Can carbon reduction aims provide green shoots from China

In the case of steel Australia is a major raw material supplier. Australia and China have a common interest in devising low carbon steel and cement. Photo by GREG BAKER / AFP

For the first time in countless months the tiniest “green shoots” have emerged from Beijing pointing towards at least some form of business to business reconciliation with China.

Those “green shoots” were coated in highly critical remarks about Australian politicians but nevertheless they were there. In my view the business community needs to test the possible opportunity.

And, by chance, a commentary in The Wall Street Journal offers Australian business an unique opportunity to test whether the “green shoots” are real.

To understand how the “green shoots” emerged and the significance of The Wall Street Journal commentary I have to take you back to an event that - totally coincidentally - took place in the week of the budget.

In an exclusive report, under the heading Business wants negotiation with China, not war, The Australian’s Ben Packham and Paul Garvey revealed details of a speech by Australian Industry Group chief executive Innes Willox to Department of Foreign Affairs and Trade officials,

Willox urged the federal government to calm tensions with China through “negotiation, common sense and diplomacy”, but not at the expense of Australia’s national interests.

He warned the nation was facing a long-feared “day of reckoning” between its security and economic relationships.

He said tensions could escalate, and called for an end to inflammatory language, such as that used by the Home Affairs Secretary.

Packham and Garvey commented that Willox’s comments were backed by other prominent corporate figures, including Warwick Smith, the former Liberal MP who now runs the Business Council’s international engagement efforts.

That might have been the end of it. But the Chinese are clearly reading comments in the Australian press. and the state-owned China Daily quickly responded with an editorial which was, as usual, dominated by criticism of Australian politicians and their contribution to the decline in relationships. But among the critical remarks were “green shoots” that I have not seen before.

Here they are:

*“an increasing number of clear-sighted Australians have, one after another, raised their voice in support of improving ties with China. The Australian government should heed these more rational voices”. (in other words the way may be open for business to improve ties with China)

*“Getting Sino-Australian ties back onto a healthy track would best cater to the country’s interests. Australia has obviously garnered great economic benefits from the previously friendly ties between the two countries”. (that’s correct but both countries have benefited)

*”Australian society views have poisoned the atmosphere for meaningful interactions between the two countries. (The Chinese blame Australian politicians for the poisoning of the attitude of Australians towards China while we would blame China’s trade bans.)

I found it fascinating that Chinese understands there is a “poisoned” Australian community attitude towards China and they are right in saying that attitude makes any reconciliation very hard. I know a great many of my readers believe you can’t deal with a country like China and I respect their views.

Yet in totality those remarks open up at least the possibility of business to business talks. But any such discussions need to be focused on specific issues that are separate from the now clearly set out areas of dispute between China and Australia. Suddenly The Wall Street Journal article opens such a possibility. Let me quote extracts.

“China has committed to capping its carbon emissions by 2030 but its demand for steel - which happens to be the nation’s top energy-consuming industry - remains ravenous. Meanwhile, steel prices have rocketed skyward in 2021.

Beijing has proved adept at temporarily curbing steel supply in the past and is doing so again now; that is one reason prices are so high. But the medium-term outlook for both prices and emissions depends significantly on whether it can fundamentally slow growth in demand.

“To succeed it will need to shift the economy away from housing and construction, a longstanding goal that has proven elusive so far

The iron and steel sector is far and away the largest industrial energy hog in China - accounting for 13 per cent of the nation’s total energy use in 2018.

“Other heavy industrial sectors like nonferrous metals, cement, glass and chemicals -which, like steel, tend to follow housing demand—together account for around a quarter of energy consumption”

In short like Australia, China’s major carbon problem is in steel and cement.

Both nations have used housing and infrastructure as part of current and past recovery programs and both are under pressure on carbon reduction.

In the case of steel Australia is a major raw material supplier. Both nations have a common interest in devising low carbon steel and cement. Businesses in both nations are looking at green steel and other ways of reducing the carbon content in steel and cement.

Surely this is an area we can start to work together because our interests are aligned and there’s no political baggage. It won’t be easy but the green shoots make it worth a try.