China business prospects perk up

Less government can mean more business. That may well be the case for the ties between Australia and China over the next year.

Illustration: Sturt Krygsman

Less government can mean more business. That may well be the outcome for the relationship between Australia and China over the next year, as both governments look set to be too distracted by greater challenges to focus much on each other.

Prospects are already perking up. Chinese business delegations to Australia that were being delayed have recently started to resume visits, state governments are noticing. This in part may be an outcome of the conciliatory speech made by Malcolm Turnbull three weeks ago at the University of NSW.

This was not a “political” speech in that it did not emerge from a narrow source, purely from Turnbull himself or from his office, but was rather a statement that emerged from the “Canberra establishment” including the Department of Foreign Affairs and Trade and other key players.

Insofar as this lengthy speech marked a desire to return to a more respectful rhetoric, its sentiments are thus likely to endure beyond the change of personalities at the top, and to inaugurate a less turbulent era in the relationship.

Of course, that’s not to say there won’t be disagreements. That’s inevitable, given the extraordinary level of engagement between the countries. It’s also inevitable given the gulf between the political systems and cultures, one that has widened with the inauguration by President Xi Jinping of his ambitious “new era” to contrast with Deng Xiaoping’s now superseded 40-year “reform-and-opening” era.

Already, we’re seeing as an example of such inevitable ups and downs with the decision to exclude from the 5G rollout corporations that may be “subject to extrajudicial directions from a foreign government that conflict with Australian law” — deemed to exclude Chinese telco equipment giants Huawei and ZTE.

And one can understand the frustration felt by the company, which is mainly owned by its employees and is thus private rather than government controlled. But Huawei, like every Chinese company, includes a communist party branch comprised of members who are consulted on key decisions — as I was clearly informed during a visit to the company headquarters in Shenzhen.

As with other private Chinese firms, and state-owned businesses, they make their own decisions in almost every case, wearing the resulting responsibility or taking the credit. But it is the capacity of the party-state to direct any Chinese organisation if it requires to do so, even if it has never done so to date, that causes concern in Canberra.

The readiness of China in the past to extend political disputes into a broad commercial front — most extensively, in recent times, in the sanctions to attempt to force South Korea to abandon its adoption of the Terminal High Altitude Area Defence anti-missile system — also naturally arouses anxiety, especially among firms that have China as their dominant client.

But the understandable reflexive pleas from such companies, and from universities that have come to rely on Chinese student revenues, need to be viewed in the context of such dependency.

In the Huawei case, while protests will continue, it is most likely that Canberra’s decision had already been factored in, and that the resumption of normal business that was already under way, will continue. Beijing will be reading Australia’s political events as leading towards a likely Labor government by the middle of next year, and will take as given, bipartisan elements such as the foreign influence legislation and 5G, while looking to other areas where it will seek to build closer links.

The new Coalition team in Canberra is unlikely to pursue foreign affairs as any kind of major theme. Its focus will be to reunite its own side. Relations with China have nevertheless become too ubiquitous to be avoided altogether over the next eight months. Foreign Minister Marise Payne may be expected, as a neophyte, albeit coming to the job from a Defence perspective, to maintain a steady course and restrain the rhetoric within lines that are carefully calibrated by DFAT, whose head, Frances Adamson, is highly versed in China diplomacy.

Such experience involves rejecting the constant false dichotomies that are set up in this area, such as between being “for China” or “against China,” or “for China” or “for the US”.

The Australian and Chinese political leaders are scheduled to meet several times during the Asian and Pacific summit season that is about to start, including at the APEC annual meeting in Port Moresby, where the two countries appear to be vying — handily for the economically troubled Papua New Guinea government — to carry most influence.

Apart from such interludes, the Xi government is going to have its hands full over the next few months with rather bigger challenges. They include the lurching trade war with Washington. After Donald Trump appeared to be in Beijing’s pocket after his strange visit there a year ago, he’s gone rogue. On Tuesday, Trump said in the wake of the failure of lower-level discussions: “It’s just not the right time to talk right now, to be honest with China.”

Big Chinese economic initiatives, including the Import Expo in Shanghai in November and Made in China 2025, are inevitably struggling more than expected in this climate.

Beijing is also facing some pushback in its grand Belt and Road Initiative, with the sprightly 93-year-old Malaysian Prime Minister Mahathir Mohamad warning, while speaking in the Great Hall of the People, that it risks being perceived as “a new version of colonialism”, and cancelling $30 billion BRI projects.

And an unknowable level of unease appears to be growing in China, where some in the party remain unhappy about the abolition of term limits for the top leadership, about the extent, and potential costs, economic and otherwise, of Xi’s ambitions.

This all reduces the scope for mutual focus by both countries at the peak political level, and potentially enhances the room for normal business to resume.