With Australia’s economic fortunes linked to China’s economic growth, Beijing presumes that it has earned the right to hector Canberra on the state of its economy. And to add insult to injury, a junior diplomat at the Chinese embassy did the hectoring by telling a business forum that Australia’s “dual-speed and patchwork economy” needed fixing, with Chinese help.
In a wide-ranging critique, Cheng Ouyang reportedly advised Australia to deal with an “infrastructure bottleneck and shortage of skilled labor.”
He maintained that China’s strengths in these areas could be utilized to “help accelerate Australia’s economic development.”
“Australia’s dual-speed [basically, the growing mining sector, while manufacturing and other economic areas are depressed] and patchwork economy would not only hurt its own economic development, but also influence China and Australia’s long-term economic co-operation,” he said.
These problems are “also limiting China’s investment in Australia,” and he sought a new mechanism to engage Australia on economic and trade issues to “solve the difficulties of the Chinese enterprises in Australia during their projects application and operation.”
China feels that Australia discriminates when it comes to Chinese investment proposals.
Basically, China wants a bigger, if not decisive, say in the way it would like to deploy its capital and labor in Australia. This will enable it to coordinate demand and supply of the commodities it imports from Australia and curb their price hikes.
In a larger sense, Beijing would very much like to integrate Australia’s economy in a supportive role to China’s economic requirements.
The flexing of China’s economic muscle is on par with Beijing’s approach to international relations, evident in the Asia-Pacific region, Africa and Latin America. It is using its economic leverage to corner resources for China’s economic development by linking the resources sector of these countries to its economic growth and creating their dependence on China.
With Australia, these are early stages, but the trend is quite clear. Indeed, there is enough disquiet in Australia to warrant a Senate inquiry into the question of foreign investments, particularly in agricultural land where China has made some forays to mine farm lands.
Australia’s relations with China are rather tricky. At one level China is its largest trading partner, with two-way trade topping US$100 billion last year, much of it in Australia’s favor. At another level, Canberra regards China as a strategic threat, which is leading it to further expand its defense ties with the US.
It is also moving much of its navy and air force to the north and west of the country, where its minerals and energy resources are concentrated and it is more vulnerable. Without naming the potential threat from China, it is taking necessary steps to secure its northern approaches.
Obviously, Canberra wouldn’t expect to face this threat on its own, but by being part of a joint and/or coordinated force with the US and, possibly, Japan.
As Greg Sheridan, foreign editor of the Australian, writes, “Moving more of our navy and air force to the north and northwest, and inviting a much bigger US military presence there, makes eminent strategic sense.”
However, the question is: How will Canberra strike a balance between its economic relationship with Beijing and its security partnership with the US? This is Australia’s China conundrum.
Hugh White of the Australian National University favors Australia playing a bridging role by persuading both the US and China to take shared and cooperative leadership roles in the region. If this is the case, Australia will not need to choose between them and might live happily thereafter.
“China needs to be persuaded that it, too, should settle for a shared leadership in Asia, a continued strong role for the US and growing roles for Japan and India,” he has said.
He apparently seems to realize the odds against this because, alternatively, he suggests that Australia might “like New Zealand, simply rely on neutrality and remoteness to keep us clear of Asia’s turmoil, and hope they keep away from us.”
The US, of course, is pretty confident that Australia will be on its side. In other words, China will have to reckon with the reality of Australia not only siding with the US in case of a military confrontation between the US and China, but also actively contributing to meet all eventualities.
Australia is, of course, not being explicit about this and is hoping that the necessity to choose might not arise, but this is like an ostrich burying its head in sand.
Apart from the leadership contest between China and the US, there are regional flashpoints like Taiwan, South Korea and the renewewd competing sovereignty claims to island chains in the South China Sea.
China knows that Australia is a US ally, but Beijing hopes to use its economic leverage through trade and investment to dent its alliance with Washington. However, if Australia were to opt for neutrality, China would be unlikely to take its claim seriously considering its vast network of strategic links with the US.
China’s growing economic interests in Australia will give it a convenient handle to interfere in Australia’s affairs. Cheng’s stern lecture to Australia requiring it to fix its economic malaise is a precursor of things to come.
In this sense, Australia’s economic fortune through its China connection might not be a blessing in the medium and long term, but, in the meantime, let us make the most of it.
Sushil Seth is a commentator based in Australia.
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