Australia catches a glimpse of China’s claws

Australia’s escalating battle with China is starting to affect key exports like education, coal and agricultural products.

A lion dance group from Hurstville performing in Sydney’s China Town. Adam Yip/The Australian

On the global stage there is now a rush for the “safety” of the US dollar which is forcing American bond yields towards new lows as the world fears we are spiralling towards an escalation of the US-China technology-driven trade war.

But here in Australia, our banking gymnastics obscure our own escalating battle with China which is starting to affect our key exports like education, coal and agricultural products. We depend on China but China is deliberately moving its itself to a position where Australia is dispensable and we do not recognise this incredibly dangerous development. It’s time to part the curtain.

My business friends tell me that when they talk to top government people in China, they are alarmed to discover that China is very unhappy with Australia. China has decided, without fuss, and on a step-by-step basis, to punish us for our bad behaviour. They have chosen to target our soft underbellies like students, coal, apartments and agriculture. The blows are not severe — more like a “rap on the knuckles”.

The decisions to act were made during 2018, and possibly before, so were carefully planned. The anger China has with Australia is unique and does not apply to any of its other developed country trading partners. Relations with the US are far better than with Australia because the Chinese understand what Donald Trump is trying to achieve. There is a clear respect for the opponent.

Accordingly, China’ s anger with Australia comes not so much from our dealings with the US nor our actual policies. Rather it’s the habit of Australian ministers and government officials to lecture the Chinese officials they meet. And, apparently, sometimes our people even criticise China — in China. Former Prime Minister Rudd caused deep anger when he criticised China in Mandarin but while our recent in-country criticisms have not gone that far, we have culturally offended the Chinese.

The business people were told mid last year that a number of our universities would see a softness in Chinese enrolments during 2019. And, of course, that’s exactly what is happening. Given that our universities depend on Chinese students, those universities that are being affected are very nervous and are asking “what’s happening!?” What they don’t know is that the Chinese had planned to boost student numbers in Canada. The arrest of Huawei’s CFO may cause second thoughts. For the moment we may be lucky.

Student demand for apartment rentals — vital to the income of those owning inner city apartments — has not been affected but the student softness would not want to escalate. Large Chinese apartment developers have been told to sell their big land holdings but, so far, have not been willing to accept the big losses that would be crystalized by selling at this time.

When it comes to agriculture, unhappiness with Australia has caused the Chinese to boost Argentine beef. Argentina’s beef exports to China went close to doubling in 2018.

And China is now looking much more closely at Europe for high quality vegetable and other agricultural products. The Belt and Road Intuitive want to develop Europe’s links to China. Ukraine is a favoured supplier. It is possible China will put a tariff on Australian corn next week. Ukraine production is booming.

Suddenly, a number of ships carrying Australian coal to parts of China have found it difficult to get a berth. The same thing might have been scheduled for Australian iron ore but there is now a shortage given what has happened in Brazil. China will redouble its iron ore drive in Africa.

I have given Bill Shorten well-deserved criticism over the blatant discrimination between both retirees and pensioners in his retirement and pensioner tax. And the implementation timing of his negative gearing plans (not the plans themselves) show a lack understanding of what is happening in the nation.

But the mistakes we have made in foreign affairs means that on this front we need a new approach. We are incredibly dependent on China — in some ways we are a state of China. About 10 years ago I was in the company of a top Chinese official who explained that in China there are still deep cultural scars from the bad treatment of China in past centuries. China is now the world’s number two country and they will not stand for being lectured to by anyone — let alone a minnow like Australia. And too many of our government people when visiting China have not worked this out.

China is too proud to openly attack a country that is way down the scale of Chinese importance. Instead they are “rapping us over the knuckles”. But the horrendous joint strike fighter (F-35) mistake and the strange $200 billion submarine affair mean that independently we are very weak in defence yet are playing games in the Pacific. Our role should be to provide a bridge between the US and China and not to culturally antagonise our largest trading partner.