JUNE 2020 ISSUE NO. 366 Australia-China Relations: The Great Unravelling NAVDEEP SURI ABSTRACT Over the last three decades, Australia and China have established mutually beneficial economic ties. However, Australia’s decision to ask for an independent enquiry into the origins of SARS-CoV-2, which causes COVID-19, has led to a backlash from China. This brief examines the more important developments since 2015 that persuaded Australia to take measures aimed at protecting both its open economy and its democratic polity against China’s systematic campaign to expand its influence. The brief describes various case studies including the attempts by the Chinese Communist Party to use Australia’s large Chinese community to support its foreign policy objectives, its attempts to secure strategic economic assets in Australia, and its efforts to use corrupt practices for recruiting politicians who would support its agenda. Attribution: Navdeep Suri, “Australia-China Relations: The Great Unravelling,” ORF Issue Brief No. 366, June 2020, Observer Research Foundation. Observer Research Foundation (ORF) is a public policy think tank that aims to influence the formulation of policies for building a strong and prosperous India. ORF pursues these goals by providing informed analyses and in-depth research, and organising events that serve as platforms for stimulating and productive discussions. ISBN 978-93-90159-20-8 © 2020 Observer Research Foundation. All rights reserved. No part of this publication may be reproduced, copied, archived, retained or transmitted through print, speech or electronic media without prior written approval from ORF. Australia-China Relations: The Great Unravelling INTRODUCTION reaction from China. Australia has held firm in its response to threats of economic coercion, Over the last three decades, China and causing concern in business circles about the Australia have developed a mutually new dynamics of the relationship. profitable economic relationship, and today China is Australia’s largest trading partner in This brief looks at the current scenario terms of both imports and exports.1 Even as and examines some of the important this relationship developed, however, China developments over the last five years that moved to translate its growing economic clout have brought matters to the present juncture. into political and strategic influence. It does not attempt to catalogue each and Indications of this had come as early as 2005 every dissonant note; what it does try is to when Chinese diplomat Chen Yonglin bring out some of the ways in which Australia defected to Australia and spoke about a has responded to China. This could hold useful network of 1,000 government informers2 lessons for other states that seek to protect being used by the Communist Party of China their open and democratic societies. (CCP) for “a structured effort to infiltrate Australia in a significant way.”3 Years later, in TESTING DIPLOMACY NORMS 2013, Chinese Prof. Zhu Feng said Australia’s Prime Minister Scott Morrison’s government global role as a member of the liberal world would have done a careful calculation before order positioned it as “a most effective tool by risking China’s ire, especially as Australia faces which Beijing can win friendships, and retain its first recession in three decades. In 2019, the gains we want.”4 Despite these warnings of China was the destination of 38 percent of Beijing’s long-term strategy, Australia’s Australia’s exports, worth A$ 117 billion.5 business lobby has been able to make a China’s market buoys various sectors of compelling case of a thriving commercial Australian economy, ranging from education, engagement with China. tourism, and mining, to products like milk and Over the last five years, China’s actions in cheese, wine, and meat. Australia have become more aggressive and On 17 April, as the number of reported the voices of the sceptics have grown loud confirmed COVID-19 cases across the globe enough to command greater attention. The exceeded two million,6 Australia’s Minister of governments of Malcolm Turnbull (2015- 7 2018) and Scott Morrison (2018-present) Home Affairs Peter Dutton suggested an have attempted to stave off the aggression, independent review into the origins and courting disapproval from China. spread of the SARS-CoV-2 virus that causes COVID-19; the call was echoed by Foreign In the past weeks, Canberra’s demand for Minister Marise Payne on 19 April.8 A Chinese China to agree to an independent review into embassy official in Canberra reacted with the origins of the devastating SARS-CoV-2 unusual belligerence, suggesting that Dutton that causes COVID-19, has drawn an must have received instructions from exceptionally strong and undiplomatic Washington to join in the anti-China 2 ORF ISSUE BRIEF No. 366 l JUNE 2020 Australia-China Relations: The Great Unravelling propaganda, adding that the move reflects is a fairly obvious and commonsense Australia’s “ignorance, bigotry and lack of suggestion.”14 independence.”9 Chinese Ambassador Cheng Jingye went a step further on 26 April, Meanwhile, China has indicated that it was implying a boycott of Australia as a tourism looking at imposing tariffs of upto 80 percent and educational destination and of products on Australian barley after completing an 18- like beef and wine.10 Payne responded on 27 month-long anti-dumping investigation. The April that the ambassador’s comments news came out on 10 May, prompting amounted to “economic coercion”, while Trade comments by Trade Minister Birmingham Minister Simon Birmingham asserted that that he may have to take the matter to the Australia would not change its policy on a World Trade Organization (WTO) if the major public health crisis on account of government failed to persuade China. The fact 11 that the threat of tariffs came within a threats of coercion. fortnight of the comments by the Chinese Commentators did not help temper the ambassador was not lost on the trade emerging hostility. Editor of Chinese state- minister.15 owned Global Times Hu Xijin opined on Weibo on 28 April 2020, “Australia is always there, If these reactions are to be the gauge, making trouble. It is a bit like chewing gum Australia appears intent on standing up to stuck on the sole of China’s shoes. Sometimes China's egregious behaviour. Indeed, China you have to find a stone to rub it off.”12 has managed to inspire a rare bipartisan consensus in the fractured Australian polity. Foreign Secretary Frances Adamson – a Opposition leaders Penny Wong16 and Antony professional diplomat who has done a four- Albanese have added the Australian Labour year stint as ambassador to Beijing – tried to Party’s voice of support to the position taken do some damage control by speaking with by the Morrison government. Ambassador Jingye on the phone on 28 April. The Chinese ambassador responded by BUSINESS FIRST? releasing a press statement about the call, “stressing that no matter what excuses the The implosion in diplomatic ties between Australian side has made, the fact cannot be China and Australia over only a few weeks buried that the proposal is a political might appear abrupt; yet, worries over China’s maneuver.”13 The foreign office was indignant, intrusive behaviour had been steadily building and on 29 April, PM Morrison asserted, “This up since at least 2015. Until then, the sporadic is a virus which has taken 200,000 lives across concerns emanating from Australia’s security the world. It has shut down the global establishment were often overridden by a economy. It would seem entirely sensible and powerful business lobby that had profited reasonable that the world would want to have from three decades of unfettered expansion in an independent assessment of how this bilateral trade and investment with China. occurred so we can learn the lessons and China was not just the largest trading partner prevent it from happening again. I think that by a huge margin; it was also the source of ORF ISSUE BRIEF No. 366 l JUNE 2020 3 Australia-China Relations: The Great Unravelling major investments in many sectors, from who have contributed to the developm ent of mining and agriculture to utilities and C h i n a ’s n a t i o n a l d e f e n c e . 2 0 T h e infrastructure.17 It was the largest source of announcement of the deal caught the United tourists and foreign students, while Chinese States (US) unawares; the US uses Darwin as a real estate purchases in cities like Sydney and pivot for the deployment of thousands of Melbourne generated an extended boom in marines each year. “Let us know next time,” property markets. then US President Barack Obama was quoted as telling Prime Minister Turnbull when they The business lobbies were willing to turn a met on the sidelines of the Asia-Pacific blind eye to the unpalatable aspects of the Economic Cooperation (APEC) summit in relationship. Indeed, Australia’s ability to ride Manila in November 2015.21 While Australia the Asian financial crisis of 1997 and the had earlier sold facilities in Sydney and global financial crisis of 2008-09 has been Brisbane ports to Dubai’s DP World, the deal cited as evidence of the success of the on Darwin was seen differently, both due to Australian model. Former PM Malcolm the port’s location and the antecedents of the Turnbull wrote a stark reminder of this in ‘A buyer. Bigger Picture,’ his autobiography published in April: “An Australian prime minister who The S.Kidman Holdings ends up in conflict with China cannot expect any support or solidarity from the Australian The Darwin deal led to demands that the business community…overwhelmingly, jurisdiction of the Foreign Investment Review they’re totally invested in the economic Board should extend to sale of strategic assets benefits of the relationship.”18 by state governments.