Australia-China relations put on backburner

Australia’s political turbulence could hamper moves by the Turnbull government to improve ties with China.

Australia’s political turbulence could hamper moves by the Turnbull government to improve ties with China.

The recent speech by the Prime Minister to the University of New South Wales was seen as a key step forward in improving strained ties between Australia and China.

The carefully orchestrated move was welcomed by Beijing, which saw it as the beginning of an effort to reset relationship.

There were also hopes that it could pave the way for a visit to China by Foreign Minister Julie Bishop, which in turn would pave the way for a visit to China by Malcolm Turnbull who has not been to the country for two years.

But yesterday’s leadership vote and increasing instability in the leadership at home will mean Turnbull has to focus on shoring up his domestic base.

While China is by far Australia’s largest trading partner and a key factor in Australia’s almost 30 years of uninterrupted growth, Turnbull will now have to focus on appealing to the conservative constituents in his own party.

Thoughts of international diplomacy, no matter how importance, will play second fiddle to domestic political survival and issues such as energy policy and company tax.

Turnbull’s speech to the UNSW was hailed as statesman like by several political commentators, including Australia’s former ambassador to China, Geoff Raby. It was also greeted by the business community with ties to China.

In a statement this week, leading members of the Asia Society including Australia China Council chairman Warwick Smith and Asia Society chairman KPMG executive Doug Ferguson, said the speech had “struck the right balance”, and been welcomed by Australian companies which export more than $90 billion in products and services as well as Chinese companies that have invested more than $100bn into Australia’s economy since 2008.

They pointed out that Australia’s relationship with China was a “multifaceted national project” which required a “comprehensive, whole of country approach based on our national interests and unapologetically focused on Australia’s prosperity and security”.

“We hope, in the coming months, the Prime Minister and the government will further articulate how Australia will chart its course in a more economically competitive and strategically contested Asia, with China at the centre.”

After the tumultuous events of the past few days, the idea of the Prime Minister sitting down to focus on projecting a comprehensive policy on China and Asia — along the lines of those led by Bob Hawke or Paul Keating or John Howard — look a long way off as he battles for his own political survival. Political uncertainty will be the name of the game in Australia at least until the next election.

That lack of policy stability is damaging for Australia both domestically and internationally.

Asked about the impact of leadership issues on Bloomberg television yesterday, Fortescue Metals chief executive Elizabeth Gaines, who leads a company whose fortunes have been based on selling to China, said business needed certainty.

“We need to have some clarity in terms of policy,” she said.

“It is really important for those long term investment decisions.

“And if we have that certainty we can make those (investment) decisions. It’s good for jobs and it is good for growth.”

Conversely, political uncertainty is not good for jobs and growth.

The next test of the relationship with China will be the federal government’s decision on whether Chinese telecoms giant Huawei can supply equipment for the next generation 5G network.

Indications last week were that the Turnbull government was not going to ban Huawei from supplying companies including Vodafone, Optus and TPG, but could impose some restrictions on the extent of its 5G operations.

The political instability in Australia contrasts with that of its two major trading and strategic partners. In China, with its Communist government, President Xi Jinping could potentially rule for an indefinite period following moves earlier this year to drop the 10-year limit on the presidency. And in the US, Donald Trump is firmly in place as the American leader — and could well look forward to a second term as president.

In both cases, two strong leaders have very clear policies — Xi with his push for tighter control over the economy while maintaining strong growth and mapping out his vision for a stronger role for China in the global debate, and Trump with his “America First” policy, pushing China for concessions on its trade policy.

Looked at from northern Asia, Australia’s role as a middle ranking power with a voice in the region looks shaky as it stumbles from leader to leader — each one shifting policy to pander to domestic political interests with no coherent long-term vision for the country.

In contrast, the 93-year-old Malaysian Prime Minister Mahathir visited China this week for a range of discussions including issues over sensitive areas in the South China Sea and Malaysia’s problems with more than $20bn worth of China’s Belt and Road projects negotiated by his predecessor, the pro-Beijing Najib Razak. In Beijing Mahathir spoke frankly of some of his concerns about a possible “new colonialism” where poor countries were unable to compete with rich countries on trade issues.

He left Beijing critical of his predecessor for “stupidly” doing some infrastructure deals with China-backed companies — deals which he is determined to renegotiate. But his five-day visit also improved China-Malaysia ties meeting face-to-face with China’s leaders in some frank exchanges. It’s the kind of hard-headed diplomacy that a strong leader with a clear view of his country’s best interests can pull off.

Sadly, Australia, with its debilitating leadership infighting and its many leadership changes, is losing its clout in the region — which also risks the country’s economic future.