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    Greater China
     May 3, '13

Australians attitudes hold back China ties
By Eileen McInnes

China and Australia elevated their economic relationship to strategic partnership early last month. China, pushing to complete its economic development, and Australia, attempting to join the top 10 global nations by 2025, view each other as important for achieving these goals.

Yet populous negative opinions of China, in some parts of the Australian public, may serve as a barrier to actualizing this partnership, according to a prominent businessman and former Australian diplomat.

Speaking before the Australian prime minister's trip to China, Sino Gas and Energy's strategic consultant, Colin Heseltine, stated

that Chinese investment in Australia generates a "hysterical" reaction from some parts of Australia and, "getting the rhetoric right is almost important as the policy itself".

At an event run by the Australian Institute of International Affairs, Heseltine labeled China as "Australia's pre-eminent business partner" and his presentation targeted Australian rhetoric as a barrier to increased cooperation between the two countries.

Channeling the famous Nike slogan, Heseltine urged a higher degree of cooperation between the two countries, "Australia, China, just do it!"

The five-day diplomatic trip to Beijing by Australian Prime Minister Julia Gillard in April secured what is generally referred to by Australian mainstream media, as a new level of cooperation and dialogue with China's Premier Li Keqiang.

The two countries have now committed to annual leadership talks, a privilege that had previously been limited to Germany, Britain and Russia.

Joint military exercises have also arisen from the Beijing visit; however, the military cooperation is limited to humanitarian assistance, disaster relief exercises and maritime engagement and peacekeeping.

Another success is the direct conversion of the yuan and the Australian dollar. Instead of converting via the US dollar, China has now allowed direct currency exchange. This move will save exporters on transaction costs, facilitating further trade between the two countries.

Chinese attempts to enter the Australian investment scene have historically been rocky. The refusal by the Australian government to grant Chinese company Huawei a contract involved with the National Broadband Network in May, 2012, is the most infamous example in recent years of this mistrust.

Hans Hendrischke, Professor of Chinese Business and Management at the University of Sydney, stated in an e-mail interview last month that since this foreign policy move was taken by the Australian government with limited public debate, "Chinese leaders are understandably concerned to gain first-hand knowledge of the thinking of their Australian counterparts".

Regardless of past investment difficulties between the two countries, Hendrischke is optimistic that Australian's will react to this closer alliance with China optimistically and in their own best interests, as China is a potential major contributor to Australian economic growth.

"Australia needs to intensify its dialogue with China for economic reasons to cope with the long term consequences of weakening Chinese demand for Australian resources and to develop new areas of economic cooperation, such as agribusiness and services," he stated.

While overall coverage of the new China-Australian partnership has declared it a success, doubts concerning China's authoritarian character, human-rights abuses, and a general lack of understanding of China's motives have crept into discussions.

The Australian, a daily national newspaper, celebrated the benefits of the agreement with the world's second largest economy, but questioned if the government - and indeed the rest of the democratic world - "worry enough about the risks attached to the untamed, uncaged beast an undemocratic China may become".

The same article, written by the contributing editor, continued to depict Australia, and other countries in the West, as being engaged in a "mad scramble" to fawn to the wishes of this serial human-right abuser in an "embrace of greed".

While the Australian government acknowledges its interest in the economic advances to be made through a closer alliance with China, when it comes to political and social considerations its approach is much softer.

Speaking about Gillard's visit, the Australian minister for foreign affairs stated, "I believe that you are more likely to be effective in encouraging the move towards the educated, outward-looking, engaged cosmopolitan China by working with them, acknowledging them, and giving them support".

Speaking on Sky News Australia, Minister Bob Carr furthered, "I've seen no evidence that beating a drum produces a change in behavior."

Similarly, Hendrischke stated that whether the alliance between the two countries is labeled strategic or not, "increased communication through deeper levels of dialogue will create a new and most useful platform to solve problems".

"Australia is playing an important role through joint training programs and by being the largest host country for Chinese outbound investment where Chinese corporations learn to operate in a highly legalized business environment," Hendrischke said.

Far from ignoring China's conflicting human-rights history, Heseltine argued that just because institutions in China are different it doesn't necessarily mean that the two countries have conflicting goals.

The analyst argued that underlying the populous hysteria in Australia, regarding China, is the notion "that the state-owned enterprises (SOE) will pursue hidden non-commercial agendas cooked up in Beijing rather than pursue strictly commercial interests".

"There is less government influence over SOE than many believe and most are run in a completely commercial basis, many are serious international players and I can attest to that from the partners that we have in Sino gas", Heseltine argued.

"It doesn't mean we have to accept everything that China does, that would be silly", he said.

According to a report released by KPMG and the University of Sydney, between September 2006 and June 2012, 116 completed deals were recorded totaling $45.1 billion of investment by Chinese enterprises in Australian businesses.

Yet, of the 45 Chinese SOEs who have invested in Australia 15 are listed in the 2012 Fortune Global 500 rankings of the world's largest companies.

Consistent with China's domestic needs, 79% of all Chinese investment in Australia is in the mining sector during the six-year period covered by the report. Oil and gas investment ranks second at 11.8%.

Heseltine argued that the overwhelming priority in China is domestic policies, and in no way conflicted with Australia's interests.

He stated that the country's ministers prime concerns are "to complete its economic restructuring while maintaining its rapid economic growth, to handle the increasing social conflicts against the background of somewhat declining political authority of the communist party and thirdly to carry out effective diplomacy".

In April, in what has in some cases been perceived as a show of limited transparency, China released its defense White Paper, which illustrates the military's priority to protect China's domestic interests.

The document highlights China's acclaimed policy that, "we will not attack unless we are attacked; but we will surely counterattack if attacked".

The paper stated, "China will resolutely take all necessary measures to safeguard its national sovereignty and territorial integrity."

It revealed that China's army totals 850,000 soldiers, the navy contains 235,000 officers and men, and the air force totals 398,000.

Some observers have commented that the information in the White Paper still poses a threat to others in the Pacific region.

China's military spending in has been increasing steadily in recent years. 2012 saw China spend $158 billion up from $136 billion in 2010 and $146 billion in 2011, according to The Stockholm International Peace Research Institute (SIPRI). Figures are based on US 2011 exchange rate.

However, as a percentage of GDP, China's spending has remained steady at around 2%.

By comparison the US spends roughly four times that of China on its military. In 2012 the US spent $669billion down from $720 billion in 2010 and $711 billion in 2011. The military giant, in 2012, used 4.4% of its GDP on military spending, according to SIPRI.

For Australia, Hendrischke stated that in the context of the release of this White Paper, the strategic relationship formed in the recent visit by the Australian Prime Minister to Beijing, "gains increased relevance as an additional element in the security architecture which critically depends on confidence building and communication".

(Copyright 2013 Eileen McInnes)

Australia's changing Asia trajectory (Nov 17, '12)



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