SYDNEY – It’s the Chinese equivalent of the post-Christmas sales in Western countries.
But instead of bargain-hunters camping outside department stores waiting for the doors to open, Chinese shoppers were standing by their laptops and smartphones ready to log on at midnight.
Only 24 hours later, Chinese consumers had spent almost half a trillion yuan, or US$75 billion, on one e-commerce platform alone, Alibaba, and about half as much again on other portals.
Across Australia company executives and trade officials were quietly relieved that recent tensions with Beijing did not seem to have filtered down to individual consumers.
Australian brands held their position as the fourth most popular foreign source in Wednesday’s “Singles’ Day,” or 11.11 Global Shopping Festival, after those of Japan, the United States and South Korea.
The online shopping splurge saw Chinese consumers spend more than $1 billion on Australian products, with items like Bellamy’s organic infant formula and Blackmores and Swisse diet supplements leading.
The consumer preference runs somewhat counter to the narrative often advanced by Beijing officials, that “hurt feelings” among ordinary citizens was part of the reason for a string of recent measures blocking imports from Australia.
However, such small sales through what’s called the Cross-Border E-Commerce channel are one thing. In more conventional trade involving bulk shipments coming through sea and air ports, it’s the attitude of officialdom that counts – and it takes the lead from state and communist party chiefs.
Here, Australia is starting to hurt. In recent months, China has slapped punitive anti-dumping tariffs on Australian barley, banned beef imports from certain abattoirs on health grounds and halted imports of Australian coal – leaving the Indian crew of one coal-carrier stranded since June at a northern China port.
An investigation into dumping of Australian wine was also recently announced.
Last week, a shipment of live lobsters destined for Chinese restaurants was held up in Shanghai and allowed to spoil. Chinese import agents told their clients they had been informed that no Australian shipments of barley, sugar, red wine, timber, wool, lobster and copper ores would be cleared from last Friday.
These items added up to about A$6 billion (US$4.3 billion) of Australia’s A$149 billion in exports to China in the year ended this June. If coal is added, the damage could surge above A$20 billion.
Strident commentary in the less “official” of the Chinese party-state media took the threat as real and added warnings, with the English-language China Daily editorializing that “Canberra only has itself to blame” and that Prime Minister Scott Morrison’s conservative Liberal-Nationals government needed to “steer clear of Washington’s brinkmanship with China before it is too late.”
However, Australian Trade Minister Simon Birmingham said Australia’s embassy had been told no such order had been given. China’s Foreign Ministry repeated this but said customs and health inspectors were just doing their jobs applying rules against predatory trade practices like dumping (selling at lower prices overseas than in domestic markets), mislabelling and pest infestations.
To experienced observers, it all added up to tactics designed to unsettle.
“China’s increasingly belligerent threats to close its markets to Australian exports have excited talk of a full-blown trade war,” said James Laurenceson, director of the Australia China Relations Institute at the University of Technology Sydney. “But let’s not panic. These threats are best understood as psychological warfare, not a statement of reality.”
To be sure, the biggest item in Australia’s exports to China, iron ore, is not something that can be readily supplied from elsewhere. The huge, high-grade iron ore mines of the Pilbara region in Western Australia ship 70% of China’s imports, earning some A$80 billion a year.
Alternative sources in Brazil are struggling to supply the rest, and vast deposits in Guinea, West Africa, are undeveloped. The other two big export sectors, tourism and education, have been temporarily knocked out of action anyway by the coronavirus pandemic.
But it could be argued that the scale of economic damage was not the point, Laurenceson argues. “Rather, by inflicting serious harm on lobster fisherman through to winemakers, the Chinese government is seeking to turn Australian producers into lobbyists that help it achieve its foreign policy objectives,” he said.
Indeed, it is niche consumer items like these that are connecting small enterprises in Australia with more worldly middle-class consumers in China being encouraged to spend now as one arm of Chinese leader Xi Jinping’s “dual circulation” economic strategy. To be cut off from this market would be a heavy blow, especially in Australia’s rural regions.
It’s new territory for Canberra. Up to a decade ago, Australia was regarded in Beijing as one of the more friendly and helpful foreign countries. But that started changing as more assertive Chinese power led Canberra to support the US “pivot” to Asia, host a US Marines task force in Darwin each year, and start to augment its own firepower.
In 2017, came revelations that a wealthy Chinese property tycoon, suspected of close ties to the Chinese Communist Party, had been donating large sums to Australian political parties, and indeed had one Australian Labor Party opposition senator in his pocket and spouting China’s line on the South China Sea. The senator resigned, and the tycoon had his Australian residential visa removed.
Then prime minister Malcolm Turnbull also responded by ordering an investigation of the CCP’s influence-building activity, legislating against foreign political donations, and making “interference” by foreign powers and their proxies a criminal offense.
The following year, Turnbull announced that the major Chinese telecoms equipment maker Huawei would be barred from Australia’s National Broadband Network and its impending 5G mobile network, on the grounds that the dispersed artificial intelligence allowed too much scope for foreign malware and disruption and that a 2017 Chinese law obliged China’s firms and citizens to assist its intelligence agencies when requested.
Turnbull also brought in a retired director of the Australian Security Intelligence Organisation, or ASIO, to chair the Foreign Investment Review Board attached to the federal Treasury Department. Investment applications by Chinese interests started getting more suspicious attention.
A proposed buy-out of an electricity distribution company by Hong Kong magnate Li Ka-shing’s group was knocked back on security grounds, as were two Chinese bids for a legendary outback cattle empire, S. Kidman and Co.
More opaquely, an A$600 million bid by China’s Mengniu Dairy Co for Australia’s second-largest milk processor, Lion Dairy & Drinks, from Japan’s Kirin group was blocked on national security grounds in August this year, even though Mengniu had been allowed last year to proceed with an A$1.5 billion buyout of Tasmanian infant formula maker Bellamy’s.
Since winning power from Labor in 2013, successive coalition prime ministers – Tony Abbott, Turnbull, and now Morrison – have cultivated a strategic relationship with Japan, and done their best to draw India into a “quadrilateral” with the United States and these two US allies.
Next Tuesday, Morrison will start a two-day visit to Japan, making him the first foreign leader to call on Prime Minister Yoshihide Suga since he took over from Shinzo Abe in September. They will sign a pact allowing their defense forces to operate and be supported in each other’s territory. None of this is welcome to Beijing.
Abe and Morrison also perfected the art of “Trump whispering” – flattering the now defeated president to keep their US relationships on a stable footing, and working together to preserve the Trans-Pacific Partnership trade, investment and intellectual property pact from which Trump withdrew the US immediately on taking office. America’s place is now open to be filled under Joe Biden.
This year, relations between Canberra and Beijing went into a deeper chill. In April, Morrison led a call for an independent, international investigation into the origins of the Covid-19 virus. The crackdowns in Hong Kong and Xinjiang also sparked periodic statements of disapproval from Canberra.
In June, ASIO and federal police officers staged a well-publicized raid on the home and office of a Labor politician sitting in the upper house of the New South Wales state parliament. The obscure MP, Shaoquet Moselmane, of Lebanese background and Muslim, had been a frequent visitor to China and fundraiser for its handicapped.
Along with him, the security agencies raided his part-time staffer, Chinese-Australian John Zhang. Agents also conducted dawn searches at the homes of four correspondents for Chinese media, who then left Australia, while two academics specializing in Australian studies at universities in China had their long-standing visas canceled. What the raids discovered is not yet revealed.
Then this month, Australian Federal Police made their first arrest under Turnbull’s foreign interference laws, charging Di Sanh Duong, 65, with “preparing for a foreign interference offense.” Duong, 65, of Sino-Vietnamese background and a resident in Melbourne for some 40 years, has been prominent in associations of ethnic Chinese from Indochina and a charitable fund-raiser. No details of his alleged offense have emerged.
In the background has been a drumbeat of warnings about a threat from China, kicked off a year back by outgoing ASIO director-general Duncan Lewis, who said the Chinese government was aiming to “take over” the Australian political system. “Espionage and foreign interference is insidious,” he told a newspaper. “Its effects might not present for decades and by that time it’s too late.
You wake up one day and find decisions made in our country that are not in the interests of our country.” The current ASIO chief, Michael Burgess, has also depicted Australia as awash with foreign spies.
The warnings are amplified by a hawkish think tank in Canberra, the Australian Strategic Policy Institute, which is funded by the Defence Department and major military equipment makers. They find a ready audience among defense reporters for the Australian media, and a group of restive backbenchers in the federal parliament who call themselves the “Wolverines” – taking the name from the group of high-schoolers who fought off a Soviet invasion in the 1984 film Red Dawn.
Suspicions cast about divided loyalties and the Covid-19 origins have led to a rise in racial slurs reported by Australia’s 1.2 million people of Chinese background.
Last month, this took a nastier turn when three prominent younger members of this diaspora volunteered to give evidence about it at a parliamentary inquiry and were asked by government backbencher Eric Abetz “whether they are willing to unconditionally condemn the Chinese Communist Party dictatorship.” Though this was widely slammed as “McCarthyism,” Morrison has not repudiated Abetz.
Although they acknowledge some differences cannot be bridged, many veteran diplomats say Canberra needs to temper its language and style of delivery, to avoid what former Western Australia state premier Colin Barnett has called “poking the panda.”
They pick out two examples where prime ministers have been too smart for the national good. Announcing his foreign interference laws in 2017, Turnbull said, in Mandarin, that “Australia is standing up” – echoing Mao Zedong’s famous statement at the founding of the People’s Republic in 1949. Then in calling for the Covid-19 inquiry this year, Morrison said it should be given “weapons inspector” powers, effectively painting China as a renegade state with something to hide.
In a speech this week at Canberra’s National Press Club, former ambassador to China Geoff Raby called for diplomacy to be returned to the heart of Australia’s foreign relations, now captured by defense and intelligence agencies, and a push-back against the idea that the only alternative to abject capitulation to China was belligerent criticism.
Another call for cooling the China debate came from Dennis Richardson, a former ASIO chief and head of the Defence and Foreign Affairs departments after a long diplomatic career. It was China’s fault the relationship has deteriorated since 2017, he said.
“It was China that militarized the South China Sea when it said it wouldn’t do so. It was China that broke an international commitment with respect to Hong Kong and it has been China that overstepped the mark in terms of foreign interference.”
But the political debate in Australia was not helping the situation, Richardson said. “I think at the moment, the Australia-China relationship has got too caught up with domestic politics in Australia, both inside of the Labor Party and inside the Liberal Party.”
Speaking at the launch of a new report by the Minerals Council of Australia, a mining industry lobby, about the prospects of diversifying exports away into Southeast Asian countries, Richardson also said business leaders should not be cowed by critics saying they were selling out the national interest to make profits.
“I think they should come back and say ‘too damn right I’m talking about my profits’, because profits mean jobs,” he said. “The business community should be far more robust in articulating publicly its own interest in this in a more coherent way in what they do at the moment.”
China has given two signals that it is willing to walk back to a more civil relationship, one from its deputy ambassador Wang Xining at Canberra’s National Press Club in August, and one in an interview with the Australian Financial Review by the former Chinese ambassador to Canberra and London, Fu Ying.
On its part, Canberra has put distance between itself and US Secretary of State Mike Pompeo’s attempt to paint the CCP as a usurper of the Chinese nation. In annual defense-foreign affairs talks in July, Foreign Minister Marise Payne stood alongside Pompeo and refrained from endorsing his anti-CCP rhetoric. “We make our own judgments in the Australian national interest,” she said, adding that Australia valued its China relationship.
It is unclear what more can be done. Trade Minister Birmingham and other ministers still can’t get through on the telephone to their Chinese counterparts. The diplomatic veterans suggest refraining from making needlessly insulting statements, restraining the Wolverines and making protests in the company of like-minded nations might be a start.
“If we do, if we steer a steady course, if we avoid gratuitous activity, we avoid calling into question the loyalty of good Australians, I think we’re going to get there,” said former ASIO and department head Richardson. “But we are going to be in the dog house I think for a good two to three years.”