By Denis Bright
What should be Australia’s responses to those mega Chinese commercial and development initiatives which have already transformed the global political economy?
This article merely offers some thoughtful resources relating to the impact of current investment and trade hostilities towards China. This is one of the most vital issues of our times. Badly handled, it could reimpose the heaviest burdens of war and militarism on future generations. Hard-line supporters of military build-ups might be endangering our future security and living standards in difficult times ahead with a focus on defence over sustainable development for the Indo-Pacific Basin.
Better relations with China would indeed be a return to normalcy when, and if, President Trump vacates the White House.
Trump’s gun-boat diplomacy is a return to a bygone era. Colonies like Hong Kong were acquired by force to facilitate exports of opium to China by the British East India Company and other agencies. Colonial expansions worldwide were stained by similar antics and especially in Australia where a whole ancient civilisation became a captive of global capitalism. Revolutionary America once stood up to such antics in the War of Independence (1776-83) and resistance to the British occupation of Washington in 1812-14 when many national monuments were set ablaze.
The fall of the Berlin Wall offered some fond hopes of a return to better times in a century which had been marred by ongoing wars, a global pandemic in 1919 and a Great Depression.
The BRICS partnership between China, Brazil, India, South Africa and Russia and The Asian Investment Infrastructure Bank (AIIB) were both Chinese initiatives that assisted in the stagnant global economy of the post-GFC era. The biggest positive impact of a resurgent China became associated with the multiplier effects of its global investment and trade in countries, rich and poor alike.
Australia should be ecstatic with all these economic positives. The lives of a vast swathe of humanity across the Indo Pacific Basin are still in the process of being ameliorated. The immediate benefits for Australians were far-reaching.
China takes almost half our exports. This share has increased since the current COVID-19 crisis as the Chinese economy rebuilds after its own pandemic. Only security controls through the Foreign Investment Review Board and now new powers proposed for use by our Foreign Minister are placing brakes on future Chinese investment (AFR 26 August 2020).
This enthusiasm for a strengthening of relationships between China and Australia was upheld by China’s Deputy Ambassador Wang Xining to the National Press Club on 26 August 2020. Here are some key extracts. The full text is available from the Chinese embassy web site.
China has been Australia’s biggest trade partner for 11 years in a row and is now Australia’s largest source of international students and tourists, and more promisingly, most important collaborator on scientific research on account of the number of university research papers and mentions in the top 1 per cent of most-cited articles.
On top of these impressive statistics, there have been more heartening accomplishments on the human dimensions of our relationship. The constantly growing business connections and cultural exchanges have consequential impact on deepening our mutual understanding and appreciation and forging stronger friendship and affinity between our peoples.
This balanced perspective contrasts with a repeat of that continued bluster against China in The Australian with its scoops from ASIO press releases and other conservative insiders who have the ear of the Murdoch press.
The current emphasis on the Thousand Talents Plan from China should be balanced by consideration of the invitations offered by the US Government to other talented Australians and future leaders:
Meanwhile, the charm offensive by Chinese leaders seems to be working with fresh winds from a Chinese economy that is recovering from the recent pandemic. Why indeed should only one side of the global political divide be entitled to use a charm offensive?
From the Chinese perspective, the charm offensive has worked well in the recent past.
The Chinese-focused mass investment initiatives complemented the more conventional market-based development priorities of the Washington-based IMF and the World Bank at a time when recovery from the GFC was imperative. US firms could indeed benefit from a consumer-led recovery across the developing world and in affluent consumer societies which make use of Chinese manufactured products to fine-tune their brand names.
Is Australia Now Hedging its Options in Anticipation of a Biden-Harris Victory?
Although the Australian Government always seeks consensus with the Trump Administration, it is not deaf or blind to the possibility of a democratic regime change at this year’s US Presidential elections. There are certainly different currents of opinions within the federal LNP about the leadership qualities of President Trump. I expect that most members of the federal LNP have positive perceptions about the prospects of a Biden-Harris victory. These MPs are keeping very quiet about this vital issue and cite the need for non-interference in the domestic affairs of the USA as their justification for silence about issues like the extent of racism and poverty as precincts of cities go up in flames again.
Foreign minister Julie Bishop suggested at the last presidential election that Hillary Clinton was likely to win in 2016. She correctly warned Australians of the consequences of a Trump Presidency on our commercial outreach to Asian countries (AFR 30 October 2016). Where are the signs of such independent assessments amongst the current crop of federal LNP leaders?
The current trade and investment wars between the Trump Administration and China in the interests of his Make America Great Again (MAGA) strategies will continue to hurt Australia badly. Capital flows to Australia have been headed in the wrong direction for over two years and long before the arrival of the current pandemic (Data is shown in millions of Australian dollars):
Back in the days when China was a valued partner in post-GFC globalization, the Abbott Government first negotiated our involvement in the AIIB. Its outreach was to assist with Belt and Road Projects across Central Asia and Southern Asia along the New Silk Road to Europe and the Maritime Road to Africa:
As the fifth anniversary of the AIIB approaches in January 2021, there are 102 countries signed up with this major global development bank, including 26 prospective members.
Ironically, the Washington based IMF continues to warn of the financial risks which have been associated with the Trump Administration’s ongoing trade and investment wars with China and EU countries in its latest Annual Report:
Back in the Obama-era, former IMF President Christine Lagarde, supported the formation of the AIIB:
“Mrs Lagarde said there was “massive” room for IMF co-operation with the AIIB on infrastructure financing. The US has criticised the UK and other allies for supporting the bank. The US sees the AIIB as a rival to the World Bank, and as a lever for Beijing to extend its influence in the region.”
Meanwhile, it is the AIIB which pushes on with its commitment to progressive globalisation while the Trump Administration has retreated into its bizarre MAGA agendas with threats of punitive tariffs and investment controls which contradict its own free-trade agreements.
With the Obama Administration well into its second term in 2014, this era was still a very positive phase of contemporary globalisation. With Australia’s support, the US widened its commitment to the Asia-Pacific Economic Co-Operation Forum (APEC).
While Secretary of State John Kerry disagreed with Australia’s commitment to join the AIIB, our choice caused no real problems. Allied countries in Europe had generally made a similar call. Even Israel, Saudi Arabia and Egypt chose to give the AIIB a chance to spread economic and community development to those areas most in need. There was a similar attitude towards the formation of BRICS. Only Japan followed the US directive to boycott the new AIIB and played no part in BRICS.
Australia’s DFAT was upbeat about the prospects for APEC which had assisted in dissipating Cold War tensions from the Vietnam War era.
There are no ideological barriers to extend the APEC community of nations. Countries between Peru and Mexico can be expected to join the current 21 members of the APEC community as well as Timor Leste and smaller island states in Micronesia and Melanesia. Even China was gracious enough to allow membership from Taiwan China. It is not just a typo error as both countries are represented separately but co-operatively.
In the favourable climate for international relations in 2013-14, the consolidation of the APEC community was a plus for Australian diplomacy from the 1980s. It was an initiative which both sides of politics supported until the arrival of those MAGA strategies from the Trump administration.
Australia proceeded to foster the integration of China and even Russia into the Pacific community of nations. Membership of the AIIB was not even a subtle challenge to the global role of the IMF and the World Bank in international affairs (AFR 24 October 2014).
US corporations generally welcomed the integration of China into the contemporary globalisation. Only President Trump failed to grasp an appreciation of the symbiotic relationship between the emergence of China as an economic superpower and the longer-term stability of the US economy.
Both sides of politics in Australia can and should work with an incoming Biden-Harris team to expand APEC into a broader Indo-Pacific Basin Forum as a substitute for the current style of gun-boast and megaphone diplomacy.
Current Realities of Australia’s Shareholdings in the AIIB
The latest update on shareholdings in the AIIB is based on the 2019 Annual Report. Australia has a subscribed capital of AU$5.25 billion in 2019. Deposit instalments were not increased this year, possibly under pressure from the Trump Administration.
To Australia’s credit, it has maintained a strong financial association with the AIIB. It has voting rights on the AIIB Board in Beijing at a time when warning bells about the resurgence of China has been noted by the White House:
“China is beginning to erode this financial system by erecting a new institutional system based in economic dependency to Chinese informal economic practices, rather than to the West and its formalized rule of law. Western financial institutions require significant macroeconomic reforms, austerity measures, and other accountability measures to secure investment. However, the Chinese provide credit without such preconditions and even offer their own workforce to deploy such investments through large-scale infrastructure projects. Such an approach increases China’s informal power over a country’s internal economic and political affairs.
China first brought this approach to Africa where they took advantage of perceptions on the continent that the existing Western financial system was exploiting them. According to the United Nations Conference on Trade and Development (UNCTAD), the Paris Club, a group of largely Western creditors, loaned African nations $540 billion from 1970-2002. Despite paying close to $550 billion, these countries still owe $295 billion. As such, African nations increasingly see these loan agreements as punishing them, rather than providing a pathway towards restored economic health.
Leveraging African scepticism of the West, China solidified its influence through investments in Africa’s infrastructure as part of their “One Belt, One Road” initiative, built and funded as a $200 million gift a new headquarters for the African Union, and is writing off or reducing $1.2 billion in African debt — a stark contrast to a Westernized system that Africans perceive is continually indebting them.
China’s infrastructure investments in Africa has already yielded social and political capital returns. Africa increasingly views the Chinese system as an attractive one that advances not just its own economic interests but theirs as well.”
While the Australian Government continues to support all the strategic rhetoric of the Trump Administration against China, our commitment to the AIIB carries a lingering spark of the Whitlamesque in Australian foreign policy.
The more eccentric initiatives of the Trump White House against China at a commercial and strategic level can be negotiated away by an incoming Biden-Harris administration that is supported by a huge mandate in the US House of Representatives. It can probably extend to the senate if some Republicans break ranks by deciding to support a new administration as only one third of the senate plus two casual vacancies will be re-elected in 2020.
In an opinion piece in the Canberra Times (22 August 2020), Crispin Hull calls on the governments of Australia and New Zealand to distance themselves from the strategic antics of President Trump if he is re-elected this year.
Hopefully, there will be a decisive result in the forthcoming presidential election. China will undoubtedly use its charm offensive to invite a return to normalcy. All significant parties in the Australian parliament will welcome developments as they focus inwardly on their own varied responses to the current public health, economic and wider social problems afflicting the nation.
Denis Bright (pictured) is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback from readers advances the cause of citizens’ journalism. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Replies Button.
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