Developing a balanced perspective on Chinese investment in Australia
30 Nov 2015|


The 99-year lease of Darwin’s commercial port to Chinese firm Landbridge Group marks an important chapter in Australia–China business relations. But the considerable controversy in the Australian defence community that has been generated by the lease belies an exaggerated sense of a putative Chinese threat to Australian security. It also reveals that Australian security experts misunderstand the nature and function of Chinese companies and of Chinese foreign and security policy more broadly. Here I address key issues raised by Geoff Wade’s original article and hope to place the lease in a proper perspective.

Geoff asks whether Landbridge Group can still be seen as a private enterprise given its ties to the Chinese Communist Party (CCP) and the People’s Liberation Army (PLA). But the definition of a private or a state-owned enterprise in China hinges on the firm’s sources of capital upon registration with the Chinese authority. If ties to the party are viewed as a crucial criterion, then all major Chinese firms are state-owned and none can be seen as private in the Western sense, simply because all of them have CCP organisations overseeing their political and ideological orientations. That simply reflects the political environment in which Chinese companies must operate. To use this as a key criterion for reviewing Chinese investments in Australia will always end up blocking such investments.

Few private Chinese firms have military connections. Landbridge, however, has a party branch secretary who is said to be an ex-PLA officer. Does that mean that the company is therefore a tool of the PLA for realising its strategic interests? In Australia, it’s not uncommon for retired military and intelligence officers to have senior positions in private enterprises. But does this mean that those firms have thus become the strategic arm of the Australian Defence Force? No general conclusion can be drawn before individual cases are analysed in detail, because each case is likely to be unique.

In the Landbridge case, its party secretary’s ex-PLA background may bring experiences and resources useful for the company’s commercial success. But the assumption that that person—or even the company as a whole—will prioritise loyalty to the PLA at the expense of commercial interests in making business decisions is highly questionable. Landbridge is, after all, a commercial enterprise driven by profit. Much more evidence is needed if one is to argue that it’s a tool for advancing China’s strategic interests while its commercial operations are nothing more than camouflage.

That raises another question about the relationship between Chinese firms and party control. Can the CCP control private firms to ensure that their economic operations serve national strategic interests? That overestimates the power of the party and creates an image of a behemoth of the Chinese state that doesn’t exist. There are plenty of examples where Chinese firms have created trouble for Beijing’s foreign policy. It’s even questionable to what extent the party exercises effective control over state-owned enterprises, let alone private firms.

Nevertheless, the fact that Landbridge has created a Department of Civil Defence (‘People’s Armed Militia’ is a misleading translation) worries many observers. But such departments are common among major Chinese institutions, be they firms, hospitals or universities. As Professor Zha Daojiong of the School of International Studies at Peking University recently told me, their main function is to provide policy guidance on routine security matters. In Peking University, for example, the uniformed guards checking identity documents at the university’s main gates follow instructions from the university’s Civil Defence Department. As Chinese companies’ global interests expand into troubled parts of the world, they may need to create private security forces to protect company assets. In the Chinese system, those security forces will need to be managed by the civil defence departments of those companies. But that’s very different from the PLA controlling those companies to advance national strategic interests.

A larger question from the perspective of Chinese foreign policy as a whole is whether Landbridge constitutes a Chinese deployment in its Maritime Silk Road initiative to realise regional economic domination and client dependency, weakening the Australia–US alliance along the way. It’s true that the Silk Road initiative encourages Chinese companies to go abroad and seek business deals. But it’s an initiative of economic diplomacy rather than military control. China is constructing commercial infrastructure in foreign countries and in some cases seeking access to them, but it’s not acquiring foreign military bases. It’s hard to see how the use of the Darwin port may create client dependency between China and Australia, and still harder to see how it may weaken the military alliance between Australian and the US. In the final analysis, Darwin is Australia’s sovereign territory and the federal government will always be able to take effective control of it.

Peter Jennings is right when he notes that commercial ports can have national security significance, such as espionage risks. But then, the logical conclusion of this observation is that in order to eliminate any security worry, commercial deals of this sort must never be signed. But it’s more important to find a proper balance between commerce and security. The national security implications of international commercial deals are an issue of management, and are manageable. All major governments around the world are managing issues of this kind, including China. Why would Australia be any different?

Some unease among Australian analysts about the Darwin port lease is understandable because of Darwin’s strategic value and because of the rarity of a 99-year lease in Chinese business deals abroad. Australian authorities should of course conduct due diligence and thoroughly examine the deal. But in expert commentaries, it’s unhelpful to aggregate China into a state behemoth under tight CCP control with even private firms seen as a deliberate link in Beijing’s purposeful international strategy. (It’s actually more useful to disaggregate ‘China’ since interest-group competition in national policy making is a daily affair in China now.) It’s even less helpful to generate xenophobic feelings toward Chinese investment as a result of this deal. A proper and balanced perspective is urgently needed for developing the next stage of Australia–China economic relations.