Raising a red flag: shaky China-US relations don’t bode well for Australia

All things China have deteriorated in recent weeks and Australia should be worried.

Five months ago there were hopeful signs that China and the US were ready to try to mend their tattered relationship. But the past two weeks have seen a sharp and hard reversal and Russia’s invasion of Ukraine looms large as a potential breaking point. 

US President Joe Biden’s unprecedented visit to Kyiv, the first by a US president to a country in a war where the US is not officially involved, came just ahead of Chinese Foreign Affairs Minister Wang Yi’s visit to Vladimir Putin in Moscow. 

Biden’s message was clear: “Over the last year, the United States has built a coalition of nations from the Atlantic to the Pacific to help defend Ukraine with unprecedented military, economic and humanitarian support — and that support will endure.”

As China sheds its standoffishness and ambivalence about Russia’s invasion, perhaps the most telling point amid much mutual and very public backslapping was Wang saying that “a crisis is always an opportunity”.

So the world holds its breath to see how far China will lean into Moscow in terms of providing arms either directly or indirectly to its war that appears ill-advised as it struggles, monumentally, to meet its invasion goals. This has been made even more complex by China’s rare move to act as a peacebroker. Last week, a year into the war in Ukraine, China finally elaborated its stance on the conflict, releasing a 12-point document proposing a framework for a political settlement.

Commentary by the Carnegie Foundation — that was echoed by many — read: “… a laundry list of familiar Chinese talking points about the war. It repeats Beijing’s support for the UN charter and the territorial integrity of states, but at the same time condemns unilateral sanctions, and criticises the expansion of US-led military alliances.

“Those who expected a roadmap to peace in Ukraine will surely be disappointed.”

On top of this were recent revelations that China is rapidly building a far more formidable nuclear arsenal driven, no doubt, by its desire to be at least the US’ equal and third to no one.

The deterioration of the US-China relationship could not come at a worse time for the Australian government as it attempts the fiendishly difficult trick of revelling in Washington’s strategic embrace — as Defence Minister Richard Marles, at the very least, is doing — and attempting to fix the bruised trade relationship with Beijing.

There is growing concern in Australia at both the secrecy and very tight embrace of AUKUS in terms of there being no clear detail of what the pact entails, the increased US military presence in Australia and suspicions that Washington is involved in Australia’s defence policy for its own ends.

Despite the highfalutin’ acronym, AUKUS is not quite an alliance but more of a security pact between Australia, the US and the UK. It has also had a mixed-to-poor reception in the region where most nations would prefer that Australia focus more closely on strategic alliance with its neighbours.

The main game with trade is the coming visit to Beijing by Trade Minister Don Farrell after an online meeting with his counterpart two weeks ago. There has already been a report in the South China Morning Post — closer to Beijing than most English language publications — that the first of three rounds of preliminary discussions between officials in the lead-up to the visit has been held.

It said that tariffs on wine and barley have been on the agenda. The fact is, Chinese buyers have easily filled those gaps with product from other nations. Australian barley growers have also found new markets, but the wine industry does not have other markets of sufficient size to replace China. This has led to growing stockpiles at home, industry sources report.

But the real kicker in the story was the “snag” facing officials trying to reach agreement was an investment quid pro quo. Chinese-Singapore companies (Chinese companies often use Singapore companies as a front in the same way they did Hong Kong companies) are not permitted to invest in Australian lithium, the main ingredient for electric batteries.

On February 15, Treasurer Jim Chalmers wielded his power over foreign investors by preventing Australian Securities Exchange-listed lithium miner Northern Minerals Ltd’s largest shareholder, China’s Yuxiao Fund, from increasing its investment in the company to 19.9% from 9.92% on “national interest” grounds.

The latest global strategic wobbles (to put it mildly) came just ahead of the commencement of China’s ruling Communist Party annual “two sessions” meeting of its rubber-stamp parliament, the National People’s Congress (NPC), and its so-called advisory body, the Chinese People’s Political Consultative Congress (CPPCC). Between them, about 5000 Chinese politicians, businesspeople and academics, as well as representatives from dozens of Indigenous and religious groups, will tick off pre-prepared ideas, legislation and possibly constitutional changes.

The CPPCC commenced Saturday and on Sunday the NPC began with the traditional “work report” from Chinese Premier Li Keqiang, the last of 10 he has made in the role. Li was forced into retirement at the quinquennial CCP Congress and will be replaced by Li Qiang, a Xi Jinping loyalist and former party chief of Shanghai, although largely unknown outside China.

Li and his team of deputies, along with a new People’s Bank of China governor, are expected to guide the country’s stumbling economy. China watchers say that this new group — whose names are largely already known — constitute a team that has far less international experience than Li Keqiang and his team. This underscored that Chinese efforts to right its economic ship will be more internal than external as the state continues the program that was introduced by Xi more than half a decade ago, of taking stronger control.

In his report, the retiring Li said China was aiming for 5% GDP growth this year, a modest target that underscored the difficulties facing the world’s second largest economy. The delivery of that 5% is hardly the news that Australia needs to hear as it pushes to improve trade ties.