20 October 2019
Australian Prime Minister Malcolm Turnbull lamented that the country's largest trading partner is not also a dominant security partner. Photo: Reuters
Australian Prime Minister Malcolm Turnbull lamented that the country's largest trading partner is not also a dominant security partner. Photo: Reuters

Will China punish Australia the way it dealt with South Korea?

As China’s economic power continues to grow, countries in the Asia-Pacific region such as South Korea, Australia and Singapore have become increasingly reliant on Beijing for trade and tourism.

At the same time, these countries are highly dependent on the United States when it comes to national and regional security.

For years these countries have been successfully navigating between the two great powers in order to have their bread buttered on both sides. Nevertheless, as China is now aggressively seeking political, economic and even military leadership in the region, such two-faced strategy might no longer work in the days ahead.

Let’s take Australia as an example. In recent years relations between Beijing and Canberra have gone sour, as Australia has been accusing China of attempting to infiltrate its domestic politics by offering juicy political donations to its leading politicians.

Their diplomatic dispute culminated in the recent resignation of opposition Labor Party Senator Sam Dastyari over his alleged receipt of huge political donations from Chinese businessmen.

The controversy over Dastyari has prompted Australian Prime Minister Malcolm Turnbull to introduce new laws banning all foreign political donations. And his accusations against the Chinese government have sparked a war of words between Beijing and Canberra.

While the foreign ministry of China strongly criticized the Australian government for “poisoning the atmosphere of Sino-Australian relations”, Turnbull retorted in Mandarin: “The Australian people have already risen to their feet!”

The diplomatic dispute between the two countries can be traced to the fact that while Australia is relying more and more heavily on China economically, it is still looking to the US for military protection and strategic alliance, and hence Beijing’s dismay.

Between 2016 and 2017, the total value of Australia’s trade with China reached AU$175 billion (US$136.3 billion), nearly three times that between Australia and the US (AU$66 billion).

On the other hand, while Australia is home to 28 percent of the world’s mineral resources, Chinese companies are now buying some 80 percent of its total output, bearing in mind that the prices of these mineral resources can have a direct impact on the exchange rates of the Australian dollar.

Moreover, since 2014, China has become the largest source of international students studying in Australia, and these Chinese students have greatly stimulated the local economy. Meanwhile, cash-flush Chinese middle-class families are also flocking to Australia to snap up properties there.

Suffice it to say that Australia’s impressive economic growth record for 27 consecutive years would not have been possible without the “China factor”.

In fact, Australia’s growing economic dependence on China has already become a cause for concern in Canberra.

On Nov. 23rd, in a foreign policy white paper, Prime Minister Turnbull said: “This is the first time in our history that our dominant trading partner is not also a dominant security partner.”

Given that, he urged the US to enhance its strategic presence in Asia so as to maintain a “rules-based” order in the region.

To address the growing domestic populist sentiment against the influx of Chinese immigrants and capital, the Australian government has also toughened its stance on China.

Canberra has tightened control over the acquisition of Australian companies by Chinese buyers. The country is also taking sides with India, Japan and the US against China over the territorial dispute in the South China Sea, not to mention that Australia has been throwing cold water on China’s “One Belt One Road” blueprint.

China is obviously unimpressed with Australia’s unfriendly moves. Beijing would probably have just swallowed its anger if it was still the 1990s, when former paramount leader Deng Xiaoping decided that China should “keep its head down” when it comes to foreign policy.

However, as China is now well on its way towards becoming a global power, it appears President Xi Jinping is determined to adopt a higher profile and aim for more ambitious goals in diplomacy. Today’s China is no longer shy about exerting its economic influence and interfering in the domestic politics of other countries.

Some in the Australian business sector are worried that China might retaliate in the same way as it “punished” South Korea for its decision to deploy the THAAD missile system.

The simplest way for Beijing to put Canberra in its place is restricting the number of its outbound tourists and students to Australia. And if Canberra continues to adopt an anti-China stance, Beijing may impose even tougher sanctions.

This article appeared in the Hong Kong Economic Journal on Dec 22

Translation by Alan Lee

[Chinese version 中文版]

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Hong Kong Economic Journal contributor