Australia's Relations with China: What's the Problem?


Current Issues Brief 23 1996-97

Dr Stephen Sherlock
Foreign Affairs, Defence and Trade Group

Contents

Major Issues

Preface - Implications of the Death of Deng Xiaoping

Introduction

Australia-China Relations in Retrospect

1996: A Year of Friction

The Taiwan Issue: One China or Two?

The Abolition of DIFF: Against 'Accepted Practice'

US-Australia Defence Links: The 'Claws of a Crab'?

The Visit of the Dalai Lama

The View from Beijing

Australia's Challenge: Dealing with an Emerging Great Power

Containment, Engagement and Australia-China Relations

Economic Growth and Political Uncertainty

Conclusion

Endnotes

Major Issues

Australia's relations with China are amongst our most important foreign policy issues. China is maintaining rapid economic growth even while entering a period of political uncertainty. Economic growth is making the country a key trading and investment partner for Australia and its success is increasing Beijing confidence in asserting its position in regional and global affairs. At the same time, however, the decline of Maoist ideology, the growth of regional and social inequality and the decline of the Communist Party's control over people's daily life is throwing the legitimacy of the Party into question. The death of Deng Xiaoping will exacerbate divisions within the Party and might see a difficult period of succession. A more aggressive Chinese foreign policy could develop if a disruptive succession led to the emergence of a weak leadership appealing to virulent nationalism to shore up its position, especially in order to win the support of the armed forces.

The Australia-China relationship has traditionally been dominated by global geopolitical and strategic concerns, but since the 1980s the two countries have built up a range of common bilateral and regional interests, including strong economic ties. Nevertheless, as a growing world power, China still views individual bilateral relations in the context of wider global issues. In particular, Australia's alliance with the US means that Australia's relations with China are directly linked to health of the US-China relationship.

The relationship deteriorated severely during 1996 and Australia's policies on China and the US were subjected to unusual and strident public criticism by the Chinese Government. Using the metaphors beloved of Chinese commentary, a Chinese publication compared Australia to a bat which gave its allegiance to the mammals when they triumphed, but showed its wings and declared itself a bird when the birds were victorious - in other words Australia was torn between its connections with Asia and its traditional allegiances. The tensions were reduced by the end of the year, but the issues at stake were an indication of the underlying sensitivities in Australia-China relations which will continue to be a challenge for Australia in the future.

A number of actions by the new Australian Government, elected in March 1996, led China to believe that Australia was changing its China policy to one which was more pro-US and less friendly to China. Australia's support for the US dispatch of naval forces into the Taiwan Straits in response to Chinese missile tests during the Taiwanese elections was strongly criticised by China. China began to react with increased sensitivity to any official Australian dealings with the Taipei government. The Australian Government's abolition of the Development Import Finance Facility (DIFF) aid scheme was attacked by China as being 'against accepted practice' and may have been seen as supporting US efforts to reduce China's access to concessional development finance. The increased emphasis on the US-Australia alliance by the Howard government was criticised in the Chinese press as part of US anti-China strategy and as a move away from Australia's previous engagement with Asia. The visit of the Dalai Lama to Australia was also attacked as hostile to China.

Chinese perceptions of how it is regarded in international affairs are still strongly influenced by suspicions that the US harbours a desire to prevent China from taking its place amongst the major players on the world stage. These feelings came to a head during a number of disputes between China and the US from 1993 onwards, including trade issues and China's membership of the World Trade Organisation, human rights, nuclear weapons proliferation and US relations with Taiwan, especially the 1995 visit of the Taiwanese President to the US.

Given the key role of the US alliance in Australia's foreign policy, China often interprets Australian actions in the context of US policy objectives. Australia is appreciated for the occasions in the recent and more distant past when it has acted independently of the US, but China remains very sensitive to perceived changes in Australia's policies which suggest a return to policies of the past. Along with managing a growing Australia-China bilateral relationship, a key challenge for Australian policymakers will be to balance the demands of the Chinese connection while maintaining close ties with the US. The ambiguous status of the US and Australian relationship with Taiwan will be a continuing issue and the reunification of Hong Kong with China in July 1997 has potential for political and economic problems.

China is an emerging great power which has not yet been fully integrated into the established norms and institutions of international relations. Suspicious of US attitudes, China regards any pressure over political and economic reform or over issues such as Taiwan, Hong Kong or Tibet as incursions into Chinese sovereignty. The problems which plagued Australia-China relations during 1996 were an indication of the sensitive nature of the relationship. In particular, Australia's relations with China will be strongly influenced by the course of US-China relations during the second Clinton administration.

Preface - Implications of the Death of Deng Xiaoping

This paper was completed just before the announcement of the death of China's 'paramount leader' Deng Xiaoping on 19 February 1997. As Deng became increasingly old and fragile in the years before his death, international commentators devoted much discussion to the political implications of the succession from Deng's leadership. The paper includes a discussion of the growing political uncertainty in China with the decline of the Communist Party's Maoist legitimacy and the Party's loss of direct control over the economy and over people's daily lives, together with problems developing with social and regional disparities and the suppressed popular desire for democratisation. The death of Deng Xiaoping is discussed as a factor which will contribute to this uncertainty, but the paper argues from the position that his death is unlikely to have an immediate impact on events.

Had Deng's death occurred before the policies of economic openness and liberalisation which he championed from the late 1970s were fully established, elements in the Party still influenced by Maoist economic ideas might have been encouraged to attempt to regain ascendancy. Equally, had he died before his designated successor, Jiang Zemin, had consolidated his position, Deng's departure from the scene would have been more destabilising. From information currently available, it seems unlikely that Jiang's authority will be challenged in the immediate future and even less likely that there would be any serious discussion of returning to the economic policies of the past.

On the issue of economic policy, Jiang has recently been associated with a 'neo-conservative' approach designed to dampen the effects of popular resentment about corruption, crime, unemployment and the continuing underdevelopment of interior regions. These negative aspects of the growth of recent years have come to be identified with the freewheeling economic policies of 'Dengism', but it is significant that while attempting to tackle such problems, Jiang's leadership has never suggested that there would be any reversal of the fundamentals of Deng's economic strategy. Rather there has been an effort (largely successful) to bring the economy to a 'soft landing' after a period of overheating and the resultant high inflation which eroded many people's incomes. Beijing has also attempted to direct a portion of new investment into the interior to facilitate more even development.

As far as the leadership is concerned, there seems little doubt that Jiang Zemin is in firm control and has strengthened his position in recent years. Jiang has sponsored a range of proteges into influential posts in the Party, government and military and has established himself 'at the core' of a collective leadership. This allows him to act as a broker in the event of conflicting views between the conservative and moderates in the Party. Jiang has also made efforts to build up a body of thought in the tradition of 'Mao Zedong Thought' and 'Deng Xiaoping Thought'. Focusing on the need to reaffirm cultural and family values as well as the drive for prosperity, Jiang's ideas are designed not only to heighten his own stature but to reinforce the idea of the Party as a moral and political leader of the Chinese people. Jiang's efforts to reinforce his political and ideological position is important in the lead-up to the 15th Party conference to be held in October 1997 where he will wish to cement and formalise his dominant role. Jiang's main weakness is that he does not have the military background which could reinforce his support within the politically powerful People's Liberation Army. On the other hand, any other likely contenders for power, principally Prime Minister Li Peng, have the same disadvantage. Li Peng also suffers from his strong popular identification with the suppression of the pro-democracy demonstrations in June 1989.

It should be stressed that even if factional divisions were to emerge in coming months or years, the terms of debate would not be about the basics of economic philosophy such as those which marked the transition from Mao's rule to that of Deng Xiaoping. The great legacy of Deng's incumbency is the hegemony of an economic strategy based on opening China to the world market and greatly reducing the role of bureaucratic planning and direction in the allocation of resources for investment. The paradox which Deng also bestowed on his successors, however, is that while expanding wealth has provided new strength for the regime after the chaos of the Mao years, social change and social problems accompanying this growth have shown their potential to undermine support for the Party. Jiang's Zemin's efforts to restore the Party's legitimacy and ideological leadership are unlikely to see it return to the position it held during the post-revolutionary years. With social discontent in the cities and growing dissatisfaction in the interior, particularly amongst ethnic minorities in Tibet and Xinjiang, the Party may have to rely increasingly on the Army to assert its control.

Introduction

Relations with China are one of the most important aspects of Australia's foreign policy. As an emerging great power in our region with whom Australia is developing a major economic relationship, good relations with China will become an increasingly prominent feature of Australia's international interests. But maintaining good relations with China is also one of the most difficult challenges for Australian policymakers. The recurring friction in Australia-China relations which marked much of 1996 was a sign of the sensitive nature of dealing with China and a good indicator of the range of issues which can arise in managing the relationship.

Problems began to emerge in 1996 when China criticised Australia's policy on China and Taiwan which it perceived was becoming too closely tied with US policy and which it interpreted as throwing doubts on Australia's commitment to a one-China policy. This perception grew out of the new Australian Government's quick expressions of support for US actions in response to China's military exercises in the Taiwan Straits during the March 1996 Taiwanese presidential election, as well as the upgrading of Australia's defence ties with the US in July 1996. China also criticised the visit to Taiwan by the Primary Industries Minister, Mr Anderson, and the discussion about the possibility of Australia selling uranium to Taiwan. Adding to the ill-feeling was the decision by the Australian Government, in April 1996, to cut part of Australia's aid program to China. The Chinese Government also condemned the action by the Prime Minister, Mr John Howard, in meeting the Dalai Lama during the latter's visit to Australia.

Concerned to prevent any further deterioration in relations, Mr Howard moved, in November 1996, to reassure the Chinese Government that Australia had not altered its China policy following the election of a Coalition Government. He took the opportunity of the APEC summit in Manila to meet with the Chinese President, Ziang Zemin, to discuss the issues which had placed a cloud over the relationship between the two countries. The meeting was reportedly very successful and the Chinese Foreign Ministry issued a statement saying:

The Chinese Government attaches importance to the statements of the Australian Coalition Government on placing emphasis on Sino-Australian relations, adhering to a one-China policy [and] being against containment...We would like to develop a long, stable relationship with Australia on the basis of mutual respect, non-interference in each other's internal affairs, and seeking common ground while reserving our differences.(1)

Ziang Zemin also invited Mr Howard to pay an official visit to China some time during the first half of 1997.

Following the meeting with the Chinese President, some observers suggested that the problems affecting Sino-Australian relations had been overcome. Certainly, the meeting between the two leaders, together with other contacts at ministerial and official level during the final months of 1996, helped reduce misunderstandings which had developed in Beijing about the direction of Australian policy.

The whole affair, however, underscored the inherently touchy nature of the relationship with China. Despite the apparent passing of tensions, Australia's relations with China will continue to have potential for friction for many years into the future. This paper outlines the recent problems in Sino-Australian relations and the light they shed on the challenges which confront Australian policymakers. It provides a background against which to understand the development of Australia-China relations and discusses the nature of sensitivities in the relationship in the context of China's relations with the United States and the country's recent economic growth and political problems.

Australia-China Relations in Retrospect

Australia's relations with China and Chinese at a non-government level have been controversial for most of Australia's European history. Anti-Chinese feeling, occasionally erupting into violence, was a feature of Australian goldfields from the 1850s and a desire to prevent Chinese immigration was one of the first motivations for the White Australia policy instituted after Federation in 1901. At an official level, Australia-China relations were, from their foundation during WWII until recently, dominated by the concerns of wider strategic relationships. In 1941, China under the Nationalist government of Chiang Kai-shek became one of the first countries with which Australia established independent diplomatic relations. This relationship was established in the context of China's struggle against Japan rather than because of any significant commercial or political links between the two countries. When the remnants of the Nationalist government fled to Taiwan in 1949 after the revolution led by the Chinese Communist Party, the politics of the Cold War led the Menzies Coalition Government to refuse recognition to the newly established People's Republic of China (PRC). It was not until 1966, however, that Prime Minister Harold Holt sent an ambassador to Taiwan to seal Australia's recognition of the Chiang Kai-shek regime as the sole legitimate government of China. By that time the question of the recognition of China had become a major political controversy in Australia and became linked to the issue of the Vietnam War and perceptions of China as a threat to Australia's security and sponsor of communist subversion throughout Southeast Asia. Despite hostile political relations, Australia nevertheless continued to trade with mainland China, especially with major sales of wheat.

The situation changed dramatically at the beginning of the 1970s with the change of government in Australia and changes in US policies on China. In 1971 Mr Gough Whitlam, then leader of the Labor opposition, visited China just before it was announced that the US Secretary of State, Henry Kissinger, had had secret talks in Beijing in July as the precursor for a visit to China by President Richard Nixon the following year. One of the first acts of the newly-elected Labor Government in 1972 was to recognise the PRC as the sole government of China. This laid the foundations for rapid growth of diplomatic, cultural and economic links between Australia and China under both the Whitlam and Fraser Governments. These developments were facilitated by China's efforts to strengthen its ties with the West as a whole, firstly to find allies against the Soviet Union and, following policy changes in 1978, to boost China's economic growth by opening up to the world economy.

From the early 1980s Australia's dealings with China began to move away from a preoccupation with global strategic issues and to concentrate on regional issues and bilateral economic links.(2) Australia's objective of broadening its connections with China meshed with China's new foreign policy, enunciated in 1982, which gave greater weight to economic relationships.(3) Under the Hawke Government China developed into a major trading partner for Australia and development assistance, technical cooperation and industrial investment was expanded. In political terms, the 'special relationship' which Prime Minister Hawke considered had developed between Australia and China came to an abrupt end, however, with the violent suppression of the pro-democracy movement in Beijing in June 1989. Concerns about human rights abuses in China ensured that diplomatic relations between Australia and China were frosty for over a year, including a ban on ministerial visits until early 1990. Nevertheless, the importance of the commercial links which had grown up between Australia and China in the preceding decade meant that there was little possibility of relations returning to the kind of enmity and suspicion which had characterised the pre-1972 period. Trade and investment between the two countries were unaffected, and the Australian Government emphasised that Australia 'remain[ed] committed to a long-term cooperative relationship with China'.(4) By 1991 all restrictions on official interchange, except in the defence field, had been lifted.

The focus of the Keating Government on deepening links with the countries of Asia meant that particular attention was given to the relationship with China. At the same time the government was sensitive to continuing domestic and international concerns about China's human rights record and emphasised that relations were maintained with a 'realistic, business-like approach' rather than with the ideas of a 'special relationship' which had marked the pre-1989 period. Prime Minister Keating conducted a successful visit to China in June 1993, with an emphasis on trade and investment.

1996: A Year of Friction

Following the election of the Howard Government in March 1996, Australia-China relations encountered serious problems as the Chinese Government began to react to what it saw as change in the direction of Australian policy on China. China had expressed concerned about Australia's increasing contacts with Taiwan during 1995, but the problems reached a new level in 1996. The Chinese perception was fuelled by a number of actions by the Australian Government which Beijing interpreted as together forming a shift away from a previously supportive stance on China towards a position more closely tied with US interests and less friendly to China. The issues over which the misunderstandings developed were an indication of the sensitive nature of the Australia-China relationship and the degree to which the relationship is directly linked to the health of China's relations with the United States.

The Taiwan Issue: One China or Two?

In March 1996 Taiwan held its first fully democratic presidential election. The Chinese Government, in an effort to reassert its continuing claim to sovereignty over Taiwan and to influence Taiwanese electors not to vote for pro-independence candidates, began a demonstrative series of missile tests in the Taiwan Straits. In response, the US Government moved two aircraft carrier groups into the area to monitor the tests and to affirm its interest in the security of Taiwan. One of the first foreign policy actions by the new Coalition Government after its election in March 1996 was to call in the Chinese Ambassador to express its concern about the mounting tensions between China and Taiwan. The new Minister for Foreign Affairs, Mr Alexander Downer, also welcomed the US decision to move warships into the Straits as a sign of US commitment to the security of the East Asian region, as 'demonstrating [US] interest in participating in regional security issues in a very practical way'.(5)

Mr Downer's statement represented the strongest support of US actions by any government in the region. Chinese Government representatives did not make any particular public response to the position of the government, but subsequent events suggest that they took note of Australia's quick support for the US and began to look for further signs that policy in Canberra was changing with the new government, in particular that Australia was moving away from its 'one China' policy. China began to register great sensitivity to Australian dealings with the government in Taipei. In July, the Mayors of Beijing and Shenzhen declined to attend an Asian cities' conference held in Brisbane in protest against the attendance of the Mayor of Taipei, Mr Chen Shui-bian, a leading figure in the pro-independence Democratic Progressive Party. Mr Downer had issued a statement saying that the federal government had no objection to a visit by Mr Chen.(6) In August, reports (confirmed by Mr Downer) that the Australian Government had authorised negotiations for the sale of uranium to Taiwan drew a strongly negative response from Chinese Government representatives.(7) In September the Chinese Government criticised the visit of the Minister for Primary Industries, Mr John Anderson, to Taiwan with a business delegation, although similar visits had been made by ministers of the previous Labor government.

The Abolition of DIFF: Against 'Accepted Practice'

The next event which marred Australia-China relations was the decision, in April 1996, to abolish the Development Import Finance Facility (DIFF), a concessional finance scheme for developing countries. Funded as part of Australia's overseas aid program, the scheme had been controversial for some time and the government decided to abolish it as part of efforts to reduce budget expenditure.(8) Whatever the government's motivations, the Chinese Government reacted with dismay saying it had not been forewarned about the decision and that a number of Chinese agencies had put time and money into investigating the feasibility of several DIFF proposals. The Chinese Ambassador said the move would:

...not only cause financial loss on the Chinese side, but also do no good to the Australian side in terms of its credibility and business interests in China...We hope that the Australian Government will follow internationally accepted practices and continue to support the projects in the pipeline...(9)

The fact that the Chinese Government particularly objected to what it considered to be the peremptory nature of Australia's action was reiterated by a Chinese Ministry of Foreign Trade and Economic Cooperation official, Mr Wang Che, who told an Australian radio journalist that:

All these projects have been committed by the two governments. If they are not to be carried out, then it won't be in line with international practices.(10)

Thus the Chinese Government was concerned about loss of Australian economic assistance and considered that the manner in which the decision was carried out was a breach of international convention. But it has also been suggested that the Chinese were particularly concerned that the cancellation of DIFF funding was part of a wider campaign by Western countries to restrict the flow of development assistance to China.(11) Australia's move came at a time when other countries were reducing their concessional finance to China and US representatives in the World Bank and the Asian Development Bank were pressuring those institutions to rule China as ineligible for soft loans on the grounds of its growing economic strength. Australia's cancellation of projects in China financed through soft loans may have strengthened fears in Beijing that Australian foreign policy was taking on a new pro-US and anti-China character.

US-Australia Defence Links: The 'Claws of a Crab'?

Chinese concerns about Australian policy reached new heights following the annual Australia-US defence talks (AUSMIN) in July 1996. Part of the foreign policy agenda of the new Coalition Government was to re-emphasise Australia's security relationship with the US. At the AUSMIN talks the two countries signed a new security declaration and agreed to expand the range of joint exercises, including regular participation by US personnel on Australian soil. Chinese reaction to the development came quickly and stridently, in the form of a commentary in the official People's Daily. The paper noted that the US Secretary of Defence, William Perry, had described Japan and Australia as the northern and southern anchors of US security arrangements in Asia and concluded:

From this we can see that the United States is really thinking about using these two 'anchors' as the craws of a crab...The recent moves by the US in Australia show that the Cold War thought process has not changed much in the minds of some people, who still hope to play the role of the global policeman.(12)

Making it clear that Beijing saw the developments in US-Australia relations as part of a policy shift by Australia, the People's Daily commented:

Whereas the previous Labor Government paid more attention to building bilateral security relations, the new government has repeatedly emphasised the importance of its traditional allies.(13)

The author of the People's Daily commentary did reassure the Australian press that the main target of his criticism was the US, but said he feared Australia was 'being used by the United States' for Washington's strategic objectives.(14) Beijing gained what it considered to be confirmation of its fears when the Minister for Defence, Mr Ian McLachlan, made a statement in August arguing that China was a source of for the regional strategic environment.(15) Chinese criticism was broadened into a general critique of Australia's foreign policy in an article in World Affairs, a publication of the Ministry of Foreign Affairs. Using the metaphors beloved of Chinese commentary, the article compared Australia to a bat which gave its allegiance to the mammals when they triumphed, but showed its wings and declared itself a bird when the birds were victorious. 'It seems', the article continued, 'that Australia is suffering from the same confusion and embarrassment', and has never had 'a truly independent defence policy'.(16) Still stronger criticism was voiced by the Guangming Daily, which described Australia's support for US actions as 'parrot-like behaviour', and said the Australian government's claims that relations with Asia remained its highest priority were not reflected in 'concrete policies':

What countries have seen instead are aid cuts to Asia and speeches by the MP, Pauline Hanson, full of anti-Asian and anti-immigration sentiment.(17)

The Visit of the Dalai Lama

The final element in the friction in Australia's relations with China came with the visit of the Dalai Lama to Australia in September 1996. As soon as it was announced that the Buddhist leader and symbol of the Tibetan independence struggle would be visiting Australia, the Chinese Government began protesting against any suggestion that the Dalai Lama would meet the Prime Minister or any senior Australian Government figure. When the Prime Minister said he would indeed meet the Dalai Lama, the People's Daily launched a particularly strident attack on the Australian government:

...the reason for this absurd decision is that those [Australian] politicians, in league with the Devil, have ulterior motives and are unwilling to abandon their evil intentions of interfering in China's internal affairs.(18)

The paper warned that the decision would 'inevitably affect political, economic and trade relations' between Australia and China.(19) When the thirty minute meeting between Mr Howard and the Dalai Lama did occur on 26 September the Chinese Government issued a statement expressing its 'strong displeasure and deep regrets' and protesting that despite repeated Chinese objections, the Australian Government had 'not only allowed the Dalai Lama to visit Australia and offered him forums for his anti-China activities, but also arranged for its leaders to meet him'. The statement repeated the warning that the decision would 'unavoidably produce a negative impact on relations between China and Australia'.(20)

The strength of the Chinese reaction to the Prime Minister's meeting with the Dalai Lama was an indication of the sensitivity of the Tibet issue for Beijing. Nevertheless, senior members of previous Australian governments and parliament had held meetings with the Dalai Lama without the vituperation which marked their reaction to Mr Howard's meeting. The Chinese have always opposed such meetings but their response on this occasion was at a new level. It is quite unusual for Australian foreign policy to be subject to a repeated critique in the Chinese press.

The View from Beijing

The change in the character of Chinese statements about Australia needs to be understood as the product of a general perception in Beijing that Australian policy was being redefined under a Coalition Government. A number of individual actions without a united objective in mind were interpreted by the Chinese authorities as a co-ordinated policy response. The Australian Government did not appear to appreciate the extent to which Beijing would read a single coherent meaning into the actions. The view from Beijing was that Australia under a Coalition Government was becoming less sympathetic to the Chinese position on highly sensitive issues such as Taiwan and Tibet and was moving to re-emphasise traditional (especially US) relationships at the expense of Asian connections. Of particular disquiet from Beijing's point of view, Australia's renewed stress on the importance of the US alliance was seen as a return to a less independent foreign policy which would conform more closely to US interests. This was regarded with particular concern at a time when China-US relations were being affected by a number of disagreements.

Australia's Challenge: Dealing with an Emerging Great Power

Following the efforts of senior Australian Government officials and the meeting between the Australian Prime Minister and Chinese President in Manila in November 1996, the government of China brought an end to the hostile public critique of Australian policy. A Chinese presidential spokesman was reported as describing the Howard-Ziang meeting as 'very friendly':

One meeting cannot resolve all the problems, but the two leaders have reached a common understanding to overcome our difficulties and keep better relations in the future. This is the beginning of another stage; that we should keep the momentum going.(21)

In January 1997, the Chinese deputy Foreign Minister, Chen Jian, told an Australian journalist that 'understanding had been enhanced' and there were 'good prospects for the further development of Sino-Australian relations'. His comments indicate that the Chinese Government has a generally positive attitude towards the prospects for Sino-Australian relations.

Politically and militarily, China and Australia pose no threat to each other. Economically, the two countries complement each other. Furthermore, there are many opportunities for Australia and China to cooperate with each other in international and particularly regional issues.(22)

At the same time, Mr Chen's remarks also showed that Beijing remains extremely sensitive about a number of issues which it believes impinge on Chinese sovereignty and on China's right to take its place amongst the major powers in the world. He said the difficulties in 1996 were due to the Australian government taking 'some actions which ended up hurting the national feelings of the Chinese people'. He concluded that:

As long as the two countries respect each other's sovereignty and territorial integrity, bilateral relations will continue to develop and the potential for cooperation between the two sides will be enhanced.(23)

Mention of 'respect for sovereignty and territorial integrity' are diplomatically phrased references to key questions such Taiwan and Tibet, but also to Hong Kong and the general issue of China's role in the world community. Although Australia's relations with China have undergone a qualitative change during the last decade and are no longer framed in predominantly geopolitical terms, the Chinese leadership still conducts all its international affairs with broader regional and global implications in mind.

Containment, Engagement and Australia-China Relations

Chinese perceptions of how it is regarded in international affairs are still strongly influenced by suspicions that the US (and to some extent Japan and other Western powers) harbour a desire to prevent China from taking its place amongst the major players on the world stage. Chinese officials look back on a history in which China saw itself as the 'Middle Kingdom' to which the rest of the world paid tribute, followed by a hundred years of humiliation and incursions into its sovereignty by foreigners. When the Chinese people 'stood up', as Mao put it in 1949, and embarked on a new effort to rebuild their country, the US instituted a policy of 'containment' which the Chinese Government considered was an attempt to keep China weak and isolated. 'Containment' had ceased to be official US policy by the 1970s and the US now conducts its relations with China under the banner of 'constructive engagement', but Chinese officials often view attempts by the US and its allies to place pressure on China over any contentious issue as part of a latent desire to keep China down.

These crucial underlying factors in China's relations with the countries of the West became especially evident in the discord which affected US relations with China beginning from 1993. Relations deteriorated over a number of issues:

  • doubts, during 1993 and 1994, about whether the US would extend Most Favoured Nation (MFN) trading status to China because of its human rights record;
  • China's lack of protection for intellectual property rights;
  • China's nuclear tests and alleged export of nuclear-weapons-related technology;
  • US pressure on China to change its trading rules and practices as a condition for joining the World Trade Organisation (WTO);
  • the visit of the Taiwanese President to the US in 1995; and
  • the dispatch of US warships into the Taiwan Straits during Chinese missile firings at the time of the Taiwanese elections.(24)

To the Chinese Government, the trade disputes were a manifestation of US unwillingness to accord China due recognition for its growing economic strength. US actions over Taiwan and strategic issues began to be read as signs of a return to the policies of 'containment'. Beijing feared that while professing to seek 'constructive engagement' with China, the US actually wanted to contain the rise of a rival superpower.(25)

Given the key role of the US alliance in Australia's foreign policy, especially in Chinese perceptions, Australian actions are often interpreted in Beijing in the context of wider US policy objectives. Australia is seen as a faithful long-term ally of the US which supported the US during the Vietnam War and the Cold War and emulated the US policy of recognising the Taiwan regime as the legitimate government of China. At the same time, Australia is appreciated for its capacity to act independently of the US, including trading with China during the 1950s and 1960s and recognising the PRC in 1972, six years before the US. During the 1980s, Australia's close relationship with China also played a small role in facilitating China's economic and political opening to the world in the post-Maoist era. Australia also expressed its disagreement with US efforts, in 1993 and 1994, to link China's MFN status with the issue of human rights. Nevertheless, the Chinese authorities remain highly sensitive to any perceived changes in Australia's strategic and economic outlook and are especially wary of any moves to return to what could be seen as a slavish emulation of the US. While Australia and China have, since the 1980s, developed a strong bilateral relationship based on shared interests, China still handles its affairs with individual countries in the context of global strategic relationships. As Australia's bilateral and regional involvement with China grows in the future, a key challenge for Australia's policy-makers will be to balance the demands of the relationship with China while maintaining close strategic and economic ties with the US.

One of the central dilemmas for both Australia and the US will continue to be the question of Taiwan. China under the current regime would never accept a formally independent Taiwan, but Taiwan has been effectively independent for many years and is becoming an increasingly important economic player in the region, lobbying with growing effectiveness for a more regularised status in the international community. The contrast of Taiwan's transition to democratic rule with the authoritarianism and suppression of human rights in China has been instrumental in winning Taipei many supporters in the US, particularly in Congress. Any change in policy on Taiwan in either Washington or Canberra would jeopardise the even more important relationship with Beijing, yet the pressures on the current ambiguous arrangements can only grow in the future.

The issue of Hong Kong is not fraught with the complexities of Taiwan's status, but the territory's reunification with China in July 1997 has many potential problems, not only in terms of their implications for US-China relations but because of Australia's direct bilateral interests. Hong Kong is a very important trading partner for Australia whose economic future is of great interest for Australia, and Australia will be unable to stand aloof from the tensions which may develop over the issue of political freedom and human rights in the territory under Chinese rule.

Economic Growth and Political Uncertainty

The growing importance of relations with China for Australian policy-makers is set to continue because China is maintaining rapid economic growth even while entering a period of political uncertainty. International attention has focused even more on this uncertainty since the death of Deng Xiaoping. The Chinese economy has sustained an average annual growth rate of almost ten per cent over the last decade and is projected to become the world's second largest economy within the next ten years. China's growth, together with Australia's greater relative economic involvement in the Asia-Pacific region, have led to a twenty per cent average annual increase in Australia's exports to China over the last five years. China is currently Australia's fifth largest trading partner and if the trade figures with Hong Kong were to be added after reunification in July 1997, the total would rank third after Japan and the US.(26) The vigorous growth in the Chinese economy has continued to create opportunities for Australian investment in Chinese manufacturing, services and primary industries. Chinese investment in Australian agriculture and minerals has expanded considerably in recent years.(27)

In addition to the direct commercial implications, China's emergence as a major economic power is of key strategic significance for Australia because it guarantees a material basis for greater Chinese prominence in regional and global affairs. China's economic success has boosted the confidence with which the Chinese Government is conducting its foreign relations and asserting its position in regional territorial disputes such as the Spratly Islands,(28) in its relations with powers such as the US and Japan and over issues such as human rights. While China's military capability is limited and its armed forces are only at the beginning of what will be a long process of modernisation, the country's rapid economic development provides the necessary conditions for its eventual rise to the status of a major military power.(29)

Paradoxically, China's rapidly expanding economy is also likely to be at the root of future problems of political stability. The effective debunking of Maoist ideology following the rise to power of Deng Xiaoping has meant that the legitimacy of the Chinese Communist Party has come to rely on its capacity to deliver access to material wealth. But the benefits of the new approach have not flowed evenly to the Chinese people. In contrast with the shared backwardness of Maoist China, regional disparities are widening as well-situated provinces take advantage of new opportunities while poorer regions experience far less growth. The rise of market-driven economics has uprooted millions of people in search of work and thrown the future of millions of workers in old state-owned industries into doubt. With rising visible poverty and crime, many Chinese perceive that the benefits of economic growth are being monopolised by a corrupt minority. The suppression of the pro-democracy movement in June 1989, which arose partly to protest against such problems, further weakened the legitimacy of the Communists and has led them to depend increasingly on the power of the armed forces. The Party continues to shrink from any ideas of political liberalisation for fear of the complete loss of control which brought about the collapse of the Soviet Union. Meanwhile the continuous growth of the privately-owned economy and of foreign trade is steadily diminishing Beijing's control over the functioning of the economy and its capacity to exercise power over the daily lives of the Chinese people.(30)

In the background to these looming issues of social change, economic inequality and pressure for political reform is the question of the leadership succession after the death of Deng Xiaoping. Although Deng held no formal office from 1990, he was still a figure of immense authority until his death on 19 February 1997. His passing may exacerbate internal tensions and contest for power within the Party leadership. His death will, at the very least, throw popular attention back onto the issue of the role of the Party. It was the spreading of a factional dispute within the Party into the streets in early 1989 which provided a catalyst for the mass movement which culminated in the events around Tiananmen Square in June 1989. While Deng's death is unlikely to provoke an immediate crisis, the future course of the process of political change in China could profoundly affect the character of Chinese foreign policy. With the loss of Maoist ideology, the Party leadership has already increasingly emphasised its role as the defender of Chinese nationalism. As Michael Yahuda has argued, trends towards aggressive nationalism in foreign relations could be heightened if there is division or uncertainty during the process of succession:

The less disruptive [the succession] may be, the more likely it is that a self-confident leadership will emerge that would be able to pursue China's sovereignty claims with moderation... The more difficult the succession the more likely that a weak leadership would respond erratically and assertively to perceived challenges, especially if it were dependent upon the armed forces who are imbued with more virulent nationalist sentiments.(31)

Conclusion

China went through an extraordinary history of political convulsions from the first Revolution of 1911 through to the Cultural Revolution of the 1960s and 1970s.(32) Although the country is now making rapid progress towards economic modernisation, it has yet to establish political institutions which do not depend crucially on the will and authority of a few key individuals. China is rapidly integrating into the world economy, but the state structures which made integration possible are slow to reform and adapt to the new Chinese society that economic change is creating. The Chinese Government understandably expects that the country's emerging status as a leading world economy should be given due recognition in global institutions and affairs, but some parts of the international community still consider that China does not conform fully to the established norms of international relations. For its part, the Chinese Government, mindful of the fear and suspicion with which it is regarded in some quarters in the US, tends to interpret any pressure to reform its institutions and politics as a new form of anti-Chinese containment. Moreover, any policy or action by a foreign power which suggests a questioning of Chinese sovereignty over Tibet, Hong Kong or Taiwan is regarded as an act hostile to the interests of the entire Chinese nation.

These issues are fundamental to the background against which Australia must conduct its relations with China. As a key element in Australia's economic and strategic environment, China will occupy an increasingly central part of discussion about Australia's foreign relations in the future. The experience of the last year of Australia-China relations was an excellent indicator of the kind of issues which must be dealt with in order to maintain a stable relationship. The issues of the status of Taiwan and Australia's dealings with the Taipei government, human rights and the treatment of the Tibetan people, the conduct of aid and economic relations, and Australia's alliance with the US are all matters of great sensitivity for Australia-China relations. Individually, they have generally been managed without major incident and the relationship between Canberra and Taipei is tacitly accepted in Beijing. The actions of the Chinese Government last year, however, indicated that if the Chinese authorities perceive any movement in Australian policy which they interpret as inimical to Chinese interests, they will not hesitate to call existing arrangements into question. In particular, given the complexities of the Chinese relationship with the US and Beijing's sensitivity about the West's acceptance of China as a world power, Australia's relations with China will be crucially affected by the outcome of efforts to manage the problems in US-China relations during the second Clinton administration. Having reaffirmed the importance of the US-Australia alliance, a major challenge for the Australian Government will be to avoid misunderstanding in Beijing about the nature of Australia's dealings with the US.

Endnotes

  1. Canberra Times, 27 November 1996, p.2.
  2. Edmund Fung, 'Australia and China', in P.J. Boyce and J.R. Angel, Diplomacy in the Marketplace: Australia in World Affairs, Melbourne, 1992, pp.280-84.
  3. Michael Yahuda, The International Politics of the Asia-Pacific, 1945-1995, London, 1996, pp.207-211.
  4. Colin Mackerras, 'China', in R. Trood & D. McNamara, Asia-Australia Survey 1996-97, Melbourne, 1996, p.124.
  5. Financial Review, 13 March 1996, p.9.
  6. Financial Review, 11 July 1996.
  7. Age, 17 August 1996, p.1.
  8. For a discussion of the issues surrounding the abolition of DIFF see Ravi Tomar, A DIFFerence of Opinion: Cancellation of the Development Import Finance Facility, Parliamentary Research Service Current Issues Brief No. 20, 1995-96.
  9. Financial Review, 17 May 1996, p.2.
  10. Transcript of interview on ABC Radio National program AM, 6 June 1996.
  11. Rowan Callick, 'Beijing reviews attitude to Australia relationship', Financial Review, 19 November 1996, p.47.
  12. Quoted in Sydney Morning Herald, 8 August 1996, p.8.
  13. Australian, 8 August 1996, p.2.
  14. Age, 9 August 1996, p.8. Canberra Times, 25 August 1996, p.8.
  15. Australian, 23-24 November 1996.
  16. Age, 30 October 1996.
  17. Australian, 5 November 1996, p.6.
  18. Sydney Morning Herald, 26 September 1996, p.1.
  19. ibid.
  20. Age, 27 September 1996, p.3.
  21. Australian, 29 November 1996, p.2.
  22. Sydney Morning Herald, 18 January 1997, p.21.
  23. ibid.
  24. For a comprehensive analysis of the recent problems in US-China relations and the prospects for the future see Frank Frost, The United States and China: Containment or Engagement?, Parliamentary Research Service Current Issues Brief No. 5, 1996-97.
  25. ibid., p.23.
  26. DFAT, Composition of Trade, Australia, 1995-96, p.40.
  27. DFAT, Country Economic Brief: China, August 1996, pp.58-59.
  28. The Spratly Islands are a group of islands in the South China Sea which are subject to competing claims for sovereignty by the littoral states. For details see Alan Shephard, Seeking Spratly Solutions: Maritime Tensions in the South China Sea, Parliamentary Research Service Background Paper No. 6, 1993.
  29. For a discussion of military aspects of China's power see Gary Brown, China as a Military Power: Peril or Paper Tiger?, Parliamentary Research Service Research Paper No. 1 1996-97.
  30. For a comprehensive discussion of the changes occurring in Chinese politics and economy see Brian Martin, China in Transition: The Politics of Economic Reform and Political Succession, Parliamentary Research Service Research Paper No. 17, 1994-95.
  31. Yahuda, op. cit., pp.218-219.
  32. Following the overthrow of the decayed Empire in 1911, the failure of the first Republican government to consolidate its position resulted in the collapse of much of China into the rule of regional warlords. Then followed the ruinous slaughter and destruction of the Japanese invasion and a decade of war, accompanied by sporadic civil war between the Nationalists and Communists. The upheaval of the Revolution was soon followed by the disastrous social experiments of the Great Leap Forward and the Cultural Revolution, both of which cost millions of Chinese lives and which ruined the lives of millions more.
 
 

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