China's influence in Australia faces tough new scrutiny as bilateral relations deteriorate. Photo: Twitter

SYDNEY —China’s state-owned enterprises may be curbing investment in Australia is dropping as relations between the two countries deteriorate, but there are rising concerns that they may be stepping up community infiltration instead.

Reports suggest that the Covid-19 crisis may have led to an upsurge in  activity by agencies run by Beijing and the Chinese Communist Party (CCP) such as the United Front, a body President Xi Jinping once referred to as his “magic weapon.”

“The Chinese Communist Party is strengthening its influence by co-opting representatives of ethnic minority groups, religious movements, and business, science and political groups in China and overseas,” said Alex Joske, a researcher at the Australian Strategic Policy Institute in Canberra, in a provocative new report on China’s activities in Australia.

“The CCP’s attempts to interfere in diaspora communities, influence political systems and covertly access valuable and sensitive technology will only grow as tensions between China and countries around the world develop,” he added. 

Chinese agencies appear to have pulled back after reports emerged that they were targeting strategic assets in Australia for security purposes. They invested only A$553 million (US$382 million) in 2019, or 24% of total inflows, according to KPMG and the University of Sydney, though some “private” firms have mixed ownership.

Overall outbound direct investment (ODI) from China to Australia fell 58% to A$3.4 billion ($2.4 billion), partly due to a crackdown by Beijing on spending, but also in response to closer checks on investment applications by Canberra.

A woman walks by Chinese language advertisements for Australian property in Sydney’s Chinatown on June 21, 2017. Photo: AFP/William West

“Chinese ODI into Australia has fallen at a faster rate in 2019 than Chinese investment into other Western countries, including the United States,” the study noted. Worldwide ODI from China declined 8.2% on 2018 levels, the study found.

Beijing is actively discouraging Chinese firms from dealing with Australia following a series of diplomatic tiffs, so prospects of a recovery of ODI in 2020 are remote. China has blocked the entry of Australian exports like barley and beef, and may cut off lucrative international education deals.

Australia this month tightened scrutiny of foreign investment applications from all sources and will now subject some deals to security checks. It denied China was the target but there is concern that Beijing is trying to buy “crucial” infrastructure like power plants and telecommunications.

In 2015, the Chinese company Landbridge was given a 99-year lease over  the operation of Darwin port, which plays an important role in defense activities, including a base occupied by US marines. Landbridge officials have close links to the Chinese leadership and the Communist Party.

Goldwind, another company with Communist Party connections, has been shortlisted to build two hydroelectric power stations in the Hunter Valley region of New South Wales, after several Australian bidders pulled out.

Likely to be reviewed by the federal investment agency, the pending deal was questioned by legislators in the state parliament on Monday, with Senator Deb O’Neill “deeply troubled” by its potential security aspects.

“If they cannot be trusted with medical gloves and masks, how can we expect them to act in Australia’s interest with our dams and our power grid?” she asked. “What is even more troubling to me is Goldwind’s desire to hide their ties with the ruling Chinese [Communist] Party.” 

Chinese Communist Party linked organizations face tough new scrutiny in Australia. Photo: Facebook

The United Front Work Department, a shadowy propaganda organization controlled by the Communist Party, is believed to have been behind the extraordinary airlift of tons of medical gear including face masks to China at the onset of the Covid-19 pandemic, which led to big shortages in Australia.

Joske said the United Front had similar operations to buy scarce supplies in Canada, the UK, the US, Argentina, Japan and the Czech Republic.

“After the virus spread globally, United Front groups began working with the CCP to donate supplies to the rest of the world and promote the party’s narratives about the pandemic,” he said.

A network of entities that advance the Communist Party’s goals, the United Front “undermines social cohesion, exacerbates racial tension, influences politics, harms media integrity, facilitates espionage, and increases unsupervised technology transfer,” Joske cautioned.

It also controls the China News Service, which in turn runs Chinese-language media outlets like Pacific Media in Australia and Qiaobao in the US, and at least 26 WeChat accounts that were accredited to nine Chinese groups. 

Joske said the WeChat accounts operate in Australia, the US, the UK, Canada and New Zealand, which jointly run the Five Eyes intelligence network, as well as in the European Union, Russia, Japan and Brazil.

“More and more party committees in state and private companies, universities and research institutes are engaging in United Front work. Representatives of the People’s Liberation Army (PLA) also attended the 2015 Central United Front Work Conference, indicating that the military is involved in United Front work,” Joske said.

Political systems are a particular target. Joske said that the China Association for International Friendly Contact, a group operated by a PLA bureau, was trying to get a foothold by courting prominent public figures.

Activists protest against Chinese government influence at the University of Queensland in Australia, July 2019. Photo: Twitter

“Those it has interacted with include an Australian mining magnate, a former Australian ambassador to China, a new‐age religious movement in Japan, and retired generals and bureaucrats from the US,” he added.

Former Australian Security Intelligence Organization chief Duncan Lewis said in November that China was trying to “take over” Australia’s political system. A crackdown was later announced on foreign political donations.

“They are trying to place themselves in a position of advantage,” Lewis claimed. “Not only in politics but also in the community or in business. It takes over, basically, pulling the strings from offshore.”

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