The London School of Economics and Political Science Complex Interdependence and China’s Engagement with Australia --- Navigating between Power and Vulnerability Yixiao Zheng A thesis submitted to the Department of International Relations of the London School of Economics for the degree of Doctor of Philosophy, London, October 2014 1 Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 99,616 words. 2 Abstract China has become heavily dependent on Australia for resource supply as a result of her rapid economic growth over the 2000s. Stable and reliable resource supply from Australia has become a matter of national economic security. Yet, China’s resource relationship with Australia is grown out of a delicate geopolitical framework, because Australia is not only a resource superpower but also a staunch U.S. ally in the Asia-Pacific region. Despite extensive economic interdependence between the two countries, China faces a huge challenge to build a genuinely reliable and close resource partnership with Australia. This study discusses how China has proactively sought to shape or adapt to the evolving power dynamics behind the bilateral resource politics over the 2000s. It provides a relevant case study on the resource politics between a rising great power and a resource superpower under the condition of complex interdependence. China’s search for resource security has become the primary goal of her policy towards Australia in the 2000s. However, China’s engagement with Australia has led to an uneasy resource partnership with growing competitive dynamics and constant power struggle. The political context of the resource ties between China and Australia has changed dramatically towards the end of the 2000s, as the systemic impact of China’s rise has resulted in a deterioration in the strategic dimension of China-Australia relatoions. This has in turn created considerable constraints and uncertainties in China’s resource cooperation with Australia. Both the difficult resource investment ties and the inequitable iron ore trade relationship show the limits of this resource partnership. Australia’s approach to this critical resource relationship with China remains ad hoc, transactional and oriented to short-term interest maximisation. Despite her growing power, China remains the more vulnerable party in the uneven resource interdependence with Australia. The Chinese have sought to improve their power position vis-à-vis the Australians; but domestic economic constraints and internal fragmentation have considerably undermined Chinese efforts to gain the upper hand in the bilateral resource politics. China has to navigate cautiously between power and vulnerability in her engagement with Australia. 3 Acknowledgements I have been extremely fortunate to undertake research in International Relations at the London School of Economics and Political Science (LSE). In particular, I would like to register my indebtedness to my supervisor, Professor Christopher R. Hughes. This thesis would never have been completed without his guidance and support. Throughout my studies, Professor Hughes has provided an endless source of enormous intellectual inspiration. His kindness and encouragement have always helped me find the strength to persevere. I could not have completely my research without the continuous financial support of the LSE International Relations Department (IRD). The IRD Research Studentship and fieldwork grants have significantly reduced my financial burden. I would also like to express my gratitude to all my interviewees who have given their time during my fieldwork in China and Australia. I am deeply grateful for their insights and assistance. I am deeply grateful to my examiners, Professor Shaun Breslin and Professor Toby Dodge, whose feedback and criticism have been most helpful in the revision of this thesis. Lastly, I would like to thank my family for their unfailing support, patience and encouragement. I alone am responsible for any shortcomings the thesis may have. 4 Table of Contents ABSTRACT .......................................................................................................................................................... 3 ACKNOWLEDGEMENTS ...................................................................................................................................... 4 LIST OF ABBREVIATIONS ..................................................................................................................................... 9 CHAPTER 1 INTRODUCTION ............................................................................................................................. 11 1.1 BACKGROUND: CHINA’S RISE AND RELATIONS WITH AUSTRALIA ............................................................................... 11 1.1.1 Predominance of Extensive Economic Interdependence ................................................................... 11 1.1.2 Paradox between Growing Power and Vulnerability........................................................................ 15 1.2 RESEARCH TOPIC AND PURPOSE ...................................................................................................................... 20 1.2.1 Research Question .......................................................................................................................... 20 1.2.2 Research Objectives ........................................................................................................................ 20 1.2.3 Overarching Argument.................................................................................................................... 21 1.2.4 Chapter Outline ............................................................................................................................... 21 1.3 THEORETICAL FRAMEWORK ............................................................................................................................ 30 1.3.1 Neoliberal Theory of Power Politics of Interdependence .................................................................. 30 1.3.2 Complex Interdependence Theory ................................................................................................... 32 1.3.3 Theoretical Relevance ..................................................................................................................... 36 1.3.4 Complex Interdependence Theory: A Critique .................................................................................. 38 1.4 LITERATURE REVIEW ..................................................................................................................................... 45 1.4.1 Chinese Language Sources .............................................................................................................. 45 1.4.2 English Language Sources ............................................................................................................... 48 1.4.3 The Broader Literature .................................................................................................................... 60 1.4.4 Critique of the Existing Literature and Contribution of the Thesis to the Studies of China-Australia Relations ................................................................................................................................................. 60 1.5 RESEARCH METHODS.................................................................................................................................... 66 CHAPTER 2 FROM POST-9/11 TO POST-2008: CHINA’S RISE AND THE EVOLVING STRATEGIC CONTEXT ............ 68 2.1 INTRODUCTION ........................................................................................................................................... 68 5 2.2 POST-9/11 GLOBAL AND REGIONAL GEOPOLITICAL SETTING: 2001-2007 ................................................................ 72 2.3 POST-9/11 SINO-AUSTRALIAN ENTENTE (PRE-2008) .......................................................................................... 78 2.4 A RUPTURING SINO-AUSTRALIAN STRATEGIC RELATIONSHIP SINCE 2008 ................................................................... 89 2.4.1 The Changing Face of Chinese Foreign Policy ................................................................................... 91 2.4.2 Canberra’s Hardening Strategic Attitude towards Beijing ................................................................ 96 2.5 NEW ALLIANCE DYNAMICS: PREPARING FOR CHINA’S RISE ..................................................................................... 99 2.5.1 Beefing up Allied Diplomatic and Defence Collaboration ............................................................... 104 2.5.2 Defence Build-up and New Defence Doctrines ............................................................................... 107 2.6 CONCLUSION ...........................................................................................................................................