Australia's China Challenge

Can Australia build a national consensus and capabilities to balance security concerns and economic opportunities?

Johannes Eisele—AFP Getty Images

18 August, 2016

This month may come down in history of Australia-China relations as a watershed moment. The decision by the Treasurer Scott Morrisson to impose a national security veto on both the State Grid and Cheung Kong Infrastructure bids for the New South Wales government's electricity distributor Ausgrid sparked a fierce debate about the future of our relationship with China. The decision has underlined a growing concern amongst Australian foreign policymakers about the nature of Chinese power and its geopolitical intentions, amidst China’s rapidly expanding global economic weight.

As Andrew Parker (Asia Society Australia Advisory Councillor) and Bates Gill write in the AFR, our economic and national security interests are closely intertwined when it comes to China. The sheer impact of China on Australian economy and future prosperity calls for a greater and clearer voice of the business community in shaping our China policy.

The need for a new thinking on the bilateral relationship is at the heart of the new seminal Australia-China Joint Economic Report by Peter Drysdale (ANU) and Zhang Xiaoqiang (China Centre for International Economic Exchanges). The report – a unique and comprehensive effort by academic and policy experts from both nations – calls for a new vision of the relationship, including a new bilateral investment agreement and the Australia-China Commission to drive education, policy and cultural exchanges.

The report is an ambitious and intellectually solid blueprint for what is a truly national project. But as Paul Kelly (Asia Society Australia Advisory Councillor) points out in The Australian, our business and policy communities are deeply divided and disconnected on how to balance security concerns and economic opportunities, and as a nation we have very little appetite for long-term, often painful policy, structural and cultural adjustments that are required by arguably the biggest disruption we face – the rise of Asia.

While the Australia-China Commission will be a welcome and important addition to the current set of bilateral mechanisms, there is also a strong case for strengthening our existing, often underutilized, under-resourced and unknown bilateral mechanisms, like the Annual Foreign, Strategic and Economic dialogues, Australia-China High-Level Dialogue and the Australia-China Council (for example, by linking their agendas and creating communities of academic and business leaders around them informing the government agenda - not dissimilar to the way U.S.-China Strategic and Economic Dialogue operates). The Government can also engage more actively and strategically a wide range of non-government education, cultural, non-profit and youth institutions across Australia creatively and tirelessly driving the relationship forward with no or little government support.

The China question cannot be addressed without understanding and explaining Australia’s place and interconnectedness with the broader Indo-Pacific region, building up of our institutions and diplomatic, intellectual and cultural toolkits to deal with the profound transformations of Australian life and the external environment brought about by Asia’s ascendancy and the shift of global power.

Bilateral investment agreements and a robust investment attraction and screening system will be a good start. But it will have to be complemented by a more inclusive conversation between business, government, education and community leaders (beyond Canberra and an elite circle) on the directions of our Asia policy. It may also mean investing in emblematic initiatives demonstrating trust and commitment - for example, intellectual and physical hubs of business, strategic and cultural engagement with Asia, which will celebrate and promote Australia’s links with the region - imagine Australia House in Beijing and Jakarta or an Asia-centered civic space in Sydney.

China’s challenge will only grow, proportionally to its power. The issues of size, values, political systems and economic dependency will not go away. But we have a number of strategic advantages – our regional neighbourhood: dynamic, growing and facing the same shifts of power and shared economic and environmental challenges; our relatively small size and opportunity (albeit increasingly elusive) to build a national consensus on the core challenges we face; our diaspora and multicultural fabric; our entrepreneurial and forward-looking approach to trade and global mobility; and the strength of our partnerships with both the United States and China.

No country can confidently predict and develop a neat solution to the change of the scale we face. But a smarter, more pragmatic and more connected Australia confidently managing a multiplicity of relationships with the key players in Asia and beyond, may have a chance.