Mark McGowan, the leader of the resource-rich state of Western Australia, has been critical of Canberra's approach to China. Photo: WikiCommons

PERTH – Beijing and Canberra are again at loggerheads after China accused it of “violently interfering” after the Australian government voiced concerns over the recent Hong Kong elections. 

The tiff comes as Australia reports strong iron ore and LNG exports to China, largely from the one state loudest in its calls for a reset with Beijing – Western Australia.

The resource-heavy state’s premier, center-left Labor Party man Mark McGowan, has been steadfast since taking office in 2017 in his belief in the importance of the resource sector, and its largest customer China. 

While the argument made best known by Professor Hugh White in 2011 – that Australia would need to choose between trade and traditional alliances – was once believed to have moved on at the national level, it has stayed alive in Western Australia. 

Only this week Australia joined with the other Five Eyes intelligence-sharing allies – the US, UK, Canada and New Zealand – to suggest democracy had been eroded in the special administrative region of Hong Kong. 

A new vetting system for candidates before they could run in the election “eliminated any meaningful political opposition,” the allies said in a joint statement released late Monday by all the foreign ministers. “Actions that undermine Hong Kong’s rights, freedoms and high degree of autonomy are threatening our shared wish to see Hong Kong succeed,” they said. 

Since the handover to China, candidates with diverse political views have contested elections in Hong Kong; the latest election reversed this trend, they said.

Two weeks ago, the US, UK, Canada and Australia vowed to boycott the Winter Olympics, which start in February in Beijing. New Zealand also will not send its officials. The nations are taking a stance over alleged human rights abuses in Xinjiang of Muslim minority Uighurs. (However, all nations will still send their athletes.) 

Former Queensland policeman and now Australian Defense Minister Peter Dutton has taken an aggressive approach to China. Photo: AFP / Mandel Ngan

Boycott ‘in Australia’s interest’

Australian Prime Minister Scott Morrison said the boycott was in Australia’s interest. Defense Minister Peter Dutton brought up the case of tennis player Peng Shui, who was still missing at the time. Dutton had previously suggested Australia could join any US moves to defend Taiwan against a Chinese attack. 

China said the boycotting nations would “pay a price” and a foreign ministry spokesperson said that “the US, UK, Australia and Canada use the Olympic platform for political manipulation.” 

“Whether their officials come or not, they will see the successful Beijing Games.”

The problem showed another divide: between Canberra and Perth. 

Labor Premier Mark McGowan, who won his second election this year in a landslide so huge the state is close to being a one-party democracy, called the boycott “inexplicable.” The premier plans a “reconnection” tour to major North Asian economies once the borders open.

“I don’t understand why we’ve done that. The Olympics should be above politics,” he said.

China is the state’s largest trading partner. In 2020-21, exports were worth A$134 billion (US$95.5 billion), despite the hit to winemakers in the south of the state and barley farmers in the wheat belt. 

A staff member sorts Australian wine in a bonded warehouse in Nantong in China’s Jiangsu province in a file photo. Photo: AFP

Wines sales dry up

The wine tariff rise by China cost Australia’s wine industry across the whole country $1 billion in comparison. A recent SBS TV report suggested that wine sold into China pre-tariff still hasn’t sold as nationalism drives sales down, leaving Chile to take the top spot. 

“We obviously want to have a good relationship with China. They are an important player in our region and a major trading partner – in fact, the major trading partner, which generates millions of Australian jobs,” McGowan said.

“We obviously have a view that we should be more diplomatic towards China.”

McGowan was clear in early 2020, well before Covid-19 shot an arrow through the reset of the China-Australia relationship, that he wanted to keep politics out of everything. Australia’s iron ore goes mostly to China, as does a good portion of its LNG, although Western Australia typically exports more to Japan. 

McGowan has spent most of 2021 calling for a reset, using the oil and gas-focussed APPEA conference to do so to 1,700 delegates. 

“It’s in our security and economic interests to do so. The LNG industry, which exports to China and knows there are many international competitors, would understand that better than most,” he said. 

But it’s not a new issue for the politician. 

In November 2019, at a resources conference, McGowan attacked the federal government for its harsh China stance, suggesting human rights were not his business and outlined the nation’s centrality to his state’s economy.  

“It’s not in Australia[‘s] interest to have those issues intertwined,” he said. “There are literally hundreds and hundreds of thousands of jobs that are dependent upon it.”

FILE PHOTO - Fortescue Chief Executive Officer (CEO) Nev Power climbs a pile of iron ore at the Fortescue Solomon iron ore mine located in the Valley of the Kings, around 400 km (248 miles) south of Port Hedland in the Pilbara region of Western Australia, December 2, 2013.  REUTERS/David Gray/File photo - RTX2YWV1
Then Fortescue Chief Executive Officer Nev Power climbs a pile of iron ore at the Fortescue Solomon iron ore mine in the Valley of the Kings, about 400km south of Port Hedland in the Pilbara region of Western Australia on December 2, 2013. Photo: Reuters / David Gray

Attacking Canberra’s stance

He was reiterating what he had said a night or so previously at a gala dinner for the event, underlining the importance of China to his state while attacking Canberra’s stance, which he saw as counter-intuitive at best and directly damaging to his state’s economy. 

The conference McGowan spoke at included a large coterie of Chinese journalists brought over to see Australian resources know-how first-hand and came at one of many recent inflection points in ties between Canberra and Beijing.

Most states have been developing their own Chinese dialogues, bypassing Canberra. 

The most recent Resources and Energy Quarterly (REQ), released Monday by Canberra’s Office of the Chief Economist, suggests that in its two-year outlook scenario Chinese gas demand will rise 13%.

It will import 80 million tonnes by the end of the year, six tonnes more than former top importer Japan. Australia is its largest supplier, but losing market share to the US and Qatar. 

No Chinese buyers have signed on to take gas from the newly sanctioned Scarborough gas field. The EnergyQuest consultancy wrote last week in a report: “The apparent absence of Chinese interest in Scarborough is inexplicable in a situation where US producers are actively signing Chinese contracts.” 

This week’s REQ found iron ore exports worth $153 billion in 2020-21. Australia has 53% of the global market, although by the close of the year the price per tonne was at an 18-month low of US$90 per tonne after China curtailed steel production, citing power shortages that included thermal coal. 

Total volumes of iron ore exported from Australia were about 220 million tonnes in the September quarter of 2021, it said.