Australia’s ties with China blighted by tension

Trade Minister Simon Birmingham greets Shanghai Cred chairman Gui Guojie at the Australian consulate yesterday. Picture: Department of Foreign Affairs and Trade.

Australia’s ties with China are thawing after a year in deep freeze. Chinese officials have taken note of speeches by Scott Morrison that underline the importance Australia attaches to the relationship with its largest trading partner.

The visit by Trade Minister Simon Birmingham to China’s ­import trade fair this week is the first official ministerial trip in more than a year, and a meeting is ­expected between the Prime Minister and Chinese President Xi Jinping on the margins of the Asia-Pacific Economic Co-operation meeting in Port Moresby in two weeks.

However, tensions remain. Political missteps have contributed to difficulties in the past year but they primarily reflect concern among Australia’s security agencies that the increasingly intertwined economic relationship is raising threats to the ­national interest.

The decision to ban Chinese companies Huawei and ZTE from participating in the rollout of 5G telecommunications infrastructure is the most recent and obvious action stemming from these fears and it has undercut the warmth the prime ministerial speeches otherwise might have generated.

While Morrison says his objective in talks with Xi will be “to provide a confidence that Australia and China can get on with business as usual”, the potential for security concerns to cause further tension is ever-present.

Australia’s trade with China (monthly)

Treasurer Josh Frydenberg is stalling on a crucial foreign investment decision over whether to allow a Hong Kong company, CKI, to take over a gas pipeline company, APA, that would give it monopoly control over a large swathe of Australia’s gas supplies.

The Australian Strategic Policy Institute’s executive director, Peter Jennings, whose thinking aligns with that of security agencies, advocates rejecting the bid, arguing it will give China the ability to sabotage Australia’s electricity supplies.

It was national security policy that first caused the rift. Late last year, Malcolm Turnbull as prime minister unveiled legislation that banned foreign involvement in the Australian political process, as well as updating treason and espionage provisions. Addressing parliament, he paraphrased Mao Zedong’s supposed comment at the time of the Chinese revolution, “The Chinese have stood up”, to declare, in his halting Mandarin that “Australia has stood up”.

Claims that the legislation was non-discriminatory were flatly ­rejected by China, with officials declaring their “shock” at Turnbull’s comments. The legislation came in the wake of ASIO concerns, leaked to an ABC Four Corners program, about the involvement of two prominent Chinese-­Australian businessmen in political donations and the forced resignation of Labor senator Sam Dastyari over his dealings with one of them.

Julie Bishop, then foreign minister, found she was unable to make appointments to see her counterpart in China, and the secretary of the Department of Foreign Affairs, former Australian ambassador to China Frances ­Adamson, was unable to get a visa to visit the country.

There was supposed to be a ­series of annual ministerial exchanges, including a meeting ­between the prime minister and the Chinese president, under the comprehensive strategic partnership, first agreed under the government of Julia Gillard and strengthened by Tony Abbott as the Australia-China free trade agreement was signed. None has taken place in the past year.

So far the freeze on ministerial contacts has been the only fallout. When China and South Korea ­relations plummeted over the ­installation of US anti-missile ­defence systems, there was economic retaliation against South Korean retailers in China and Chinese tourism in South Korea.

Australian universities have been worried that the flow of Chinese students, who account for a large share of their revenue, may suffer, as have tourism operators for whom Chinese tourists have become their largest source of business. But so far there has been no sign of that, with enrolments strong and tourist numbers still rising.

Chinese officials see the problems with the relationship as coming from the Australian side. As one official told a group of Australian journalists on a Chinese government-funded tour last week: “Australia is seen by many people in China as the pioneer of anti-Chinese thinking.”

The China Institute of International Studies think tank closely reflects official thinking and is ­affiliated with China’s Ministry of Foreign Affairs. Its vice-president, Ruan Zongze, says the breakdown in the relationship during the past year reflects Australia’s “identity problem”.

“You are geographically located closest to the Asia-Pacific ­region but your culture and values are Western,” he says. “This has ­always torn Australia and you’re struggling to cope with this.”

Ruan says China and Australia will always have differences. “The issue is how to address the areas where we do have different views. The attitude is extremely important. You can do it well or you can do it badly.”

He says Australia is trying to push China out of the South ­Pacific, encouraging island ­nat­ions to reject China’s offers of aid. Following Turnbull’s rhetorical flourish over foreign interference, a further political misstep ­occurred when Concetta ­Fierravanti-Wells, then foreign aid assistant minister, condemned China for luring Pacific nations into excessive borrowing to fund infrastructure projects. The concern was genuinely held by the Department of Foreign Affairs and Trade but her incendiary expression of it in an interview with The Australian upset China.

Ruan also highlights Australian concerns that Chinese students were a potential security threat. “Being accused of being a spy is similar to Donald Trump’s narratives. It comes as a shock to the Chinese.”

Chinese officials view the decision to ban Huawei from participating in the 5G infrastructure as discriminatory, noting two other members of the “Five Eyes” security group — Canada and New Zealand — have not imposed a ban, and Britain is permitting Huawei’s involvement with conditions.

The Huawei decision cannot have been a surprise to China, given that the Gillard government had banned its participation in the NBN. However, Australian Signals Directorate director-general Mike Burgess further aggravated the issue last week when he effectively branded Huawei, which is ­acknowledged to have the world’s leading and lowest cost telecommunications technology, as a “high-risk vendor”.

The Weekend Australian reported on Saturday that secret intelligence reports given to Australian officials outlined a case in which Chinese spy agencies used Huawei staff to acquire access codes to ­infiltrate a foreign network.

The concerns of the Australian intelligence agencies partly reflect changes in China under Xi. China had been gradually liberalising under his predecessors, allowing greater scope for private and foreign enterprise and allowing modest increases in political latitude. Xi has greatly centralised control, reasserting the place of state-owned enterprise in China’s economy and strengthening ­censorship.

At the same time, the fast-rolling wave of technological inno­vation is opening new vul­nerabilities. Everything is con­nected and hence can be hacked, while innocent data gains strategic value when it can be manipulated by artificial ­intelligence. Security agencies are voicing concern over Chinese acquisitions of minor ­assets such as health ­clinics ­because of the data they contain.

The security agencies view that China is a potential long-term threat is not new. The Rudd ­government’s 2009 defence white paper, which paved the way for the Coalition government’s ­investments in submarines and ­warships, was designed to deal with a potential “major power ­adversary”, which everyone knew to be China.

But the new threats raised by cyber-security are compounding security agency concerns over rising Chinese investment in Australian infrastructure, growing numbers of Chinese residents in Australia and an increasingly sophisticated Chinese economy.

However, any consideration of the national interest has to include the value to Australia of the economic relationship. Australia’s strong economic performance since the early 2000s has been driven primarily by the growth of trade and investment with China. During the past decade, world trade has stagnated but Australia’s ­exports to China have more than tripled in value.

The security concerns have been pushed into the background by Morrison as he attempts to ­restore the relationship. He spoke to a Chinese community meeting early last month, declaring: “Australia will always, always welcome Chinese students, investors and visitors to our country, supporting our national interest.” He followed this up with a positive interview with the Chinese media.

In his speech last week, Morrison said he was committed to deepening Australia’s strategic ties with China. He told a questioner: “We’ve got to be really clear about where the lines are, where the rules are, how we make decisions, and do that, I think, in a very courteous and engaging way.”

He brushed off security concerns, citing businessman Ryan Stokes’s response when asked whether China was “friend or foe”. Stokes replied that China was a customer.

Bill Shorten was clearer about how a Labor government would view Chinese security concerns in his foreign policy speech last week.

“The next Labor government will not deal with China purely through the prism of worst-case assumptions about its long-term ambitions,” the Opposition Leader said.

“Pre-emptively framing China as a strategic threat isn’t a sufficient response to its role and increasing influence in our region.”

Daniel Andrews’s government in Victoria sought to highlight the federal government’s difficulties with China by announcing a memorandum of understanding to join China’s Belt & Road Initiative, under which Beijing is sponsoring infrastructure development around the world, a deal that was hailed by the nationalist Chinese newspaper Global Times.

Jennings, who argues Australia should be pulling back from economic engagement with China, says the BRI’s strategic aim is to make weaker countries more ­dependent on China.

Chinese authorities do not see that a change to a Labor government at next year’s federal election will necessarily improve the ­relationship, recalling that such hopes had been held for Mandarin-speaking Kevin Rudd until his government sparked a series of minor conflicts.

The director of the National Centre for Oceania Studies at Sun Yat-sen University, Yu Changsen, says different parties have their own views in opposition but when they come to power they reflect the national interest and the ­importance of the US security ­relationship.

Chinese officials say their ­nation has been treated unfairly by Australia. “Why is Australia so aggressive against China?” Ruan asks.

He says difficulties exist on such a range of fronts that they are unlikely to be resolved by a meeting between Morrison and Xi. A working group is needed to sort through it, Ruan argues. Officials say the warm words from Australian leaders need to be matched by actions, with some suggesting that a revisiting of the decision over Huawei would be helpful, improbable as that is.

There is no doubt that China would prefer to have a better working relationship with Canberra. Australia remains the most important supplier of raw mat­erials to the Chinese economy and is the most significant Western ­nation in the region. But the growing chorus of criticism of China’s strategic direction within Australia is unlikely to let up.

While many of these concerns are held by the security establishment, no Australian government is likely to have an easy ride in its most economically important foreign relationship.

David Uren travelled to China as a guest of the Chinese People’s Institute of Foreign Affairs.