FEATURE: China-Australia relations

In 2007, Australia's soon-to-be Prime Minister, Kevin Rudd, welcomed Chinese leader, Hu Jintao, to the APEC summit with a speech in Mandarin.

It was hoped Australia's relationship with China would only blossom, but instead a series of diplomatic issues between the two countries has seen the long-standing political relationships become increasingly strained - even as new business relationships bring the two countries economically closer than ever.

Last Updated: Thu, 17 Sep 2009 08:47:00 +1000

And almost two years on from his historic welcome, Mr Rudd says Australia's relationship with China will not always be smooth.

"I think the China, Australia relationship is always full of challenges," he said.

"It always has been thus and it will be thus for quite a long time to come. That is because we share enormous common interests with our friends in China and we have continuing differences.

"They are differences of values, and from time to time differences of interests. There could well be further bumps in the road ahead. Our challenge in managing these relationships is simply to negotiate those bumps in the road as they occur."

Defence White Paper

The first of those bumps appeared with the launch of an Australian Defence White Paper, focusing on the country's future security plans, and the strategic implications of China's rise.

The paper didn't declare China to be a threat, but former deputy head of Australia's defence department and now head of the Strategic and Defence Studies Centre at the Australian National University, Professor Hugh White, says the White Paper's message about the region is muddled.

"It is not sure whether we should regard China's growing military capacities as a threat to us or not," he said.

"And it's not too sure whether we should be fundamentally transforming our force structure in order to respond to that kind of a threat or whether we should keep doing more of what we've been doing in the past."

The reaction from China wasn't muddled - with a Chinese foreign ministry spokesman quoted as saying China is a peaceful force which neighbour countries should see without bias.

Australia's Defence Chief, Air Chief Marshall Angus Houston said there was no official response from China.

"I had a conversation with the defence attache and he was very balanced in his approach to the briefings that were conducted in Beijing and very open with me about what's in the White Paper," he said.

Rio Tinto-Chincalco deal

The Chinese government did make its disappointment known, however, over the collapse of a major Chinese investment in mineral resources company Rio Tinto.

In June, Rio Tinto rejected a huge investment by China's Chinalco after arranging another deal with rival miner BHP Billiton, and China's government spokesman, Qin Gang, expressed Beijing's displeasure at this result.

"The decision made by Rio Tinto, I believe, has not only very much disappointed the related Chinese company, but has caused strong reactions from the iron and steel industry and also the general public in China," he said.

Australia's government maintained the collapse of the deal was a commercial matter, with Trade Minister Simon Crean saying there is still a role for foreign investment in Australia's economic landscape.

"I believe we can make the argument as to why Chinese investment is good for this country, if that investment is expanding our productive activity, if that investment is enabling us to better capitalise on our comparative advantage," he said.

Stern Hu

The business and the politics of the deal appeared to come to a head in July, when China's state security agency arrested four Rio Tinto executives - among them Australian Stern Hu - on suspicion of espionage and stealing state secrets.

The arrests came at a time when China's steel mills, and miners like Rio Tinto, were in intense negotiations over the contract price of iron ore - and the collapse of the Chinalco deal was fresh in the minds of both countries.

There was talk about payback, but Andrew Godwin from Melbourne University's Asia Law Centre thinks that's unlikely, because the damage it would do to confidence in China would be too great.

"That, to me, would constitute a greater threat to confidence in China generally, and for that reason, I'd be surprised if they were motivated by those concerns," he said.

The Chinese foreign ministry spokesman, Qin Gang, warned the case was an internal legal matter for China.

"It is inappropriate to make this individual judicial case bigger, or even politicise it, because this will be no good for Australia."

Politicised it was, however, with Australia's opposition saying the lack of information out of China about the arrest showed evidence of a fracture in Australia-China relations.

Russell Smith, formerly an Australian military attache in China, says when it comes to China, the diplomatic relations have to take a back seat to security.

"I would agree with that, because diplomacy takes a back seat when you talk about national security," Mr Smith said.

"The Chinese are clearly saying this is a case of national security."

When charges were laid in August, the executives were accused of violating commercial secrets and taking bribes, and Australia said 'internal pressure' helped persuade China to downgrade its charges.

Rio Tinto said the downgrade showed the case against its executives were weak, and suspended iron ore price negotiations with China.

The head of Rio Tinto's iron ore division, Sam Walsh, says talks have been suspended indefinitely because China has detained the company's negotiators.

"Not at this point in time we're not negotiating, no," he said.

"I mean, remember that we have our negotiators detained."

Rebiya Kadeer

As Stern Hu waited in detention for charges to be laid, another point of contention between the two countries was brewing in China's north-west Xinjiang province.

Riots in the capital, Urumqi, on July 5, between mainly Muslim Uighurs and Han Chinese left nearly 200 people dead, and thrust the region's ethnic tensions, and exiled Uighur leader Rebiya Kadeer into the international spotlight.

Ms Kadeer, President of the World Uighur Congress, was accused by China of planning the riots, just weeks before a film about her life, The Ten Conditions of Love was due to be shown at a film festival in the south-eastern Australian city of Melbourne.

Organisers of the Melbourne International Film Festival say they refused a request by the Chinese consulate to withdraw the film - which led to a boycott of the festival by Chinese film-makers and cyber-attacks on the festival's website.

And Australia would receive an official complaint from the Chinese government when it permitted Ms Kadeer to visit the country in August to attend the premiere of the film.

During her visit, diplomatic pressure continued, with Australia's National Press Club saying was pressured to drop a speech by Ms Kadeer - a move Australia's Foreign Minister, Stephen Smith, described as counter-productive.

"I've made the point myself to my counterpart that when such representations are made, often what occurs is that the person the subject of the representations gets much more publicity that would otherwise have been the case," he said.

And Mr Smith also said a visit by Chinese Vice Minister for Foreign Affairs, He Yafei, had cancelled a scheduled visit to Australia in the wake of the visit.

"If it does take further action as a result of us allowing Rebiya Kadeer to come to Australia we will of course regret that," he said.

"From time to time in any bilateral relationship there will be difficulties. These difficulties need to be managed carefully and successfully as Australia is currently managing difficulties in the relationship we have with China."

Economic deals

If it's been a time of political tensions, the time for business relations between Australia and China has, conversely, never been better.

Amid the diplomatic tensions, a number of major deals were mooted and signed, as China's industrial engine eyed Australia's resources sector.

The centrepiece was a $US41.2 billion dollar deal to sell liquefied natural gas from Australia's Gorgon field to Chinese energy giant PetroChina over the next 20 years, described as the largest export deal in Australian history.

In other deals, Chinese state-owned MinMetals moved to buy up most of struggling miner OZ Minerals, steelmaker Baosteel Group took a minor stake in iron ore exporter Aquila Resources, a cut-price deal was reached for Fortescue Metals iron ore exports, coal-producer Yanzhou bought Felix Resources, and the China Guangdong Nuclear Power Company positioned itself for a major stake in Australian uranium exploration company Energy Metals.

Australia's Resource Minister, Martin Ferguson, who was in China to ink the Gorgon gas deal, says the business links between the two countries have never been stronger.

"China is resource and energy-hungry; Australia's well-placed to meet the needs of China as it goes forward on the development phase," he said.

"With any relationship there are tensions from time to time, but life goes on commercially. China needs our resource and energy products, and we're looking to actually sell those resources and energy products to China. So the relationship is mutually beneficial."

Business and politics

Professor Minyue Hou, Deputy Director at the Australian Studies Centre at East China Normal University in Shanghai, says while there have been tensions in recent months, there are no lingering historic problems - and no ongoing issues - as long as both sides remember whether they are talking about business, or talking about politics.

"In dealing with the bilateral relations between these two countries if it is purely about economic matters, I don't think there will be a lot of trouble or disputes," he said.

"But sometimes it is very hard to separate economy and politics. If there is some connection between security, politics and economy, I think caution needs to be exercised by both sides, to deal with the political and security issues connected with economic relationships very carefully."

Lacking the bilateral pillars

Amid the flurry of commentary about how low Australia-China relations have sunk, one of Australia's leading diplomatic figures and experts on relations with Asia has detailed precisely where Kevin Rudd's government has failed to manage a relationship that is out of the ordinary.

In 1972, Australia and China opened their doors to each other. The then Whitlam Labor government in Canberra officially recognised the People's Republic for the first time. An exchange of ambassadors the following year saw Beijing send one of the main architects of the relationship, Zhu Qizhen, to its new embassy in Canberra while Canberra sent Professor Stephen FitzGerald to be its first representative in Beijing.

Professor FitzGerald's knowledge of China is deep, his understanding of the processes of running foreign relations broad, and he has now levelled some robust criticism at the Labor government of Kevin Rudd about its management of one of Australia's most important relationships.

He outlined his position in an essay for the East Asia Forum, a blog run by the East Asian Bureau of Economic Research based at the Australian National University, and elaborated on some key points in an interview with Radio Australia's Linda Mottram.

He says the troubles of the last 18 months in the Australia-China relationship are major and are on Australia's side.

"The major problem seems to me to be that the government has not really set out a long-term policy or made a long-term strategic framework with China," Professor FitzGerald says.

Since this is directed at the government of a man noted for his China expertise, the Prime Minister Kevin Rudd, now in office for nearly two years, it is damning. And it is detailed.

"The basis for any such framework would be an extended China assessment, which is fairly common practice in approaching major foreign policy issues.

"There doesn't seem to have been such an extended assessment.

"So we're lacking the most important pillars for having a strong, robust and effective China policy," Professor FitzGerald says.

This is not what was expected of Kevin Rudd, Sinologist and Mandarin speaker with a diplomatic background.

"The fact that one may have that kind of experience does not in itself suffice if you don't put the long term strategies in place and develop a consistent narrative which is explicable to one's own government as well as to the Australian public and also of course to the Chinese government which is to say the least puzzled at the government's China policy and finds it inconsistent and difficult to explain," Professor FitzGerald says.

"It also requires all the advice of all the professional agencies, all the intelligence that can be brought to bear, and not just one politician," he says.

Australia was recently described in an analysis by the Lowy Institute for International Policy as having a "diplomatic deficit", echoing an ongoing complaint by observers and some diplomats that Australia's Department of Foreign Affairs and Trade has been run down over recent years and lacks the capacity needed in such challenging times of major global shifts.

No one to talk to

Without the proper framework for its relationship with China, Australia has found itself with no-one to talk to when serious matters do arise, Professor Fitzgerald argues, for example in the Stern Hu case.

While such issues can be expected to arise from time to time, Professor FitzGerald says dealing with them requires a well articulated position on the relationship and an effective dialogue.

As the Stern Hu matter dragged on over the weeks (and continues to do so), Australia's leader and foreign minister were talking not to their Chinese counterparts but to a vice-foreign minister, a relatively junior position in the Chinese system and certainly not the equivalent of an Australian Prime Minister.

"What I mean by dialogue is dialogue of a kind where you have connections at very senior level, you are able to pick up a phone and talk to people and even though there may be disagreement, there is a capacity at the other end and a willingness to talk and to discuss these issues at high level," Professor FitzGerald says.

There is a similar problem, he says, running through all the recent issues that have dogged the relationship, with private channels away from the glare of the media apparently non-existent.

Defence, investment talks lacking

The failings as Professor FitzGerald sees them are also worryingly evident in the case of the recent Australian Defence White Paper.

Australian officials visited China ahead of the paper's public release to brief officials on the contents of the document.

But that, Professor FitzGerald says, is not the same as an ongoing dialogue about defence matters, which he says Australia does not have with China.

And that turned out to matter, given the focus on China after the White Paper's release and some experts describing its message as confused.

Professor FitzGerald says the White Paper's "imaginings" about a potential, future, Chinese military threat were opposed by the key Australian agencies, the Office of National Assessments and the Defence Intelligence Organisation.

"The Prime Minister has not repudiated that, so once again we're left with question marks about long term policy and long term strategy," Professor FitzGerald says.

The situation is much the same in the critical area of Chinese investment in Australia, where, despite long-standing ties, there's no effective, government-to-government forum for discussion of the kinds of difficulties that have arisen recently.

No ordinary relationship

"You can't just sit around and wait for something to come up," Professor Fitzgerald says.

"You need a proper framework in which to address these issues over the long term."

Describing China as "no ordinary foreign country" and Australia's relationship with China "no ordinary relationship�, Professor FitzGerald says it�s not enough to just mark time and hope the economic relationship will be sufficient.

"China is now the dominant influence in our region, its dominant in our foreign economic relations and it�s already becoming dominant to some extent in domestic Australian politics," Professor FitzGerald says.

Where Australia's dominant relationships in the past have been with countries more or less like Australia itself, China, he says, is different.

"The challenge of building a relationship with China is much greater and it�s not good enough simply to allow the relationship to mark time on the political front and say, well, the economic relationship will go on," Professor FitzGerald says.

Regional architecture that brings China into the management of regional relations on a multilateral basis is important, he says, as Kevin Rudd continues to push just such an idea in the form of his Asia Pacific Community idea looking out to the year 2020.

But Professor FitzGerald says the equivalent of the Howard government's Foreign Policy White Paper, setting out Australia's relations with the major powers.

He says if the Rudd government does not follow that example, perhaps even producing a China White Paper, it might seem that Australia's foreign policy on China is being driven by defence policy, in the wake of the Defence White Paper.

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