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June 30, 2020

CHINA/AUSTRALIA: Deteriorating bilateral relations are a harbinger for others

BY Gabriel Wildau

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( 6 mins)
  • Sino-Australian relations have deteriorated sharply across a range of issues, including trade, investment, security, cybersecurity, Covid-19, and human rights.
  • Australia’s relationship with China may offer a preview of trends that are also beginning to emerge in other industrialized democracies.
  • Rising anti-Chinese sentiment, hostile media coverage, and racist incidents against Chinese Australians suggest that relations will continue to worsen.

Sino-Australia relations have deteriorated sharply in recent months, accelerating a longer-term decline that began around 2017. Australia arguably presents a preview of trends emerging in other rich democracies. Australia’s relatively large share of Chinese tourists, students, and citizens of Chinese descent; geographical proximity to China; and exposure to China’s economy all combine to create a sense that Beijing wields excessive influence. But the same basic trends are also visible in the US, Europe, and Japan.

Espionage and “influence operations”

Australian politicians, security agencies, and media have all warned about the risks of Chinese espionage, as well as softer forms of influence such as political donations, NGO activity, and efforts to mobilize Australia’s ethnic Chinese population, including Chinese students.

In 2017, the Labor Party’s former Senate whip, Sam Dastyari, resigned from parliament amid allegations that he accepted travel and legal expenses from Chinese companies in return for supporting China’s position on the South China Sea, in defiance of Labor’s official position. In 2018, Australia’s parliament passed sweeping legislation to counter foreign influence, including a ban on political donations by foreign nationals and a requirement that lobbyists for foreign governments register as such.

On 26 June, Australian Federal Police raided the home and office of Shaoquett Moselmane, a Labor MP from New South Wales who previously served as a deputy senate whip. Federal police are conducting a joint investigation with the Australian Security Intelligence Organisation into whether Chinese agents have infiltrated his office. Moselmane has espoused positions that are friendly to Beijing and has spoken out forcefully against racist incidents targeting Chinese Australians. He denies wrongdoing, insists his political views are based on conviction, and says the investigation is politically motivated.

Economic “coercion”

In March 2019, Australian coal exports to China reportedly suffered customs delays after Canberra decided to exclude Huawei equipment from Australia’s 5G telecom networks, though both governments officially denied any connection between Huawei and coal shipments. Chinese foreign direct investment in Australia dropped 58% year-on-year in 2019 to its lowest level since 2007. In March 2020, Canberra strengthened its screening process for foreign investment in sensitive industries including telecommunications, energy, technology, and defense, a change that was widely seen as targeting China.

Covid-19 has accelerated the relationship’s downward spiral. In April, Prime Minister Scott Morrison’s support, alongside the US’s, for an international investigation into the origins of the virus led to a diplomatic spat with China’s ambassador to Canberra. In May, Beijing banned imports of Australian beef exports from four large producers and imposed 80% tariffs on Australian barley. Though the import restrictions were ostensibly due to safety concerns over beef and dumping allegations against barley producers, Morrison labeled the move “coercion” and vowed never to compromise Australian values.

Tensions escalated further on 5 June, when China’s tourism ministry issued a travel alert warning its citizens to avoid travel to Australia due to rising anti-China sentiment and incidents of racially motivated violence. On 16 June, Australian Foreign Minister Marise Payne accused China of running “disinformation campaigns” against liberal democracies, citing the travel warning as an example.

Security, cybersecurity, and “hostage diplomacy”

China’s shift to a more aggressive foreign policy has fueled security concerns in Australia. On 19 June, Morrison said that Australia was suffering a coordinated series of cyberattacks from a “sophisticated state-based actor” against a range of institutions. He declined to attribute the attacks specifically to China, but media leaks indicated that Australia’s security services blame China.

On 10 June, a Chinese court sentenced an Australian national, Karm Gillespie, to death for drug smuggling, seven years after his arrest at a Guangzhou airport allegedly carrying 7.5kg of methamphetamine. Australian officials warned against linking the death sentence to the decline in bilateral relations, but Australian media widely portrayed the incident as “hostage diplomacy.”

Canberra is bolstering its regional security relationships to counter China. Morrison is expected to finalize a Reciprocal Access Agreement at a summit with Japanese Prime Minister Shinzo Abe in Japan in July. The pact authorizes the two militaries to operate in and around each other’s territory.

Media and public opinion

Beyond the specific incidents outlined above, Australian media is awash in accusatory, conspiratorial, and often thinly sourced stories about China. In November 2019, a high-profile television news investigation purported to reveal wide-ranging Chinese espionage activities by Wang Liqiang, a defector and self-proclaimed ex-spy. Wang claimed to have participated in supporting pro-Beijing candidates in Taiwan and in the abduction of anti-Beijing booksellers from Hong Kong. But critics poked holes in Wang’s story, and many believe he is a fraudster who fabricated his spy connections to win asylum.

Criticism of China from politicians and media have affected public opinion. A poll released on 23 June shows that only 23% of Australians trust China either “a great deal” or “somewhat” to act responsibly in the world, down sharply from 52% in 2018. The same poll found that 51% trust the US.

Outlook for relations

The bilateral relationship is unlikely to improve in the near term, as Morrison’s government has staked significant political capital on a confrontational approach to China. On the other hand, the importance of the economic relationship for both countries is likely to limit further downside risk. Beijing has notably declined to restrict imports of Australia’s biggest export, iron ore. China relied on Australia for 62% of total iron ore imports in 2019, with the next largest supplier, Brazil, accounting for only 21%. Consumer exports like beef, grain, dairy, fruit, nuts, and wine are more susceptible to boycott diplomacy but also less important for Australia’s economy than iron ore. If relations deteriorate further, coal could be the next target.

Despite the downturn in relations, significant political constituencies in Australia still favor positive relations with Beijing. These include exporters; universities, who benefit from the 212,000 Chinese international students in Australia at the end of 2019; and property developers and other participants in the real estate market, where Chinese investors have invested an estimated USD 135bn over the last decade. The result will likely be a continued slow deterioration during which Canberra hardens its defenses and seeks to diversify its economy, while working to limit short-term damage to the economic relationship.

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