How Gillard forged a post-Rudd China trust

Julia Gillard's deals with Beijing are not ground breaking, but her approach has made Australia's relations with China better than under Kevin Rudd.

Last week, Prime Minister Julia Gillard returned from China in a triumphant mood. Australia became one of just a small number of countries to secure an annual Strategic Economic Dialogue between its leader and the Chinese premier. Australian Treasury and Foreign Ministers will meet senior Chinese counterparts at the dialogue. A currency deal, which allows the Australian dollar to be directly converted into the Chinese yuan (without having to use the greenback as an intermediary currency) has been agreed to. There will be live firing exercises between the navies of the two countries and Chinese warships are likely to visit Australian ports later in the year. All in all, not bad for a prime minister who declared that she had little interest in foreign policy upon her ascension to power.

Back in April 2011, I published an article in The Australian newspaper arguing that Gillard would do better than her predecessor Kevin Rudd in managing relations with China. As we all know, Rudd is a Mandarin-speaking former diplomat with immense interest and some expertise in Chinese history, politics and culture - ‘foreign affairs’ is his thing. As prime minister, Rudd probably devoted more intellectual time and physical energy to Australia’s relationship with China than any prime minister in history. Yet, under Rudd, Australia’s relationship with China reached a generational low from 2009 onwards. In contrast, Canberra’s current engagement with Beijing is seemingly as strong as it was under the prime ministerships of John Howard, Paul Keating and Bob Hawke. Why has the ‘bogan’ in the Lodge – as Rudd reputedly called Gillard after the latter seized power from him – outshone a man who promoted himself as a ‘foreign affairs’ prime minister when it comes to Australia’s relationship with its biggest trading partner?

The main reason is the misguided nature of Rudd’s immense personal and national ambition of reorganising Australia’s role in Asia generally and with China specifically, combined with Gillard’s lack of game-changing ambition when it comes to Australia’s place in Asia. Ironically, the former mindset damaged Australia’s relations with China while the latter (in comparative terms) has enhanced the relationship. Let me explain how I arrive at this counter-intuitive position.

When Rudd became prime minister, one of his first decisions as leader was to ask his then foreign minister Stephen Smith to unilaterally withdraw from the Quadrilateral Initiative (involving the US, Japan, India and Australia) while standing next to Chinese Foreign Minister Wang Jiechi. In a highly symbolic gesture Rudd then broke with tradition when he visited China, but not our existing security partner Japan, in his first overseas trip to Asia as prime minister. He also proposed other initiatives such as the Asia-Pacific Community idea to reset and reorganise multilateral relations in the region, which was immediately enthusiastically received by China. This would implicitly have allowed China a much more equal place and standing in Asia’s new security architecture vis-à-vis the United States.

The problem was that Beijing largely views winning friends and influencing regional capitals as a zero-sum game with America. In this respect, any genuine break-through or sea-change improvement in relations between Canberra and Beijing is accepted as genuine and enduring by China only if it involves a corresponding distancing of our strategic relations with the US.

A strong supporter of the alliance with America, Rudd had no such intention of improving strategic ties with Beijing at Washington’s expense. Having ignored Beijing’s tendency to view its strategic relations with other states as a zero-sum competition, Rudd subsequently raised and then dashed Chinese hopes that Australia was shifting towards its sphere of influence and away from America. As awkward issues emerged between the two countries – for example, the failure of Chinalco to buy a larger stake in Rio Tinto; the subsequent arrest and jailing of Rio Tinto executive Stern Hu; Beijing’s displeasure at the arrival of Uighur activist Rebiya Kadeer for an Australian film festival etc - the Australia-China relationship under the Rudd government worsened.

Although disagreement over specific issues need not lead to a general deterioration of the bilateral political relationship, it is now widely known that the previous Chinese leadership came to view Rudd as two-faced and distrustful. As far as Beijing was concerned, the impressions created and words used by Rudd with the Chinese in meetings were inconsistent with impressions created and words used with counterparts in Washington and domestically. Although not all the blame can be laid at Rudd’s feet, the former prime minister clearly created false expectations in Beijing and subsequently mismanaged a relationship with the country that he was known to be an expert about.

Unlike Rudd, Gillard has shown the Chinese consistency in policy and mindset. This has undoubtedly been aided by Gillard’s fundamentally modest approach to Australia’s role in the region and in our relationship with China. Gillard has always taken the hard-nosed political view that foreign policy successes will rarely win you an election, but failures can certainly lose one for you. By adopting the mindset of not ‘rocking the boat’ in external affairs with large powers, she has settled on the well-trodden path of reaffirming the American alliance as the bed-rock of Australia’s security and improving relations with other countries the best that she can within a framework where ANZUS remains central.

Figures such as Paul Keating and Kerry Stokes deplore what they see as a lack of vision and imagination. But Gillard’s approach has the virtue of not artificially raising expectations in Beijing of Australia moving closer to its strategic and political orbit at America’s expense. While Beijing does not see Gillard as a particularly visionary leader in foreign affairs, they do not see the need to second guess the true motivation and direction of Australian policy under her leadership towards China. While there is no great Chinese admiration for Gillard, neither is there disdain for, nor distrust of, this Labor leader.

This pragmatic and conservative Gillard approach to China has reaped rewards simply because both countries are now soberly cooperating in areas when it is in their interests to do so – without attendant expectations of game-changing breakthroughs. Let’s look at the agreements that were announced between the two countries last week.  

From the Chinese side, the Strategic Economic Dialogue makes sense because Beijing is keen to establish a forum it can use to press Australia on policies that create obstacles to Chinese investment in the country. This includes lessening regulatory oversight and restrictions on foreign direct investment by Chinese companies, and also reviewing the ban on Huawei in bidding for the National Broadband Network. The currency deal makes sense as it reduces the transaction costs for exporters in both countries. And the announcement of limited joint military exercises and naval port visits is part of an overall Chinese effort to reduce the wariness of its military rise that is evident in every major maritime capital in Asia.

In other words, China has agreed to these deals simply because it is in China’s national interest to do so – no more, no less. As prime minister, Gillard’s virtue is not that she has been an outstanding and imaginative deal-maker when it comes to China; only that she is not viewed by Beijing as a distrustful deal-breaker in the way that the more cerebral Rudd came to be.

Finally, as further evidence that the announcements of last week do not represent a sea-change in our relations with China, remember that the annual leader’s meeting is between the Australia, Prime Minister and the Chinese Premier, not the latter’s President. Although Premier Li Keqiang has a lead role in economic policy formation and execution, it is the Chinese President Xi Jinping that sits atop the Standing Committee of the Politburo (China’s peak political decision-making body) and is Chair of the Central Military Commission (China’s peak military decision-making body.)

It is indication that Beijing intends to pursue an economically strong, but largely transactional relationship with Canberra for the moment, and is not seeking a genuinely strategic and game-changing one. This is not to take away from the significance of last week’s announcements, but to temper any expectations that our relationship with our largest trading partner has just been fundamentally transformed.    

Dr John Lee is the Michael Hintze Fellow and adjunct associate professor at the Centre for International Security Studies, Sydney University. He is also a non-resident senior scholar at the Hudson Institute in Washington DC and a director of the Kokoda Foundation in Canberra.

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Last week, Prime Minister Julia Gillard returned from China in a triumphant mood. Australia became one of just a small number of countries to secure an annual Strategic Economic Dialogue between its leader and the Chinese premier. Australian Treasury and Foreign Ministers will meet senior Chinese counterparts at the dialogue. A currency deal, which allows the Australian dollar to be directly converted into the Chinese yuan (without having to use the greenback as an intermediary currency) has been agreed to. There will be live firing exercises between the navies of the two countries and Chinese warships are likely to visit Australian ports later in the year. All in all, not bad for a prime minister who declared that she had little interest in foreign policy upon her ascension to power.

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