The change of government in Australia in May 2022 presented an opportunity for improvement in the Australia-China relationship ahead of its fiftieth anniversary in December. The new Chinese ambassador Xiao Qian, who arrived in January, had invited Australia to meet China half-way in mending strained relations. The Albanese Labor government brought a change in tone and atmosphere. Despite this, the Albanese government has stuck to the basic principles set out by the Morrison government: defending sovereign agency, making no concessions and exercising strategic patience. As the foreign minister, Senator Penny Wong said on 8 July 2022: ‘we are a government and a nation that has made certain decisions on the basis of our national interest, our national security and our sovereignty and won’t be resiling from those’.
Defence Minister Richard Marles met his Chinese counterpart Wei Fenghe in June in Singapore on the sidelines of the Shangri-La Dialogue security summit, breaking a three-year freeze in official bilateral meetings. Foreign Minister Wong subsequently met her Chinese counterpart Wang Yi twice, at the conclusion of the G20 Foreign Ministers meeting in Bali in July and again on the sidelines of the UN General Assembly in New York in September. She also spoke with Foreign Minister Wang again before the Bali Summit. Prime Minister Anthony Albanese met briefly with Premier Li Keqiang at the ASEAN Summit and then with President Xi Jinping at the Bali G20 Summit. The Albanese-Xi meeting went smoothly but as expected did not produce any breakthroughs on matters of contention such as ongoing trade restrictions. The fact that these meetings took place in the margins of international conferences and there have been no visits to either Beijing or Canberra for more than three years indicates that things are not back to normal yet. The meetings do not in themselves indicate a reset of the relationship.
Although Defence Minister Marles has dropped the harsh rhetoric of his predecessor Peter Dutton, he remains a strong advocate for the US Alliance and the AUKUS agreement, which prominent Beijing think tanks have labelled provocative and destabilising and part of a ‘dangerous conspiracy’. The new government has not shifted the parameters or narrative of the Coalition’s foreign and defence policy on China.
On the other hand, the two countries have revived their Comprehensive Strategic Partnership and toned down their respective harsh rhetoric. As foreign minister, Wong has consciously focused on stabilising the relationship rather than aiming for a reset but the government has not embraced an alternative discourse to the adversarial and militarised narrative of the relationship created by the Morrison Government. The vital economic relationship has been side-lined by a near total focus on national security concerns.
What Does Australia Want?
The Australian view has been that China has changed since the high point of the relationship in 2014 and has been taking concerning actions against Australian economic interests and national security. Therefore, Australia wants China to take the lead to repair the relationship and, especially, to lift the trade restrictions imposed in 2019, after Australia enacted the Countering Foreign Interference Legislation, banned Huawei from the 5G roll out, and rejected a series of other Chinese investments. China imposed further sanctions in 2020 after the Morrison government demanded China allow an international investigation of the pandemic’s origins with the powers of weapons inspectors. It is widely held in government circles that China wanted to make an example of Australia as a warning to other countries not to cross its ‘red lines’. The view in government circles is that for any progress in the relationship, China needs to take the lead and to offer real concessions that benefit Australian interests, not just expressions of friendship or one-sided offers that only favour China.
What China Wants
The Chinese position is that Australia is responsible for the deterioration of relations. In his meetings with Minister Wong, Foreign Minister Wang Yi called for ‘concrete actions’ by Australia to match the change of rhetoric. At his Chinese National Day speech on 30 September 2022, Ambassador Xiao made a similar appeal. Another Chinese diplomat said to the author that all the Albanese Government had done so far was say ‘nice things’ (hao hua 好话) but no real action has been taken by Australia to mend the relationship. China has been keen to blame the Australian government and media for maintaining a hostile anti-China narrative.
Ambassador Xiao Qian in his speech to the National Press Club on 10 August 2022 stressed that Australia needed to change its discourse about China from a narrative of threat to a narrative of cooperation. The two sides should adopt positive policies towards each other, he said, ‘to seek common ground and properly handle their differences’.
In meetings with the author and Australian officials, Ambassador Xiao has stressed that China has been a key economic partner for Australia, especially since the Great Financial Crisis (GFC) of 2008-2009 — when Beijing embarked on a massive infrastructure-building drive that relied on Pilbara iron ore, creating an unprecedented boom in Australia’s mining profits — and the implementation of China Australia Free Trade Agreement (ChAFTA) in 2014. The measures that China had taken against Australia occurred in response to Australian actions against China, such as the banning of Huawei from the 5G roll out, the call for a COVID inquiry and other hostile rhetoric towards China.
Ambassador Xiao further insisted that China is not a military threat to Australia and has no intention or capability to attack Australia. This does not seem to take into account the fact that in recent times there have been encounters between the Australian military and the PLA in which the Australian side has accused China of aggressive action. Xiao has maintained that China’s primary interest is to improve the life of the Chinese people and develop economic relations with its partners, such as Australia. Xiao has also said that Australia misunderstands the Taiwan issue and stressed that China is committed to peaceful reunification: Taiwan’s status and history, he argues, is very different from Ukraine’s. Yet he has also reiterated that China ‘will not renounce the use of force’ and that it was ready to use ‘all necessary means’; he also said that advocates of Taiwan independence would be ‘punished’ and other Taiwanese ‘obligated’ to acquire a ‘correct view of China’. His words were widely noted in Australia.
In conversation with the author, Xiao was confident that in the long run relations could improve, but Australia needed to view China as a partner not an adversary.
Points of Contention
Although neither Australia nor China have budged on their respective statements of fundamental national interests, neither country has ruled out improving relations. The problem is the route to get to this goal. Senior officials believe that there is a path forward and it remains in our interest to find a working solution to the relationship with our largest trading partner, one that can return our relations to the level enjoyed by our Quad and AUKUS partners. To do so Australia and China would need to address four major contradictions in the relationship.
The first is rhetorical. The last three years saw diplomatically damaging rhetoric coming from both Beijing and from Canberra. The rhetoric has softened on both sides and this has made basic cooperation and interaction, such as meetings at both the ministerial and leadership level, possible.
The second is economic. China remains Australia’s number one trading partner by far despite the tensions in the relationship and strategic threat China poses to Australia. In 2021 two-way trade in goods and services grew 14.6 percent to reach AUD 282 billion, which was 31 percent of our total trade; by October 2022, that had reached 32 percent. Our exports to China grew by an equally impressive 18 percent to reach AUD 189 billion, representing 36.4 percent of total exports. Trade with China provides a level of prosperity for Australia that could not be replicated by any other market. Two studies by the Department of Foreign Affairs and Trade (DFAT) and Treasury have confirmed that no other market could replace China as a market for Australian commodity exports — China’s need to buy from Australia and Australia’s to sell to China gives leverage both ways and helps to avoid a total breakdown in relations. The Australia China Business Council reports that despite the political tensions, Australian and Chinese business were getting on with the good work of ensuring trade and Australian prosperity.
Chinese sanctions, however, have damaged selected industries including seafood, wine and barley. Some of these losses have been recouped in new markets but often at the cost of lower prices. Australian business has also incurred intangible losses and opportunity costs, such as missed investment opportunities, loss of future expansion in the vast Chinese market and the costs of finding new markets.
China claims to be the victim of Australian sanctions, especially through investment restrictions and anti-dumping policies. The Chinese Embassy has claimed from the start of 2019 up to March 2022, AUD$370 million of Chinese investment has not gone ahead due to changes to the Australian foreign investment regime. This has included everything from the high-profile ban on Huawei in the 5G roll out to the Coalition government’s declaration that China’s Mengniu plan to buy Lion Dairy in 2020 was ‘contrary to the national interest’. The Chinese claim that such decisions are vindictive, discriminatory and contrary to the spirit of ChAFTA. The Huawei decision is widely viewed in both China and in DFAT as the real watershed in the deterioration of the bilateral relationship. China would like the Huawei ban lifted and has continued to agitate for that outcome. The Chinese have also focused on the anti-dumping measures taken against China where the imbalance is 111 to 3. DFAT is confident that Australia can win the barley and wine anti-dumping cases brought by China.
A third area of contention is around human rights and consular issues. These are long term irritants in the relationship. The Chinese side prefer human rights concerns and consular issues to be handled ‘under the table’ or confidentially between the two countries, not through public statements. In the terms of human rights issues, the Chinese side favour a structure similar to the bilateral Human Rights Dialogue which ran from 1997 to 2016, in private with Australia, avoiding (from its perspective) unnecessary public criticism of China’s human rights breaches. As Ambassador Xiao said in his speech to the National Press Club, ‘differences should be handled in a proper manner.’ It is the Chinese position that human rights have been weaponised as part of a negative political discourse against China, which ignores China’s real successes in areas it defines as human rights such as lifting a billion people out of poverty.
Several high-profile consular issues remain unresolved and represent key obstacles in the relationship. These include the years-long detention of the Australian writer Yang Hengjun and journalist Cheng Lei on charges they both claim have no basis. While DFAT does consular work behind the scenes, the government must retain the right to comment and advocate on behalf of the cases of Australian citizens held in China.
Finally, there are the strategic issues. China wishes to reshape the geopolitical order in the region to its benefit. A second major goal for China is for other countries to respect its ‘red lines’, including on Taiwan, Xinjiang, Hong Kong the South China Sea and other issues. This has brought China into contradiction with the US-led ‘rules-based order’. China is neuralgic about its ‘red lines’ and views any Western criticism or pushback on these issues as an attack on their sovereignty and the legitimacy of CPC rule.
These strategic differences are difficult for Australia to deal with as all these issues, including Huawei, South China Sea, Chinese influence in the Pacific and Taiwan, are at least in part linked to our strategic alignment with the US, including through AUKUS and the Quad. It would also be very difficult not to speak up on geo-strategic issues that matter to us, including infringements of the established rules-based order. The forward leaning strategic stance of China under Xi Jinping raises genuine concerns for Australian national security in areas as varied as the South China Sea, the Pacific and Taiwan. Likewise, China’s approach to Hong Kong and disregard of human rights there and in Xinjiang challenge both Australian values and national interests. However, China finds Australia’s intervention in these issues provocative and unjustified.
Australia has viewed growing Chinese influence among the countries of the Pacific Forum with concern, especially the security agreement signed in 2022 between China and the Solomon Islands. The Pacific countries have had a long term and close relationship with Australia based on mutual economic, security and people-to-people links. As a result, China’s growing influence there is seen as disruptive and destabilising and will remain a vital strategic concern for Australia.
Washington’s strategy to counter China, however, is based in part on utilising allies and partners like Australia to help counterbalance China’s power in the region and globally. This has led to enhanced alignment and new agreements and groupings such as AUKUS, the Quad and the Indo-Pacific Economic Framework as well as even closer interoperability and interchangeability between the Australian and US military. China historically accepted the Australia-US alliance as a reality and appreciated that the alliance did not automatically lead to anti-China alignment or actions. However, these new post-2017 measures link Australia even more closely to the US and its war fighting plans against China. In China’s view Australia has become a branch office of the US. China wants Australia to go back to its pre-2017 position of seeking to balance the relationship with China and the USA, and Chinese officials have indicated that this would improve relations.
What Can Be Done?
The Albanese government has made progress with China by stabilising the relationship through a restoration of multi-level dialogues and eschewing provocative rhetoric. The view in Canberra is that time is on Australia’s side: there is no need to rush to make concessions. China will continue to buy our resources at a high price and the sanctions have not been too crippling except for seafood sector and to a lesser extent wine. The government knows China will struggle to diversify away from Australia in a number of key commodities in the medium term (e.g., iron ore, liquefied natural gas, and wool) and is also unwilling to modify key national security positions given its assessment of the difficult strategic situation facing Australia.
There is, however, also a view in government circles that it is in Australia’s interest to seek a way to improve relations with China given the long-term and central role China plays as an essential economic partner and regional power.
There is a possible path forward but it would require flexibility and diplomacy from both countries. On the Australian side, the most important action would be a change of narrative about China, stressing common interests, especially in the economic sphere and with issues like climate change, over any militarised threat. Australia should look at China through multiple lenses, not just the single lens of national security, as a hawkish narrative limits room for manoeuvre and diplomacy. One of the key points of the Australian government’s position over the past three years is that there is a moral danger of giving into coercion, which could be seen as surrendering our sovereign agency. The new government is also aware that the opposition and elements of the media would frame any concession as a ‘kowtow’ to China or an act of appeasement or weakness; in many cases this kind of framing is a deliberate misconception put forward by China hawks. On the contrary, the practice diplomacy is the process of seeking to advance our national interests, and this certainly applies to diplomacy with our largest trading partner.
Australian officials acknowledge that there is room to negotiate on some of Beijing’s concerns if it would lift its trade restrictions and end its anti-dumping actions against Australia. The Australian side in turn could consider its position on Chinese investment and its own anti-dumping policy. Supporting China’s aspirations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement between Australia and countries including Japan, Brunei, Malaysia, Singapore and Vietnam as well as Canada, Chile and other Pacific-adjacent nations, would be a low-cost gesture for Australia. This would also match the position of other CPTPP members.
The problem is who moves first. The lack of trust between the two countries caused by the mutually abusive rhetoric and sanctions makes this difficult. China has demanded that Australia make the first move, saying China would then meet Australia halfway. This implies that Australia is in the wrong and responsible for the problems that have risen in the relationship. If there is not full reciprocity no agreement would be able to move ahead.
The Human Rights Dialogue mechanism effectively handled differences on human rights with China for nearly twenty years. However, senior DFAT officials say that this approach would be impossible in 2022. International findings by the UN, research by credible researchers and high profile reporting in the traditional media and social media effectively compel the government to comment on issues such as human rights abuses in Xinjiang an issue. Possible Xinjiang sanctions on Chinese officials under the Magnitsky-inspired legislation adopted in Australia in late 2021 is a potentially new problem for the bilateral relationship. There is disagreement in government circles on the wisdom of taking further steps that would certainly provoke China.
There will always be a strategic contradiction as long as Australian security policy remains based on the US alliance and while Xi Jinping continues to take China on its current course. Yet diplomacy and considered actions could lessen the strategic contradiction and continue the defrosting begun with Prime Minister Albanese’s meetings with Xi and other Chinese leaders, as well as the ministerial dialogues carried out in the second half of 2022. The Albanese government could shift away from the line of the previous government, which was to hew very closely to the US on China policy. This already has happened on the subject of Taiwan and the One China Policy. Australia has not joined the US in hollowing out its One China Policy and strategic ambiguity on its willingness to defend Taiwan. In addition, we have avoided provocative actions that US has taken in sending senior office holders to Taipei. The visit by six backbench Members of Parliament to Taiwan in December is a return to a regular practice of such visits that was interrupted by COVID travel restrictions. Under Albanese, the Australian rhetoric on Taiwan has been restrained and nuanced. The Albanese government’s realignment of policy on West Jerusalem (reversing the previous government’s provocative decision to recognise West Jerusalem as the Israeli capital), provides a model for rethinking undesirable elements of our China policy authored by the Morrison government or that have been an offshoot of US policy.
Most important would be a change in the official narrative about China and the development of diplomatic mechanisms for dealing with differences while focusing on common interests. If we do not take this path, a tense relationship with constant irritants and the ever-present risk of escalation into conflict will become a permanent normal to the detriment of both countries.
