The true potential of China-Australia ties

Concluding the free-trade agreement between China and Australia this year is a worthy goal, but Tony Abbott should set his sights even higher by adopting a big, forward-looking agenda.

Next month, Tony Abbott will put his personal stamp on the Australia-China relationship when he leads an unprecedented delegation of state premiers and senior business leaders to China.

As previous prime ministers -- Hawke, Keating, and Howard --  who managed the relationship well have shown, its importance and complexity is such that it requires Abbott's personal attention.

The task for Abbott and his advisers, however, is much harder than it previously has been. Today China is vastly more important to Australia, is economically more powerful, and is internationally more assertive and confident.

Recent claims in Australia that the US is a more important economic partner than China are muddled as they confuse stocks of foreign direct investment with flows, effectively confusing the past with the present and the future. This makes no sense when the comparison is with a country that accounts for over a third of Australian exports; is the biggest source of foreign fee-paying students; and is the second most important source of tourist income.

Abbott would know that China’s economy today is almost twice the size it was when he visited as health minister in 2007. If, as is expected, his visit includes the south-western city of Chengdu -- the capital of Sichuan with a population of some 95 million -- he will see a city utterly transformed over the past seven years.

Apart from the former health minister’s jogging track alongside the Jinjiang River that runs through central Chengdu, little else remains from those years. He’ll arrive at a massive new airport terminal; police escorts will need to clear the roads of more than twice as many cars; he will speed along broad freeways sweeping under multi-storied, clover-leaf overpasses. From striking glass towers, he will gaze across miles of new construction, towering cranes, green parklands, and buzzing industrial zones.

Chengdu now houses the Chinese headquarters of many Fortune 500 companies, recently hosting a Fortune 500 global conference. After years of prevarication, Australia has now belatedly joined some 20 other countries with consulates in Chengdu.

On this trip, China’s leaders will want to understand how Australia views the relationship, how committed the Australian government is to maintaining close and stable relations, and whether the Australian Prime Minister has a thought-out vision of future relations.

For Australia’s part, the Prime Minister will want to understand the stability and growth prospects of the Chinese economy; the extent to which the new leadership has consolidated its grip on power; and, most important of all, China’s intentions towards its neighbours (especially Japan) and towards the US.

When dealing with China, head-of-government meetings are treated with the utmost seriousness. For the Chinese side, they offer both the opportunity to explain (and justify) policy settings, and the political and social systems, and hopefully attract a sympathetic hearing. 

They also use these meetings forthrightly to explain the government’s position on issues of some sensitivity both within and without China -- especially Tibet and Xinjiang. Taiwan is far less sensitive than it once was. Human rights standards are expected by the Chinese to be raised and their responses are well rehearsed.

Beyond these matters, over which the Chinese leadership knows big differences often exist with foreign visitors, they will look towards giving the relationship strategic direction, involving bilateral trade and investment deals and other forms of cooperation.

Following the recent National People’s Congress, energy, environmental research, and technology are likely to near the top of China’s list of areas for cooperation with Australia.

For the Australian side, the Prime Minister will no doubt wish to point to differences in values and the central role the US alliance plays in Australia’s security. Abbott will seek the early conclusion of bilateral free-trade agreement negotiations, the ramping up of bilateral military cooperation, possibly live cattle exports from Australia, and how Australian financial sector services firms can participate more fully in the sector’s opening up under recent reform policies. 

Abbott will also be at pains to reiterate that Chinese foreign investment is warmly welcomed in Australia, notwithstanding some restrictions on investment in agriculture and potentially residential real estate in the future.

A strong base of substantive issues exists for the visit to be constructive and productive. The Chinese side will go out of their way to make it a success.

There is no reason why it cannot also be warm and forward-looking, but this will depend in on the chemistry of the leaders and how well-prepared we are and what ideas we bring to the table.  

In terms of atmosphere, the Prime Minister will need to be measured in how he discusses the differences between us. It is important to recognise the Chinese leadership knows this litany very well.

Nothing he will say will be new to them, but how it is said will be closely scrutinised. If we are seen to be giving excessive weight to differences and putting relatively less on areas of constructive cooperation and vision for the relationship, goodwill and warmth on the Chinese side will dissipate quickly. That will make it harder to move on the Prime Minister’s other priorities.

The early missteps in managing the relationship by the new Australian government have been noted with considerable displeasure in Beijing. These were the unfortunate gaffes that Japan was our “best friend in the region” (the usual formula is “we have no better friend”); continuing the previous government’s blanket exclusion of Huawei’s participation in the National Broadband Network when a review was foreshadowed by some ministers; and the unnecessarily high-profile, media-driven account of representations made to the Chinese Ambassador over China’s declaration without consultation of an Air Defence Identification Zone in the East China Sea.

Each of these, however, is really a problem with style and presentation born from inexperience, rather than substance. Huawei doesn’t need the NBN business, for instance, though it no doubt would like it. But a blanket ban makes everyone on the Chinese side lose face and stokes feelings of resentment towards Australia.

In recent years, prime ministerial visits to China have tended to be defensive in tone. There is no need for that.

Australia should be confident in its approach. China welcomes a close and constructive relationship with Australia. The successful prime ministerial visits have been when prime ministers have had big, forward-looking agendas. Take Bob Hawke in the ‘80s, when the Channar iron ore project began the era of strategic cooperation in iron and steel sectors; Keating engaging China in the APEC leaders’ meetings; or Howard with North West Shelf Australia LNG project. When dealing with China, these big initiatives could only be done at the prime ministerial level.

The Prime Minister’s objective of concluding the FTA this year is worthy, but our sights could be much higher. Great scope exists for China to work with Australian firms in easing infrastructure constraints on resource exports, such as in the Bowen and Surat Queensland coal basins or the iron ore, copper, and other resource mines in the interior of Port Augusta and other regions of South Australia. China would also be interested in helping to consolidate and increase the efficiency of parts of Australia’s agricultural sector, such as dairy.

The potential agenda for Australia-China cooperation is vast, limited more by our imagination than by economic constraints. To tap into this potential, however, high-level understanding and trust between the leaders on both sides and between our business and wider communities more generally is required.

To this end, Abbott’s public and private support for the China-Australia Senior Business Leaders’ Forum is significant. At the leaders’ level, however, it is vital to move beyond seeing the relationship in purely transactional terms. Leaders must find ways of using cultural exchanges, education and scientific engagement, and cooperation regionally and globally, to lay a really solid grounds of respect and trust. Only then might we witness the true potential of what a strong China-Australia relationship could bring.

Dr Geoff Raby is co-Secretary General of the SBLF, chairman and CEO of Beijing-based advisory firm Geoff Raby & Associates, and a former Australian ambassador to China. He is also vice chairman of Macquarie Group China and a Vice Chancellor's Professorial Fellow at Monash University.