16 October 2019
Last weekend, in response to Peter Dutton’s criticism of Chinese Communist Party values, a Chinese foreign ministry spokesperson accused Australia of a “Cold War mentality”. The spokesperson, Geng Shuang, used the same phrase last year to describe the debate about foreign interference following the publication of Silent Invasion, Clive Hamilton’s controversial exposé of Communist Party influence in Australian academia and politics. In Washington, too, the US rivalry with Beijing is increasingly being likened to the Cold War.
But the West’s tensions with China are a new and distinct phenomenon. Unlike the Soviet Union, China offers the world an enormous and growing class of consumers. It’s not just a rival great power but a giant, attractive market, rich in opportunities. A popular theory following the Cold War was that no two countries with a McDonald’s would ever go to war; China already has almost 3000 outlets.
China’s rise forces countries to navigate ties with a nation that offers economic benefits, yet has very different values. For Australia in particular, overcoming this dilemma is crucial. China now accounts for 40 per cent of Australian exports. No single country has dominated Australian trade in this way since Britain in the early 1950s. No developed economy is as dependent on trade with China as Australia.
Yet, as Allan Gyngell points out in the latest issue of Australian Foreign Affairs, China Dependence, divergences in values and political systems are not the only determinants of the relationship between the two countries. These differences affect the level of trust between China and Australia, he argues, but do not preclude close relations. Values, he explains, “have to be weighed against interests, which often have a moral value of their own”.
“A strong economy, for example, provides us with more opportunities to build a just society … Many governments with which Australia deals closely, from Vietnam and Thailand to the UAE, have values different from ours. If Australia did not engage with such countries, our influence in the world would be minimal.”
The question for Australia is not whether, but how, to engage with China. According to Gyngell, Australia is well equipped to grapple with this challenge but is doing a poor job. It’s failing on a number of fronts, and he lists diplomatic blunders by successive Australian leaders, a lack of China experience among politicians and officials, and inadequate dialogue with Chinese-Australians among them.
There is a stark discrepancy between Australia’s current diplomatic and economic ties with China. In the past three years, China has reacted angrily as Australia moved to block its investments in significant assets and to prevent Chinese interference in domestic affairs. Other disputes have focused on the South China Sea or on China’s arrests of Australian citizens. Political relations have deteriorated. It’s been more than three years since an Australian leader visited Chinas. And yet, throughout this period, Australian trade with China has hit new highs, confirming Gyngell’s observation that values alone do not determine foreign relationships. Last year, trade increased by 17 per cent to $215 billion.
As Richard McGregor notes in a separate essay in Australian Foreign Affairs, China’s growing economy depends on a steady flow of products from Australia, including ore, and would suffer if it suddenly cut purchases. On the other hand, China is likely to use its economic clout to punish Australia in the future. The question is when and how this might occur.
“There is little doubt that China has its red lines, which, if crossed, would trigger sanctions,” McGregor writes. “Think Taiwan, or taking sides in a military clash in the South China Sea.”
This is not a Cold War. The rivals are not on the verge of nuclear confrontation and are not engaging in proxy wars like those that occurred in Vietnam and Afghanistan. The main battlefront is economic – for now. And Australia has more to lose than almost anyone else.