Coping with the Beijing freezer
28 Jun 2018| and

In a 2017 poll conducted by the Chinese newspaper Global Times, Australia had the dubious honour of being voted ‘least friendly country to China’. In the same Chinese Communist Party–linked newspaper, a recent editorial argued that a temporary cooling of China–Australia bilateral relations would be ‘a good lesson for Australia to learn’, while declaring that there were ‘no benefits for any country that chooses to take provocative measures against China’.

There’s been much commentary on the Australia–China relationship in the wake of the Australian government’s introduction of foreign interference legislation and the sharpened political rhetoric of Australia’s political leaders towards China—and the chill that followed from Beijing. The punitive refusals of visas, for instance, has even extended to the Australia-China Relations Institute, a ‘think tank’ headed by one of the most pro-Chinese voices in Australia, former foreign minister Bob Carr.

But Australia isn’t the only state that has found itself inside the ‘Beijing freezer’. China has long deployed a diplomatic carrot-and-stick approach, wherein states are rewarded when they engage in activities that are favourable to Beijing’s interests and selectively punished for public criticism of the CCP’s actions and intentions. Status recognition is an important factor in Chinese foreign policy, with any perceived slights resulting in strained relations—as Australia and other countries are now learning.

Norway provides an instructive example of the ways China can punish and gradually transform the behaviour of states, particularly middle and smaller powers. Beijing put the Sino-Norwegian relationship in the deep freezer after the Nobel Peace Prize was awarded to Chinese dissident Liu Xiaobo, which included a ban on Norway’s lucrative salmon exports. Relations were deeply strained for six years despite the Norwegian Nobel Committee’s independence from the Norwegian government.

China demanded an apology but Norway repeatedly refused. The 2016 joint declaration that ended the stoush stopped short of an apology, but committed Oslo to acknowledging ‘China’s core interest and major concerns’ and to ‘do its best to avoid any future damage to the bilateral relations’. The thaw in relations followed substantive efforts at confidence-building, and highlights how China also benefits from normalised trading relations with other states.

More recently, China applied informal economic sanctions against South Korea in retaliation for its deployment of the Terminal High Altitude Area Defense (THAAD) system. As a consequence, Hyundai’s car sales in China dropped 64%, Lotte supermarket sales fell 95%, and the banning of Chinese tour groups to South Korea resulted in an estimated revenue loss of US$15.6 billion in 2017. While trade overall increased between the two states, pressure was selectively and skillfully deployed.

South Korean President Moon Jae-in, himself sceptical of THAAD, presented China’s President Xi Jinping with a ‘three no’s policy’ in response to the economic sanctions, promising no further deployment of THAAD, and no participation in US missile defence networks or a trilateral military alliance with the US and Japan.

More importantly, the retaliatory sanctions convinced the Moon administration that South Korea’s economy was too dependent on Chinese customers and needed to protect its national interest by diversifying its diplomatic and economic profile. It has since initiated a ‘New Southern policy’ aimed at deepening relations with the member states of ASEAN and India.

Singapore’s relations with Beijing also soured after the island nation appeared to side with the US and other countries in opposing China’s island-building and ongoing militarisation of the South China Sea. Singapore’s Prime Minister Lee Hsien Loong was excluded from the 2017 Belt and Road Summit in Beijing, and was invited for a state visit only after agreeing to sign a formal memorandum of understanding on Belt and Road collaboration in April.

So how can Australia and other middle powers in the region deal with Beijing’s ‘doghouse diplomacy’? Should policymakers roll over and acquiesce to China’s demands, or should they seek to cope with strained ties by pushing back or diversifying their economic relations?

Like South Korea, Australia would benefit from a more diverse trading profile and deeper economic engagement with the ASEAN states and India. It’s also in the collective interests of ‘like-minded’ states to form coalitions to manage their relations with Beijing, thereby preserving their independence and protecting their national interests.

According to the Lowy Institute’s Asia Power Index, the combined GDP (PPP) of Japan, India, Indonesia, South Korea and Australia is $20,087 trillion, compared with China’s $21,780 trillion and America’s $18,624 trillion. The annual military expenditure of these five middle powers is $204.1 billion (PPP), compared with China’s $210 billion and America’s $641 billion.

Unilaterally, middle powers have little capacity to shape international systems, but this data suggests that in concert they could push back against a coercive rising power, particularly if they retain the support of the US, which remains a significant player in the region and a key economic partner to states such as Australia.

The revived Trans-Pacific Partnership is a great example of how regional and middle-power states can articulate and defend their collective interests in coalitions that exclude great powers, although it remains to be seen how effective it will be in the absence of the US.

Australia needs to work more closely with other countries that are concerned by China’s destabilising actions in our region to effectively resist China’s retaliatory diplomacy while upholding international rules and norms. Beijing prefers to deal with states on a bilateral basis, allowing it to exert maximum economic and political leverage. By binding together, like-minded middle powers may be able to resist or blunt Beijing’s bullying behaviour.

But to do this, they will need to find a convergence of strategic and economic interests vis-à-vis China and a broad consensus about the rules, norms and institutional architecture that have supported regional peace and prosperity in the post–World War II period. No state can afford to turn its back on Beijing, but they can decide the terms on which they are willing to engage with China.