Australia and China: a view from the US
28 Oct 2019|

Three years ago, I created a minor diplomatic furore when I opined, during a live interview broadcast on the ABC’s Radio National Breakfast, that the time was fast approaching when Australia might be required to choose between deepening its economic relationship with the People’s Republic of China and its longstanding alliance with the United States. The fact that I had offered only my personal opinion and not an official position of the United States was lost in the storm of indignation that followed.

I was the topic of a 10-minute briefing to US Secretary of Defense Ash Carter and heard from reliable sources that Prime Minister Malcolm Turnbull himself telephoned the US State Department to complain about me. To the intense displeasure of many observers, the incident had absolutely no impact on my career—though for some reason I have since received a flood of Chinese-language spam emails and robo-calls.

I did not mention Labor senator Sam Dastyari during my interview. Nor did I refer to Clive Hamilton’s research for what became his 2018 book Silent invasion: China’s influence in Australia. My opinion came from my own close study of Chinese military, economic and diplomatic activities in the South China Sea from 2012, including several months spent as a resident fellow at the Australian Strategic Policy Institute in Canberra.

It seemed to me in 2016, and even more so today, that it might already be too late to protect Australia without some level of economic and social dislocation. From port facilities to infant formula to commercial real estate to agriculture, Chinese capital investment has continued to grow and totaled $64 billion in 2018. Much of this money originates from attempts by various Chinese state-owned enterprises to use the returns on foreign investment to recapitalise their own operating losses—or, more insidiously, to acquire technology and experience in an industry or sector for the ultimate benefit of China’s domestic market.

In an effort to close the tax loophole, the Chinese government increased regulation of state-owned enterprises investing abroad beginning in 2017, though notably it didn’t prohibit such investments.

Overseas investment is central to the realisation of president-for-life Xi Jinping’s Belt and Road Initiative. State-owned companies work hand in hand with China’s Asian Infrastructure Investment Bank, now recognised as an explicit competitor to the World Bank and the International Monetary Fund. That allows an aid recipient country to access more money with fewer restrictions than it could get from the World Bank or the IMF. In some cases, it appears that the Chinese government has made loans with the full expectation that the money won’t be repaid.

When the Sri Lankan government couldn’t meet its obligation for loans it received in 2010 to develop a port at Hambantota, it ceded control of the facility to China for 99 years (the same terms are included in the deal reached for the Port of Darwin, though it was negotiated under different circumstances). Hambantota is an exemplar of China’s use of the AIIB to fund the BRI through ‘debt-trap diplomacy’. Zambia offers another example—the Chinese succeeded in securing imperialist concessions that mirror those held by European powers from the Chinese emperors in the 19th century. At least eight other nations are in sufficient debt distress to be vulnerable to Chinese assaults on their sovereignty.

Of course, anything that’s ‘state owned’ is by definition a part of the government of its home nation, and can be expected to operate as an adjunct of the government’s domestic and international policy bureaucracies. When the home nation is China, however, and the home government is the Chinese Communist Party, enthusiasm for investment should be tempered by healthy caution. Last year, journalist Rob Schmitz published a lengthy summary of the extent of the ‘inform and influence’ activities the CCP undertakes inside both Australia and New Zealand. Indeed, to read Schmitz’s report (or Hamilton’s book) is to gain a new understanding of the term ‘fifth column’. For how else can one describe official Chinese government activities than as the deliberate creation of a prepositioned corps of supporters who will act in accordance with Beijing’s wishes whenever and wherever asked?

Those who believe that the Chinese state under Xi poses no threat to Australia’s sovereignty and independence, or who, like Hugh White, have already surrendered, won’t be swayed by these arguments. However, for readers who still have open minds, some recent examples from the region could be instructive.

First and most obvious is Beijing’s treatment of Hong Kong. The ‘one country, two systems’ promise appears to be on life support, and the ‘freest city in Asia’ will ultimately be under the domination of a ruthlessly oppressive regime—no doubt aided by technologies stolen from laboratories and industries around the world.

Second is the recent shift in the Indo-Pacific region against Taiwan in favour of Beijing. Last month, Kiribati and Solomon Islands announced that they were withdrawing their recognition of the government of the Republic of China in Taipei. Without admitting to any overt pressure from Beijing, Kiribati’s President Taneti Maamau revealed that the decision was based on what was ‘in the best national interest for our country and people’.

While it may be true that President Tsai Ing-wen is determined to mitigate such diplomatic snubs by deepening Taipei’s bilateral relationships with Washington, Canberra, Tokyo and New Delhi, it’s too soon to tell whether such heavy-handed coercion will result in an anti-Beijing backlash with broad support. Moreover, China’s actions redound to Beijing’s benefit beyond narrow economic interests. Not only has the CCP scored a strategic messaging victory and further marginalised a hated rival, but it’s also that much closer to establishing the conditions necessary to manipulate in its favour the official platforms and programs of international bodies such as ASEAN and the UN (UNCLOS, anyone?). That end result runs directly contrary to the long-term interests of Australia, the United States and all others who continue to defend the rules-based international order.

The capitulation to CCP pressure by the US National Basketball Association over Daryl Morey’s support for Hong Kong protesters, and by Paramount Pictures over patches on the ‘Maverick’ character’s flight jacket in the forthcoming movie Top Gun II, illustrate the siren call of China’s market for US-based companies eager to cash in. How much greater is the potential for China to engage in economic blackmail of Australia? Let’s hope the Morrison government takes the necessary steps to reduce Australia’s vulnerability now, while (perhaps) there’s still time.