Australia and China at 40

By James Reilly and Jingdong Yuan

To mark the 40th anniversary of diplomatic relations between Australia and the People's Republic of China, expert writers from both countries have come together to analyze their relationship, addressing the question on many Australian minds: How should Australia respond to the seemingly unstoppable and dazzlingly swift rise of China? Highlighting security and economic issues, trade and investment, and political, diplomatic, and strategic challenges, this book examines the implications of Australia's deepening engagement with China and takes on big questions, such as Could this global powerhouse become a military threat? and Will these two countries have healthy trade and diplomatic relations and a genuine, robust dialogue?

• Language: English
• Publisher: Independent Publishers Group
• Release date: Jun 1, 2012
• ISBN: 9781742241388

Book preview

AUSTRALIA AND CHINA AT 40

AUSTRALIA AND CHINA AT 40

EDITED BY

JAMES REILLY AND JINGDONG YUAN

A UNSW Press book

Published by

NewSouth Publishing

University of New South Wales Press Ltd

University of New South Wales

Sydney NSW 2052

AUSTRALIA

newsouthpublishing.com

© University of New South Wales Press Ltd 2012

First published 2012

10 9 8 7 6 5 4 3 2 1

This book is copyright. While copyright of the work as a whole is vested in University of New South Wales Press Ltd, copyright of individual chapters is retained by the chapter authors. Apart from any fair dealing for the purpose of private study, research, criticism or review, as permitted under the Copyright Act, no part of this book may be reproduced by any process without written permission. Inquiries should be addressed to the publisher.

National Library of Australia Cataloguing-in-Publication entry

Title: Australia and China at 40/edited by James Reilly and Jingdong Yuan.

ISBN: 978 174223 338 3 (pbk.)

ISBN: 978 174224 138 8 (ePub)

ISBN: 978 174224 348 1 (Kindle)

ISBN: 978 174224 591 1 (ePDF)

Notes: Includes bibliographical references and index.

Subjects: Australia – Foreign relations – China.

China – Foreign relations – Australia.

Australia – Commerce – China.

China – Commerce – Australia.

Other Authors/Contributors:

Yuan, Jingdong.

Reilly, James, 1972–

Dewey Number: 327.94051

Design Josephine Pajor-Markus

Cover image Andrea Schaffer

Back cover image Gough Whitlam’s trip to China, 1973: NAA: A6180, 14/11/73/209

Printer Griffin

This book is printed on paper using fibre supplied from plantation or sustainably managed forests.

Supported by

CONTENTS

Foreword

Contributors

Introduction

Australia’s relations with China in a new era

James Reilly and Jingdong Yuan

Historical legacies

1  ‘The world changes’:

Australia’s China policy in the wake of empire

James Curran

2  From Kapyong to Kapyong:

A cycle in Australia–China relations

James Cotton

Hard or false choices?

3  Never having to choose:

China’s rise and Australian security 

Nick Bisley

4  Managing off-balance tripartite relations:

How to avoid unnecessary confrontation

You Ji

Economic interdependence

5  Sino-Australian economic relations:

A general review

Yu Chang Sen

6  China’s resources trade and investment with Australia 

Ding Dou

Australia–China relations in bilateral and regional contexts

7  Divergence in Australia’s economic and security interests? 

John Lee

8  East Asian regional co-operation and Sino-Australian relations

Han Feng

9  How your attitudes help shape relations with China

Fergus Hanson

Conclusion

Australia and the China boom

Michael Wesley

Notes

List of abbreviations

Bibliography

Index

FOREWORD

I am delighted to extend my congratulations on the publication of Australia and China at 40.

In December 2012 we will celebrate one of our most important bilateral relationships: the 40th anniversary of the establishment of diplomatic relations between Australia and the People’s Republic of China. The anniversary is an exceptional opportunity to reflect on our past accomplishments and, even more importantly, to contemplate future directions.

China’s emergence as Australia’s largest trading partner and as an increasingly important force in global and regional order presents arguably the most complex foreign policy dilemma to Australia. The manner in which both countries will choose to address their differences and build on strategic opportunities and long-term common interests will be the key mission of Australian and Chinese policymakers for the next forty years.

This mission will be underpinned by informed public dialogue and increasingly close interactions between Australians and Chinese outside government quarters.

The Australia-China Council sees its mission as a facilitator of these interactions. That is why on behalf of the Council, I am very pleased to offer our support to this important book that takes forward a frank and sophisticated conversation on the opportunities and challenges of Australia-China bilateral relations.

By bringing together an impressive group of Australian and Chinese thought leaders, Australia and China at 40 presents a timely and persuasive account of the complexity, depth and enormous development potential of Australia-China engagement.

I am in no doubt that the book will make a significant contribution to both public debate about Australia-China relations and the strengthening of mutual understanding and friendship between our countries.

The Honourable Warwick Smith AM

Chair, Australia-China Council

CONTRIBUTORS

NICK BISLEY is Professor of International Relations and Convenor of the Politics and International Relations Program at La Trobe University. Nick is the author of Building Asia’s Security (2009), Rethinking Globalization (2007), and co-editor (with Mark Beeson) of Issues in 21st Century World Politics (2010). In 2009–10 he was a Senior Research Associate of the International Institute of Strategic Studies and is a member of the Council for Security and Cooperation in the Asia-Pacific.

JAMES COTTON is Professor of Politics, University of New South Wales at the Australian Defence Force Academy, Canberra. He has held visiting professorial positions at the London School of Economics, University of Hong Kong, and the Woodrow Wilson Center for International Scholars. He is the author of over 200 publications on international relations, Asian politics and political thought. His first book was Asian Frontier Nationalism: Owen Lattimore and the American Policy Debate (1989); most recently he published (edited with John Ravenhill), Middle Power Dreaming: Australia in World Affairs 2006– 2010 (2012).

JAMES CURRAN is Associate Professor in the Department of History at the University of Sydney. In 2010 he was the DFAT/Fulbright Professional Scholar in Australia–US Alliance Studies, based in Washington D.C. He has served as a Policy Adviser in the Department of the Prime Minister and Cabinet, and as an Analyst in the Office of National Assessments. His books include: Curtin’s Empire (2011), The Unknown Nation: Australia After Empire (co-authored with Stuart Ward) (2010) and The Power of Speech: Australian Prime Ministers Defining the National Image (2004).

DING DOU is Associate Professor at the School of International Studies, Peking University. He is the author of The Sub-regional Economic Integration in East Asia (2001) and the sole translator of the university textbook, International Economics: A Policy Approach (2010). He has also published a number of articles in Chinese SSCI-listed journals, including World Economy and Politics and International Politics Quarterly. He has contributed numerous English articles to publications such as East Asian Policy, East Asia Forum, China Daily and The Japan Times, among others, as well as chapters in several edited volumes.

HAN FENG is Deputy Director and Research Fellow at the Institute of Asia-Pacific Studies, Chinese Academy of Social Sciences. A graduate from Beijing University, Prof. Han’s research focuses on security and international relations in the Asia-Pacific, politics and foreign policy of Australia and New Zealand, and Southeast Asia. From March 1994 to April 1995, he was a Visiting Scholar at the University of Tasmania. His major works include Contemporary Australia: Social Change and New Developments in Politics and Economy (2004) and other academic articles and opinion pieces. He is also Vice President, China Association of Southeast Asian Studies, and Secretary-General, China Asia-Pacific Studies.

FERGUS HANSON is the Director of Polling and a Research Fellow at the Lowy Institute. He holds a Masters in International Law from the University of Sydney, and has studied at the University of Cambridge and Uppsala University. He has worked for the Department of Foreign Affairs and Trade (DFAT), and at the Australian Embassy in The Hague. In 2010–11, he was a visiting Fellow at the Center for Strategic and International Studies, Pacific Forum, and was awarded a 2011 Professional Fulbright scholarship.

JOHN LEE is an Adjunct Associate Professor and Michael Hintze Fellow for Energy Security at the Centre for International Security Studies, the University of Sydney. He is also a non-resident scholar at the Hudson Institute in Washington. He is the author of Will China Fail? (updated and reprinted in 2009). He is frequently asked to brief ministerial- and secretarial-level officials in Australia, the US, Singapore, Malaysia, Indonesia and India, and is a regular commentator in international and Australian media on China, Chinese and Australian foreign policy, and international relations in Asia. He holds a PhD in International Relations from the University of Oxford.

JAMES REILLY is Senior Lecturer in Northeast Asian Politics in the Department of Government and International Relations at the University of Sydney. He is the author of Strong Society, Smart State: The Rise of Public Opinion in China’s Japan Policy (2012). He has also published articles in Modern Asian Studies, Journal of Contemporary China, Survival, Washington Quarterly, Asian Survey and China: An International Journal.

MICHAEL WESLEY is the Executive Director of the Lowy Institute for International Policy. Previously he was Professor of International Relations and Director of the Griffith Asia Institute at Griffith University. Prior to this, he was the Assistant Director-General for Trans-national Issues at the Office of National Assessments, and a Senior Lecturer in International Relations at the University of New South Wales. His most recent books include: There Goes the Neighbourhood: Australia and the Rise of Asia (2011), Energy Security in Asia (2007), The Howard Paradox: Australian Diplomacy in Asia 1996–2006 (2007) and Making Australian Foreign Policy, 2nd edition (with Allan Gyngell) (2007).

YOU JI is Associate Professor at the University of New South Wales. His research focuses on China’s political and economic reform; elite politics; military modernisation; and foreign policy. In addition to numerous articles and book chapters, his books include The Armed Forces of China (1999), China’s Enterprise Reform: Changing State/ Society Relations after Mao (1998), In Quest of High Tech Power: The Modernization of China’s Military in the 1990s (1996).

YU CHANG SEN is an Associate Professor in the School of Asian Pacific Studies, at Sun Yat-Sen University, Guangzhou, China. He teaches and researches on Asia-Pacific international relations and international security. He obtained his PhD from the Research Institute of Nanyang at Xiamen University, China, and was a visiting scholar in the Department of Modern Asian Studies at Griffith University from 1998 to 1999.

JINGDONG YUAN is Associate Professor of International Security and Acting Director in the Centre for International Security Studies at the University of Sydney. He is the author of The Dragon’s Will: The Exercise and Limitation of China’s Power from Pyongyang to Khartoum (2013), and co-author, China and India: Cooperation or Conflict? (2003). His publications have also appeared in Asian Survey, Far Eastern Economic Review, Contemporary Security Policy, International Herald Tribune, Journal of International Affairs, Nonproliferation Review and Washington Quarterly, among others.

INTRODUCTION

AUSTRALIA’S RELATIONS WITH CHINA IN A NEW ERA

James Reilly and Jingdong Yuan

Reaching 40 years of diplomatic relations with the People’s Republic of China offers an opportune moment for Australians to reflect on their past, present and future relations with the world’s most populous nation and a rising power. For the first time in its history, Australia’s leading trading partner is not a democracy; but rather a one-party authoritarian state with a fast-growing economy, a rapidly modernising military and global ambition.

China’s economic boom has directly contributed to Australian prosperity, and yet many Australians feel unease with China’s rising nationalism and assertiveness in regional affairs, tight political controls and state-driven investment. A more prosperous China is good for Australia’s bottom line, but a richer China can also mean a more powerful Chinese military. Economic interdependence with China may even constrain Australia’s diplomatic and security options. In short, Australia’s economic and security interests are diverging.

The rise of China poses a challenge of historic significance for Australia, matched only by the shift from Britain to the United States as Australia’s major security partner following World War II, and by Australia’s deeper engagement with Asia beginning in the 1970s. Having considered themselves a valued part of the British Empire, Australians were shocked by Britain’s inability to defend Australia against the Japanese threat in World War II. The rapid shift from Britain towards the United States was, at the time, the most profound and disorienting transition in Australia’s history of foreign relations.

Australia’s deep economic enmeshment within Asia, begun in the early 1970s and then actively promoted under Labor governments from 1983 through 1996, represented an equally disorienting transformation in Australia’s external relations. Closer engagement with Asia transformed the nation’s economy, diplomacy and national identity. Impressively, Australia managed to deepen its economic integration within Asia while reinforcing the security alliance with the United States. Today, the dual pillars of Asian economic co-operation and US security co-operation form the foundation of Australia’s prosperity and security.

Australia’s deepening economic interdependence with a rising China poses a national test of equal significance. Managing the China challenge requires, first and foremost, a lively domestic conversation guided by a clear sense of national purpose, priorities and values. This book is designed to stimulate and enrich that conversation.

The following pages bring together some of the most influential thinkers on Australia’s relations with China for an informed and lively discussion on the conditions that underlined diplomatic recognition, the subsequent developments of bilateral ties in economic, diplomatic and socio-cultural spheres, and the challenges Australia faces as China becomes a truly global power. Despite the prominence of China in Australia’s daily media, deepening scholarly interest, and a lively public debate over China policy, Australians still did not have a single book that examines the economic, political and strategic implications of their deepening engagement with China over the past decade.¹ This book now fills that gap.

Hard choices or false choices?

We begin by distinguishing between the hard choices and false choices posed by the rise of China. Must Australians choose between their economic and security interests; between the United States and China; between China and other Asian powers? Do Australians have to relinquish long-standing national values in order to sustain economic engagement with China? Establishing the extent to which China does, or does not, pose a dilemma for Australia’s external relations and domestic priorities is the first step towards an informed national conversation on the implications of China’s rise.

The alliance with the United States has remained the bedrock of Australia’s national security strategy for over half a century. The warm reception accorded Prime Minister Julia Gillard in her March 2011 visit to Washington is evidence that the relationship has grown even closer during China’s rapid rise to global power. For some, this is only natural. ‘I do not believe Australia faces a choice between our history and our geography’, former Prime Minister John Howard famously declared.² Yet such comforting ambiguity may no longer be sustainable. One place where these dilemmas come to ground is Taiwan. Having fought loyally alongside American soldiers in Korea, Vietnam, Iraq and now in Afghanistan, Australians may one day be forced to answer the question: would we go to war with China to defend Taiwan? Posing such uncomfortable questions helps put the China dilemma into stark perspective.

In his 2010 Quarterly Essay ‘Power Shift’, Hugh White urges Australia to consider charting a more independent course in Asia, as the US is forced to share power with a rising China.³ Other experts retort that Australia’s deepening economic interdependence with China requires strengthening, not eviscerating, the US alliance.⁴ Still others look to Japan, South Korea and India, arguing that Australia should strengthen its ties with other Asian democracies to balance against the rise of China.⁵ Australia’s influential, if subtle role in promoting Asian regionalism suggests yet another venue for engaging China. Indeed, as a middle power, Australia’s interests lie in strengthening international institutions, where norms, rules and conventions can and have influenced behaviours of states, including major powers such as the United States, and could have similar impacts on a rising China.

Since 1972, Australia has adopted a more pragmatic and less values-based approach to China than the US or most European states, a divergence that has at times raised eyebrows in Washington. As China’s ongoing crackdown on dissent deepens, with arrests of prominent dissidents, restraints on protests, and enhanced internet and media censorship, Canberra has continued to raise its concerns rather quietly, through the annual human rights dialogue. Is this adequate? Should human rights be integrated more closely into Australia’s overall China policy? Are Australians willing to see trade with China suffer in order to promote human rights? Contrasting former Prime Minister Kevin Rudd’s frank language on China’s human rights record in his April 2008 ‘true friend’ (zhengyou) speech in Beijing with Julia Gillard’s cordial lunch with Chinese business executives in Beijing three years later highlights the difficult choices facing Australian diplomacy.

In his recent book, There Goes the Neighbourhood, Michael Wesley warns that Australians remain dangerously insular just as Asia has become more important than ever for national prosperity and security.⁶ Yet Australians are also profoundly ambivalent over China’s rise. While keenly aware that the current round of prosperity amid the global financial crisis is, in many ways, ‘made in China’, polling data reveals that most Australians remain deeply worried over China’s burgeoning military might and resilient authoritarian system.

Chinese citizens are equally inattentive to fast-moving currents within Australian domestic politics and society. For its part, the Chinese government tends to view commercial setbacks in Australia as evidence of a pervasive ‘anti-China bias’ rather than resulting from divergent legal and political systems. While Beijing urges the Foreign Investment Review Board to assess its state-owned firms as commercial enterprises, it has failed to alleviate unease over Chinese investment in Australian agriculture and natural resources. As the two societies become more closely intertwined, such divergences complicate efforts to manage the relationship.

Trade-offs in the China trade

Focusing squarely upon the paradox of economic interdependence and security anxiety leads us directly to three critical questions. First, how has economic integration with China affected Australia? The speed, scope and centrality of the economic ties are remarkable. Total trade levels have grown nearly ten times since 2000, far exceeding growth in China’s overall trade volume and reaching just under $100 billion by 2010. The bulk of the growth came in Australian exports, which sky-rocketed from $5.4 billion in 2001 to $60.9 billion by 2010. China is now Australia’s largest trade partner by far, accounting for nearly onefifth of goods traded.⁷

The scope of the economic relationship is unmatched by any of Australia’s previous partners, with the exception of Great Britain. Few Australians today remain untouched by China. Rural Australians understand that agricultural and resources exports to China help sustain their local economies and indeed their way of life, even as they worry about Chinese investment in agriculture. In the cities, Chinese students populate Australian universities, Chinese workers staff both white- and blue-collar jobs, and Chinese migrants purchase and rent homes in Australia’s priciest real estate markets. Each year, almost one million people – primarily students and tourists – travel between China and Australia. The payoffs for Australians have been substantial. According to the Australia China Business Council, the average Australian household generates an additional A$3400 a year from trade with China.⁸

This deepening economic embrace with China begs the second question: how dependent is Australia on China? The disparity and imbalance of the relationship is obvious. China is Australia’s largest trading partner, but Australia is only China’s tenth-largest trading partner. Australia takes only 1.7 per cent of Chinese exports, while China takes one-fifth of all Australian exports.⁹ As trade with Japan and the United States has stagnated in recent years, the relative significance of China has become even more pronounced.

Australian exports of natural resources are at the core. Seven of the top ten Australian exports to China in 2010 were resources. Iron ore alone made up one-quarter of all merchandise exports to China. Coal exports were equivalent in value to all service exports combined. China now takes 73 per cent of Australia’s iron ore exports, and is Australia’s largest market for copper, nickel, aluminium, zinc, wool and cotton, and a major and growing market for natural gas.¹⁰ Thanks largely to Chinese demand, Australia has become the world’s leading producer of bauxite and coal, second-largest producer of gold, iron ore, lead, uranium and zinc, and the third-largest producer of silver and nickel.¹¹ Resources now account for over half of all Australian exports, up from 35 per cent a decade ago.¹² China’s voracious appetite for Australian resources has sustained, and indeed transformed, the Australian economy.

Relying so heavily upon energy exports raises fears of dependence. Yet Geoff Raby, a former Ambassador to China, asserts that the reverse is true. ‘China’s heavy reliance on Australia’s mineral and, increasingly, energy resources is a significant national asset for Australia in our diplomatic dealings with China.’¹³ Indeed, Australia is an energy superpower. The sixth-largest country in the world, with the 18th-largest economy (in purchasing power parity terms), a per capita GDP of US$55 150, and a well-educated population of 22 million, Australia is hardly a small state. Providing some 40 per cent of China’s iron ore imports clearly provides substantial leverage, as John Lee’s chapter in this volume argues. Bolstered by its security alliance with the United States, strategic location in Asia, and an attractive quality of life, Australia enjoys more power and autonomy than is often assumed.

Concerns about a deepening dependence on China lead to the third and most difficult question: whither China? Much of the debate over Australia’s China policy hinges upon a set of assumptions about China’s future trajectory that are rarely made explicit. Three domains of China’s future are critical: strategic, economic and political. While spotlighting China’s ongoing military modernisation, the controversial 2009 Defence White Paper failed to answer the most central question: is China becoming a threat to Australia? To some observers, China’s recent assertive stance over territorial disputes in the South China Sea and elsewhere proves that Chinese leaders have finally jettisoned Deng Xiaoping’s famous dictum to ‘hide our capabilities and bide our time’ (taoguang yanghui). Yet even if China is becoming both more capable and more assertive, the implications for Australia, and the possible options in response, remain unclear.

The alternative outcome is even less