’s Belt and Road deal.

The message from Chinese state-owned media outlet the Global Times comes after Foreign Affairs Minister Marise Payne on Wednesday night announced that two Belt and Road agreements would be axed under new laws.

The Morrison government, which scrapped the deals because they did not meet the national interest test, has been accused of firing a major shot to provoke China, and the move could “lead up to a potential trade conflict”.

Mr Frydenberg said he wanted Australia to continue having a productive relationship with its largest trading partner.

“But at the same time we will be clear and consistent with respect to our national interest,” Mr Frydenberg said

“Whether it is around human rights, foreign investment, or other national security related issues.”

On the issue of Australia’s iron ore exports to China, Mr Frydenberg said the trade was mutually beneficial.

“I’m confident that relationship, despite the challenges we have today, will continue,” he said.

Foreign Affairs Minister Marise Payne has rejected assertions the move could prompt retaliation from Beijing. Picture: NCA NewsWire / Gary Ramage

But Chinese scholar Chen Hong – who had his Australian visa cancelled after an intelligence investigation – told the Global Times that Australian officials were fully aware of the consequences of the scrapping Victoria’s Belt and Road deal, but did it anyway.

“That clearly shows Australia’s intention to further escalate tensions with China rather than de-escalate,” Mr Chen said.

The new powers, which passed the parliament in December, have been accused of targeting China.

But Senator Payne has strongly rejected the claims, adding Australia has also binned agreements with Iran and Syria.

Chinese Academy of International Trade and Economic Co-operation research fellow Song Wei told the Global Times the move would “worsen the China-Australia trade relationship” and would have a “negative impact” on the Victorian economy.

University of Sydney professor Hans Hendrischke said the commercial impact of cancelling the Belt and Road agreements was minimal.

“These were standard trade and investment promotion agreements that are routinely signed by corporate and government entities,” Professor Hendrischke said.

“The Chinese National Development and Reform Commission is a planning and co-ordinating body without executive powers.”

He said the cancellation of the agreements now brought Victoria in line with other states.

Australia says its door is open to conversations with Chinese officials.

The relationship between Australia and its largest trade partner hit new lows last year, as China took aim at Australian barley, wine, seafood, timber and coal.

A change of Australian trade ministers has not helped repair the frosty relationship, with Beijing officials refusing to pick up calls.

Senator Payne and other senior ministers have repeatedly rejected claims of anti-China policies, saying they would continue to make decisions based on Australia’s national interest.

Chinese diplomat Wang Xining on Wednesday told the National Press Club that if Australia did not intentionally obstruct people-to-people exchange programs, he didn’t see “any obstacle for the resumption of a normal state of our relationship”.