Australia- China relations

Geoff Wade, Foreign Affairs, Defence and Security

Key issue

Australia- China political relations have seen a marked decline over the last 8 years, while trade relations have continued and expanded. Australia’s concerns about Chinese obstacles to Australian exports, influence operations within Australia and strategic aspirations regionally have seen a range of Australian responses: stepped up strategic and defence collaboration with partners, legislation to deal with foreign interference in diverse realms and efforts to expand Australia’s markets. Relations with China remain tense and this will be a key issue to be addressed by the new Parliament.

In November 2014, China’s paramount leader Xi Jinping made a visit to Australia to attend the G20 Summit, to jointly announce the China- Australia Free Trade Agreement, and to speak to the joint Houses of Parliament . In his 17 November speech to Australia’s legislators, Xi noted:

Our relationship has reached a new and higher starting point, and we should be more visionary, broad minded and set more ambitious goals. Our two countries should increase dialogue and exchanges and deepen political trust, expand result-oriented cooperation, and work together to sustain peace, stability and prosperity in the Asia-Pacific.

That evening, at a parliamentary dinner, Prime Minister Tony Abbott also spoke of bilateral relations, stressing:

I have to say that the respect and affection that we Australians have for the people of China was reinforced by the remarkable speech that President Xi has delivered in our Parliament today.

I have never heard a Chinese leader declare that his country will be fully democratic by 2050. I have never heard a Chinese leader commit so explicitly to a rule-based international order founded on the principle that we should all treat others as we would be treated ourselves.

Those speeches marked an apex in Australia- China relations, described in that year as a ‘comprehensive strategic partnership.’ In the 8 years since that peak, however, there has been a gradual decline in virtually every aspect of the positive bilateral relationship promised in those speeches. Today, Australia’s relations with China have arguably reached their worst state since Australia’s recognition of the People’s Republic of China (PRC) in 1972.

A brief review of the key developments since 2014 provides a useful context for understanding the factors affecting the Australia- China relationship today. This is provided below with the backdrop of a major extension of China’s power beyond its borders over that period.

The PRC political landscape has, since 2012, been marked by the political domination of Xi Jinping. During Xi’s decade in supreme power, he has pursued an agenda described variously as the ‘China Dream’ or the ‘Chinese renaissance’ domestically, and ‘building a community with a shared future for mankind’ internationally. This has involved declaring himself ‘core leader’ in 2016, extending his control over the domestic politics of the PRC, while also expanding China’s economic and political influence across the globe. This extension of China’s global aspirations has seen it increasingly contending with the US, particularly in the Western Pacific. Australia, as an ally of the US, has inevitably been involved in this contention.

Since 2014, China has been increasingly assertive in its efforts to claim leadership in the region and this has included efforts to influence Australia’s domestic and foreign policies. These have been seen in a variety of spheres, as have Australia’s actions in responding to these efforts.

On the broadest level, Australia has been concerned about China’s regional strategic policies. The expansion of China’s maritime claims and presence in the South China Sea under Xi, the growth of PRC economic links and influence operations in Southeast Asia, the extension of economic and military links with Pacific Island states and the overall build-up of China’s military capacity have given rise to ongoing concerns among Australia’s strategists and policymakers. China’s implementation of a National Security Law in Hong Kong in June 2020 also prompted a reaction from Australia and its partners.

In the sphere of strategic and economic statecraft, Australian officials were greatly concerned in 2018 when Victoria signed on to Xi Jinping’s signature Belt and Road Initiative, an agenda the federal government had been assiduously avoiding. Victoria’s Premier, Daniel Andrews, signed a further BRI deal in October 2019, and urged other states to participate in the PRC initiative.

It has been in the economic realm that the PRC’s pressure and influence has been most pronounced. In 2019, the China market absorbed more than 32% of Australia’s total exports, with up to 100% of some commodity exports going to the PRC. In 2020, this figure exceeded 40% in some months. The remarkable growth in China’s economic influence over Australia (and regionally) during the last decade has proved to be a ready lever of influence over the economy, the application of which has induced deep concern among many sectors of Australian society.

The PRC has used this leverage to impose a wide range of obstacles to and economic sanctions on Australian trade with China over the last several years. These actions have been seen by commentators to be aimed at inducing Australian primary producers to exert influence on the Australian Government to accede to Chinese preferences. Researchers at the Australian Strategic Policy Institute (ASPI) refer to these practices collectively as ‘coercive diplomacy’ and their study shows how these practices have increased during the rule of Xi Jinping.

These PRC practices have included imposing tariffs on barley and obstacles to coal and cotton shipments, deterring PRC students from travelling to Australia for education, and placing restrictions on timber, rock lobsters and beef exports from a range of meat processors, and high tariffs on Australian wines. Much of this economic pressure was exerted following the call by the Australian foreign minister in April 2020 for an independent inquiry into the origins of COVID-19. That China’s economic sanctions on Australia are being instituted to indicate dissatisfaction with Australia’s political alliances and actions has been acknowledged by a PRC Foreign Ministry spokesperson.

To further underline the unhappiness of the PRC with Australia’s orientation, in May 2021, the PRC’s National Development and Reform Commission announced that it was suspending its participation in the China- Australia Strategic Economic Dialogue indefinitely.

In November 2020, while the various sanctions and obstacles were being implemented, a list of ‘14 grievances’ was delivered to an Australian journalist by the Chinese embassy in Canberra. These highlighted the various actions and policy decisions that China said needed revision for Australia’s relations with China to be improved. The list of objections to Australia’s actions included:

obstruction of Chinese investment
banning of Huawei from Australia’s 5G program
foreign interference legislation
expulsion of PRC scholars and journalists
engagement in international fora on Xinjiang, Hong Kong and Taiwan issues
the call for an independent enquiry into COVID-19 origins
siding with the US in anti-China activities
funding anti-China think tanks.

The list was criticised by the Australian Government, with Prime Minister Scott Morrison discussing it with global partners at the G7 meeting in the UK in June 2021.

Yet, despite the wide range of economic punishments China imposed on Australia over this
2-year period, in September 2021, the PRC lobbied Canberra to support China’s application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Australia insisted that China drops its sanctions and reopen ministerial-level trade talks as a prerequisite to considering such support.

Within Australian society, the PRC’s political influence operations have also been a cause of burgeoning concern for the government and security agencies. Such ‘united front’ influence operations, well-attested globally, have been seen within business, universities , Chinese-language media, and social organisations across Australia. The challenges such activities pose to Australian society have been outlined by Australian Security Intelligence Organisation (ASIO) officials and academic scholars.

These influence and interference phenomena have not only been observed at a federal level. China’s subnational engagement with states and localities – most clearly reflected in the Victorian BRI deal – has presented new challenges for Australia. Some of these issues are addressed in a February 2022 ASPI publication, Taking the low road: China’s influence in Australian states and territories.

Australia has responded to the various China challenges outlined above through 3 major spheres.

Expanded strategic alliances and defence collaboration

Australia’s concerns about China’s regional aspirations and burgeoning military capacities are shared by other regional allies and partners. This has enabled Australia to adopt new strategies to respond at diverse levels to protect Australia’s sovereignty and promote its values.

Since 2017, Australia has been involved in a resurgent Quadrilateral Security Dialogue involving Australia, India, Japan, and the US (the Quad), in an effort to counter an expanding China, militarily and diplomatically. In the years since, the Quad engagement has become ‘a key pillar in Australia’s foreign policy’, and encompasses health security, climate change, maritime domain awareness, humanitarian assistance, disaster relief, cyber, space and infrastructure. Quad interactions variously involve officials, foreign ministers and state leaders. The incoming Prime Minister, Anthony Albanese, and the Foreign Minister, Penny Wong, attended the May 2022 Quad Summit in Tokyo as their first official duty following the federal election. Further details of Australia’s Quad engagement are available on the Department of Foreign Affairs and Trade (DFAT) website.

In July 2020, Australia was newly assertive regarding China’s claims in the South China Sea, urging the PRC to respect the 2016 decision by the Permanent Court of Arbitration, and rejecting China’s assertion that its sovereignty claims over the Paracel and Spratly Islands were ‘widely recognized by the international community’. Australia’s naval patrols in the South China Sea have been subject to repeated Chinese challenges and threats, and Australia will likely be actively engaged in South China Sea issues for decades to come.

In November of the same year, Prime Minister Morrison visited Japan and, with Japan's new Prime Minister, Yoshihide Suga, announced ‘in-principle agreement’ on a Reciprocal Access Agreement for their respective defence forces, ‘in response to an increasingly challenging security environment’. The agreement was signed in January 2022.

In September 2021, a new trilateral security partnership was announced by Australia, the US, and the UK. Dubbed ‘AUKUS’, the agreement is directed at responding to China’s growing assertiveness in the Indo-Pacific. The AUKUS agreement commits the parties to ‘significantly deepen cooperation on a range of security and defence capabilities’, to be achieved through ‘deeper integration of security and defence-related science, technology, industrial bases, and supply chains’. An April 2022 joint update notes the various advances in the AUKUS endeavours, including on Australia’s proposed nuclear-powered submarines and a new submarine base. The AUKUS arrangement fits within an overall strategy being pursued with the US whereby, as the US Secretary of State put it in May 2022, ‘we cannot rely on Beijing to change its trajectory. So we will shape the strategic environment around Beijing to advance our vision for an open and inclusive international system’.

New legislation and measures to deal with domestic interference

Domestically, the Australian Coalition Government has pursued a wide range of responses to address the challenges presented by the PRC.

In 2017 and 2018, a raft of legislation was passed under the Turnbull Government to deal directly with various aspects of foreign interference. The National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 introduced new national security offences; the Foreign Influence Transparency Scheme Act 2018 established a registration scheme for those acting on behalf of foreign entities; and the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018 restricts political donations by foreign entities. These were the earliest such counter-foreign interference laws in Western countries. The first person charged under the foreign interference legislation was an Australian-Chinese community figure in 2020.

Further key legislation included the Australia’s Foreign Relations (State and Territory Arrangements) Act 2020, which gives the federal government the power to invalidate any arrangement made by state and territory governments or universities. One of the first actions taken under this law was the abrogating of the BRI agreements that the Victorian Government had reached with China’s National Development and Reform Commission. The 99-year lease of Darwin Port by the Northern Territory Government to the Chinese company Landbridge is a commercial arrangement and is not directly covered by the legislation. However, the Albanese Government has stated that it intends to review the lease.

In the telecommunications, data and cyber spheres, there has been a range of policy and legislative adjustments. In August 2018 Australia banned Chinese companies Huawei and ZTE from participating in the rollout of Australia’s 5G network. This was the first such ban globally, and was predicated on the need to both prevent spying and preclude the potential shutdown of key national systems.

The report Australia’s cyber security strategy 2020 laid out the major challenges faced in this sphere and the steps being taken to ameliorate threats. The Australian data strategy and Action plan of December 2021 set down data protection aims and measures, while a range of legislation aimed at protecting Australia’s critical infrastructure has been passed since 2018.

In addition, as the possibility of COVID distress leading to businesses becoming vulnerable to overseas takeover became more apparent, in June 2020 the Morrison Government announced reforms to the foreign investment system, including the screening of all foreign investments regardless of value or purchaser. While that was a temporary measure, under the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020 investments in a ‘national security business or national security land’ continued to be subject to a zero-dollar monetary threshold for mandatory national security screening. The reforms were evaluated after a year of operation.

A number of raids by ASIO and the Australian Federal Police and the revoking of the visas of some PRC businessmen, journalists and scholars in recent years have also been predicated on foreign interference concerns.

Trade and industry policies seeking to diversify Australia’s trade markets to reduce economic dependence on China

The distress (some suggest a figure of $4 billion in losses) that the economic tariffs and obstacles imposed by China have inflicted on Australian business over the last several years resulted in a growing determination by the Morrison Government to seek other economic avenues as an alternative to dependence on the Chinese market. At the same time, other actions have been taken to ensure that Chinese companies do not take advantage of depleted industrial sectors in Australia.

In 2019, Prime Minister Morrison queried whether China’s developing country status under World Trade Organization (WTO) rules was congruent with the massive economic power of the PRC, and asked whether this provided it an ‘unfair advantage’. Treasurer Josh Frydenberg told a press conference in 2021 that he had ‘increasingly seen foreign investment applications that are being pursued not necessarily for commercial objectives but strategic objectives’ and as such, had rejected applications ‘that in the past may have been approved’.

Efforts to protect Australian industry and society were observed in the blocking of Hong Kong-based CK Group’s $13 billion bid for Australia’s east coast gas pipeline owner APA Group; the refusal to approve China Mengniu’s purchase of Lion Dairy; and the blocking of a $300 million takeover of building contractor Probuild by China’s largest construction company.

On the global trade management level, in December 2020 it was announced that Australia had lodged an official complaint with the WTO over China’s tariffs on Australian barley exports. China responded in 2021 saying that it would use WTO procedures to challenge Australia’s measures targeting railway wheels, wind towers, and stainless steel sink products from China. The PRC also blocked Australia’s first request for the establishment of a WTO dispute settlement panel to examine China’s tariffs on Australian wines.

At the same time, Australia fast-tracked the Australia- India Comprehensive Economic Cooperation Agreement negotiations to diversify Australia’s markets. An interim agreement was signed by the 2 countries on 2 April 2022. DFAT is also reported to have been seeking ways to boost investment from the developed Asian markets of Japan, South Korea and Singapore, as well as European states.

Following the election of the Albanese Labor Government in May 2022, the Chinese premier offered congratulations, while the PRC ambassador to Australia has urged the new government to work to get the relationship ‘back on track’. PRC Foreign Minister Wang Yi has also suggested that it is time to ‘seek common ground while shelving differences’, but that ‘concrete actions’ are required. Australian Government responses have so far been muted. However, Defence Minister Marles did meet with PRC Minister of National Defence General Wei Fenghe at the Shangri-la Dialogue in Singapore in early June.

Conclusion

The prospect of a Chinese military base being established in Solomon Islands, just 2,000 kilometres from Australia was suggested by the signing of a security agreement between the PRC and Solomon Islands in March. This and the South Pacific-wide visit by the Foreign Minister Wang Yi in May–June 2022 have further focused the foreign affairs agenda of the incoming Albanese Government on the challenges posed by China regionally and domestically. The immediate post-election visits by the Prime Minister to the Quad leaders summit in Tokyo and to Pacific neighbours by the Foreign Minister have underlined the concern with which the new government views China’s regional activities.

In addition to the many concerns outlined above, with Australia- China ministerial contacts yet to fully emerge from a deep freeze, 2 Australian citizens still in detention in China, disquiet about developments in Hong Kong, Xinjiang and PRC threats to Taiwan ongoing, the US- China rivalry accelerating, and a growing need to address China’s Western Pacific aspirations, the Australia-China relationship will be one of the key economic and strategic issues with which the new Parliament will need to engage.

Further reading

Australian Government, ‘China’, Department of Foreign Affairs and Trade.

John Fitzgerald, ‘AUKUS, Australia, and China: A View from Australia’ The Asan Forum, 27 December 2021.

Natasha Kassam, ‘Great Expectations: The Unraveling of the Australia- China Relationship’, Brookings, 20 July 2020.

Zoya Sheftalovich and Stuart Lau, ‘How Xi Jinping Lost Australia’, POLITICO, 27 September 2021.

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