The China and Australia puzzle. Photo: iStock
The China and Australia puzzle. Photo: iStock

The complex and uneasy US-China and Australia-China relationships are about to get more stressful and complicated, given recent developments.

The Australian government has openly accused China of meddling in its political affairs and stealing university research material. In the US, the Congressional-Executive Commission on China held a hearing titled “The Long Arm of China: Exporting Authoritarianism with Chinese Characteristics.”

The US Congress also passed the National Defense Authorization Act, allowing navy ships from Taiwan and United States to visit each other’s ports.

These recent anti-China moves invite the question: Does heightening the rhetoric by the political establishments in Australia and US hurt China or themselves?

US Congressional-Executive Commission

The US Congressional-Executive Commission was set up to monitor Chinese activities in the US and around the world. The commission’s latest anti-China episode was holding a hearing titled “The Long Arm of China: Exporting Authoritarianism with Chinese Characteristics” on December 13.

One of the invited “China scholars” testifying before the commission said the BRI was a geopolitical agenda disguised as a trade platform. According to this “expert,” the BRI might be China’s “Trojan horse” to dominant the world.

The BRI will expand China’s global influence because of the economic opportunities it has generated. Trade between China and the participating countries is expected to surpass US$1 trillion this year. With nearly $1 trillion to be invested in these countries, its economic influence over those 60 countries (and growing) would only grow.

Unlike the US insisting that its neoliberal-inspired “Washington Consensus” is a “one-size-fits-all” model, China does not claim its “socialism with Chinese characteristics” should be a template for economic or political development for developing countries. Indeed, it always urges countries to adopt a model that fits their history and institutions. Given its words and deeds, China does not seem to be interested in dominating the world as its critics warn.

However, recent US and Australian policies seem to indicate they believe otherwise.

National Defense Authorization Act

The US Congress passed the National Defense Authorization Act this year, allowing US and Taiwanese warships to visit each other’s ports.

The act triggered a quick response from Beijing, warning that a US Navy ship docking at a Taiwanese port could invoke the 2005 Anti-Secession Act, using “non-peaceful means” to reunite the island with the mainland. In this regard, the US Congress might have made many people in Taiwan and Japan nervous.

The US might not come to Taiwan’s defense in such a scenario because such an intervention could spark a nuclear holocaust, but Japan might for economic and security reasons. Having Taiwan reunited with the mainland would leave its southern “underbelly” vulnerable. Japan also has a huge industrial presence on the island, built during its occupation.

Australia’s anti-China rhetoric

The Australian foreign minister has alleged that China is meddling in its universities. That allegation was said to have been sparked by some Chinese students questioning an Indian-Australian university professor showing a map of China without some of its autonomous regions or provinces.

Peter Jennings, executive director of the Australian Strategic Policy Institute, has claimed China might be using students or exchange faculties to steal Australian artificial-intelligence, supercomputing and driverless-car technologies, of which he claimed Australia was the leader. However, CNN Tech, the Brookings Institution and other Western technical analysts have declared China, the US, India, Japan and Germany, not Australia, as the leaders in all of these “Australian-inspired” technologies.

One could even argue that having Chinese scientists working at Australian universities might improve research quality.

Unnecessary policy dilemma

The decisions made by Washington and Canberra regarding China have created policy dilemmas for them. China is not perfect, but it did make  Australia the “lucky continent” and sustained the financial health of many of America’s largest enterprises.

Without China buying more than 30% of its exports each year, Australia would not have become as prosperous as it is today. Indeed, it was China’s huge demand for iron ore that sustained or lifted the commodity’s price, affording the Australian government increase spending which in turn contributed (in part) to increase growth from 0.3% in the first quarter to 0.8% in the second of this year.

As indicated in past articles, more and more senior officials from the business communities, states and cities are visiting the communist country to drum up business. President Donald Trump’s state visit to China this year culminated in reaping more than $250 billion worth of business deals for the US.

Without a sound and stable economic relationship with China, Trump’s ‘America First’ policy would not likely succeed. His administration’s much-talked-about tax-reform policy of bringing back manufacturing would be more fantasy than real

What’s more, the US requires China’s help in defusing many global issues such as the Korean Peninsula nuclear issue. And without a sound and stable economic relationship with China, Trump’s “America First” policy would not likely succeed. His administration’s much-talked-about tax-reform policy of bringing back manufacturing would be more fantasy than real. After decades of dismantling America’s factories and laying off workers, it would take years if ever before manufacturing can be viable.

China, on the other hand, might be able to weather a deteriorated relationship with the US and Australia. The country’s huge domestic market with enormous purchasing power could buy a big chunk of the goods that factories produce for the US market. In addition, its Belt and Road Initiative absorbs more. Reducing exports to US and Australia would cause some short-run economic difficulties, but China seems to to be prepared for that eventuality with its BRI, designating domestic consumption as the engine of growth and forging closer relations with other countries in Africa and South America.

For these reasons, those who advocate “get tough” policies may in fact harm Australian and US national interests more than China’s.

By maintaining a huge military budget to “contain” China, the US will have to cut spending on infrastructure repair and social programs, culminating in economic inefficiency and undermining economic growth. The American middle class will shrink further and the impoverished population will rise.

China can buy commodities and energy resources from other countries. Indeed, the US is trying to pry China away from buying Australian natural gas, offering Beijing a $45 billion LNG (liquefied natural gas) deal with Alaska. Brazil and other resource-based countries would be more than glad to replace Australia as China’s supplier of iron ore and other commodities.

By treating China as an “enemy,” the US and Australia risk upsetting their own business communities and consumers. Where can US firms sell large amounts of their products? China buys 25% of Boeing aircraft and it is the most profitable market for US automakers. US consumers can afford to buy many consumer goods because of China.

With regard to Australia, to which country or countries can its mining and gas companies sell large amounts of resources? Indeed, there is reason to believe that without China buying its commodities, sending thousands of students to its universities and millions of tourists visiting the country, Australia would be in far worse shape economically than it is today.

However, treating China as a “partner” would rile the two countries’ neoconservatives or anti-China crowd. For example, Trump’s recent “national strategic strategy” might not be his, but that of the “hawks.” The US president might sound belligerent in his rhetoric, but he is aware that upsetting China for no reason other than ideology would not “Make America Great Again.”

In Australia, the small parties that hold the balance of power would go ballistic over any friendly overtone with China. Its media and think-tanks would have a field day in crucifying the government.

The Australian and US governments are indeed between a rock and hard place. After many years of misleading information fed by the media, negative public opinion against China persists, albeit to a lesser extent. While “disliking” China, the majority of American and Australians are also depending on China for their economic well-being.

Ken Moak

Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China's Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.

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