But China’s economic leverage is not yet shaking the bonds with AmericaOct 25th 2018Print edition | Special report
THE CITY OF Darwin occupies a T-shaped peninsula. At one end of the T, facing the Indian Ocean, is Larrakeyah Barracks, home to the headquarters of a detachment of American marines that visits Darwin each year. At the other end, less than 3km away, is Fort Hill Wharf, part of Darwin’s port, which is operated on a 99-year lease by Landbridge, a privately held Chinese firm.
When the Northern Territory, of which Darwin is the capital, agreed the lease with Landbridge in 2015, America’s president at the time, Barack Obama, complained that his government had not been consulted. Just four years before, as the centrepiece of his trumpeted “pivot” to Asia, Mr Obama had signed the 25-year protocol under which the “Marine Rotational Force-Darwin” (MRF-D) is deployed. America had paraded the deal as proof of its commitment to the region and of the unparalleled strength of its alliance with Australia. Now Australia appeared to be inviting the very country causing all the concern to observe their trysts.
Never mind that Landbridge denied being an agent for the Chinese government, or that, as an Australian official pointed out, there was no need to buy the port to keep an eye on military comings and goings (you could find out just as much “sitting on a stool at the fish-and-chip shop on the wharf”). The moment embodied the Australian elite’s growing anxiety that it might have to pick between its closest ally and its biggest trading partner.
Politicians tend to maintain, in public at least, that there is no tension between strong economic ties with China and a close diplomatic and military alliance with America. In private they accept that the Chinese government wants Australia to be more pliable, and is willing to use its economic clout to bring it to heel. After all, it regularly punishes countries that cross it politically.
China has always loomed large in the Australian imagination. After the “First Fleet” dropped off the convicts and soldiers who initiated British colonisation in 1788, several of its ships stopped in Guangzhou on the way back to London to buy a cargo of tea. There are records of Chinese immigrants to Australia as early as 1818; in the gold rushes of the 1850s some 40,000 arrived. In 2009 immigration from China exceeded that from Britain, previously the biggest source, for the first time. There are now more than 1.2m Australian citizens of Chinese descent. Mandarin is the most commonly spoken language after English.
What has changed in recent years is the way in which China looms over the Australian economy. At Darwin’s airport, posters herald direct flights from Shenzhen on Donghai Airlines, a Chinese carrier. That is one of 173 flights a week from China to Australia. China provides 16% of Australia’s tourists—more than any other country. They are also more extravagant, accounting for 26% of tourist spending. Their numbers grew by 14% last year.
A similar story could be told of almost any other industry. China is the biggest buyer of Australia’s iron ore, copper, wool and wine. It sends more students to Australia than any other country. All told, it buys 30% of Australia’s exports—and rising.
Those who play down China’s role note that American firms’ cumulative investments in Australia dwarf those of Chinese companies: A$190bn compared with A$41bn. But Chinese ones will catch up soon, since they dominate the flow of new investment. In 2017 they won approval from the Foreign Investment Review Board for A$39bn-worth of deals, compared with American firms’ A$26bn. Some transactions, such as the one involving the port of Darwin, create a stir, but most proceed with little fuss. Recent targets include a pet-food company; a condom-maker; lithium, coal and gold mines; gas pipelines and a chain of radiology clinics.
It is also clear that China’s interests are not just economic. In 2016 a senator named Sam Dastyari was caught defending the Chinese government’s fiercely disputed territorial claims in the South China Sea, in contravention of the views of both his party (Labor) and the Australian government. It turned out that he had accepted handsome donations from businesses run by men with ties to the Chinese government. Worse, the same businesses had made big donations to both the Liberal and Labor parties.
Stories like that have stoked anti-Chinese hysteria in some quarters. Politicians who try to get on well with China are labelled “panda huggers”. In a recent book, “Silent Invasion”, Clive Hamilton, an Australian academic, argues that China is systematically infiltrating Australia’s institutions and subverting its democracy. He even suggests that China may eventually lay claim to the Australian landmass.
On top of that is the possibility of an economic boycott. Last year, for instance, China stopped its tourists visiting South Korea and orchestrated a popular boycott of the country’s brands in China after the South Korean government defied it by going ahead with the installation of an American anti-missile system. It is not hard to see how Australia could end up in a similar fix. Should Chinese tourists disappear, or Chinese drinkers stop slurping Australian wine, many Australians could lose their livelihoods.
Ironically enough, however, the prospect of such bullying appears to have strengthened Australia’s alliance with America, not weakened it. Australian politicians seem to assume that, since it would be unthinkable to embrace China’s worldview, their best defence against Chinese blackmail is to head it off by demonstrating unequivocally that ties with America are non-negotiable.
The MRF-D helps to reinforce that idea. The number of American soldiers participating in the annual, six-month-long deployments has steadily increased since their inception, in 2012. This year more than 1,500 took part. The weapons and training involved are also becoming ever more elaborate.
This time the marines brought eight MV-22s, aircraft that can fly long distances but take off and land like helicopters, as well as their fanciest field artillery. While the marines were in Darwin, the Australian air force invited ten other European and Asian allies, including India, Indonesia, Malaysia, Singapore and Thailand, to send aircraft for a three-week exercise. Just as significantly, the Americans leave a lot of equipment in Australia each year when they return home. At Robertson Barracks, a few miles from Darwin, ibises and black cockatoos peck at the grass in front of a hangar-like garage filled year-round with rows of American trucks and armoured vehicles.
The Australian government has also been trying to curb Chinese efforts to suborn Australian politicians. In the wake of the Dastyari scandal, it pushed through a “foreign-influence” law that requires any person or company acting on behalf of a foreign government to register, and institutes prison sentences for those who fail to do so. A law banning foreign donations to politicians and parties is also in the works.
The authorities are also pickier about Chinese investment in strategic industries than the example of the port of Darwin suggests. When he was treasurer, the new prime minister, Scott Morrison, banned two Chinese telecoms firms, Huawei and ZTE, from participating in the construction of Australia’s 5G mobile network. Without naming the pair, Mr Morrison explained that certain firms had to be excluded for fear that their home government would oblige them to provide “unauthorised access or interference”. Two years before, he had barred a Chinese firm from buying part of the power grid. And it is not just Mr Morrison: in 2011 a Labor government banned Huawei from a scheme to build a nationwide broadband network.
Some Australian grandees see all this as folly. They argue that Australia should be seeking to accommodate China in some way, even at the expense of relations with America. Mr Keating, who declared Australia to be part of Asia when that idea was shocking to many of his countrymen, says lack of imagination about China is one of the current crop of politicans’ greatest failings.
This idea has grown since Donald Trump became America’s president. Australians have less trust in Mr Trump than in the Chinese president, Xi Jinping, according to the Lowy Institute, a think-tank. Fully 42% of Australians see his presidency as a “critical threat”; only 36% say the same of China’s growing power. Mr Trump withdrew America from the Trans-Pacific Partnership, a huge free-trade area intended as an economic counterweight to China. He has alarmed Asian governments first by his bellicose tone towards North Korea and now by his credulous response to its promises to disarm. Fear that Mr Trump might drag Australia into an Asian war is widespread.
Yet even with Mr Trump in office, the idea that Australia might start sidling over to China seems far-fetched. Australians have fought alongside Americans in seven wars. The country routinely shares intelligence with America and buys American weapons. The two have agreements on everything from collective security to pensions for expatriates. Institutional ties between them are so strong, in short, that they will be hard to fray. Conversely, Australia has been prevaricating for over a decade about ratifying an extradition treaty with the Chinese.
What is clear, however, is that Mr Trump heightens the awkwardness of Australia’s position. China is likely to feel even more frequent disappointment and irritation at Australia’s conduct. Even if a fundamental shift seems unlikely, the threat of a damaging row with China will be ever present.