05.09.2016 Author: Vladimir Terehov

On China-Australia Relations

345345234324Australia is an important player in the political games of Asia-Pacific Region. As the New Eastern Outlook has written many times, the country’s authorities have been searching for a compromise between two increasingly divergent objectives for over 10 years.

One of them, a legacy of the Cold War, is related to the image of Australia as a “deputy sheriff” in the region. The second one is driven by the growing dependence of Australia’s economic prosperity on its economic relations with China, against which the global “sheriff’s” foreign policy is being re-targeted.

It should be noted that China ranks first in Australia’s foreign trade: Australia sells most of its iron ore – its major export product – to China. Exports to China make up 32% of the total share (Japan, in second place, makes up 16%). Yet, Australia is 14th in the list of China’s foreign trade partners.

The drama of Australia’s position in terms of foreign policy is reflected in the key issue that its politicians are asking themselves: what will we do if the USA rushes into war with China due to Taiwan or other small islands?

This question and how it may be answered are at the heart of the conflict in foreign policy between the two main parties of the country, led by the right-of-centre Liberal Party of Australia (LPA) and left-of-centre Australian Labour Party (ALP).

The first party responds thus: “Alas, we will have to join these idiots from across the ocean”, whereas the second one prefers not to pose this question in such an acute (but increasingly inevitable) form, highlighting the urgent need to develop multilateral relations with China – its nearest great neighbour.

The inter-party struggle occasionally becomes more acute, especially during the election cycle, such as during the 2016 elections to the lower house of Parliament on July 2.

They were closely monitored by Beijing, whose preference for the Australian Labour Party are quite clear. The golden age of China-Australia relations development fell on the period of ALP’s time in power (2007-2013).

It would seem that China fondly recalls the first Prime Minister of the ALP, former school teacher Kevin Rudd, a sincere enthusiast who promoted versatility in their relations.

After the defeat in the elections in 2013, the Labour Party gradually began to restore their electoral position, but on July 2, 2016, they failed to defeat the conservative bloc. The latter overcame the 50% bar in the lower house of Parliament, albeit with a struggle. This allowed the last Prime Minister Malcolm Turnbull to keep his position and form a government of conservatives.

It is worth noting that LPA is no less interested in maintaining economic relations with China than the Labour Party. This was clearly demonstrated during M. Turnbull visit to China three month before the elections. The entire visit, of course, affected the mood of voters, as most of them decided (unreasonably though, as it turned out) that nothing bad would happen to relations with China even under a conservative-led government.

China, to put it mildly, responded without enthusiasm to the news about the victory of the bloc led by the LPA in the elections in Australia. It soon turned out that this reaction was well founded, as Canberra was one of the first to support the decision of the Hague Court of Arbitration of July 10 this year that declared the territorial claims of China in the South China Sea illegal.

The semi-official newspaper, the Global Times, pulled no punches (in contrast to the undoubted official narrative of the China Daily) and wrote strong statements that depicted Australia as “the craziest country” and “a paper cat” in connection to its support for the Hague ruling. According to the context of the article in the Global Times, Australia does not deserve the catchword “paper tiger” (and we all know who that phrase is normally directed at).

A week later, the same newspaper published another article, which highlighted that the previous article had made the proper impression on the addressee. Australian media started to discuss the “threat of war” from China that had allegedly been expressed in its “main state-run newspaper”.

Pointing out that there was nothing of such kind in the first article, the Global Times, however, once again underlined China’s willingness to use force “without hesitation” in case of a threat to its “territorial integrity” from foreign vessels in the territorial waters of the archipelagos in the South China Sea claimed by China. Canberra is recommended to abandon “mindless adherence to the American strategy on China’s restraint”.

Amid the political component of the bilateral relations, which sharply deteriorated in just a month, the reaction of China to the refusal of Australia’s government to allow China’s state electric power distribution company to acquire a 50.4% stake in its counterpart Australian company Ausgrid for a huge sum of 7.7 billion dollars, attracts attention. The aforementioned refusal was submitted on August 11, 2016 (“for security reasons”).

Comments on this event in the same Global Times were presented in far more conciliatory tones in comparison with those statements made a week or two ago in connection with the support of the Hague Arbitration Court decision by the Australian government. Although there are regrets about the cancelled transaction, this particular failure is considered in the “short-term” perspective, while the long-term forecast on bilateral economic relations is quite optimistic.

Thus, China demonstrates its interest in the developing relations. As Australia is unlikely to scale down these relations (the refusal of the actual sale of the main electricity distribution company to China does not seem to have any connection to the current political background), we should expect a certain alignment of bilateral relations.

Nevertheless, the decision of the Hague Arbitration Court will surely bring about a significant (and now almost inevitable) negative element in China-Australia relations. However, the same can be said about China’s relations with all its other neighbours in the South.

Vladimir Terekhov, expert on the issues of the Asia-Pacific region, exclusively for the online magazine “New Eastern Outlook”.

 


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