Friday, November 8, 2024

The contradictions in Australia’s China policy

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The differences became starkest after China decided to punish the Morrison government by imposing bans or restrictions on key Australian exports like wine and beef that it could manage without – unlike the staple of iron ore.

It means the Australian community’s attitudes towards China have hardened considerably since Tony Abbott fulsomely welcomed President Xi Jinping to Canberra a decade ago.

Even then, Abbott’s typically overly candid assessment afterwards to Angela Merkel, promptly leaked, described Australian policy towards China as driven by the two emotions of fear and greed.

Bilateral opportunities in green metals and clean energy technology are among the most sensitive areas when it comes to the government’s definition of national security.

That bifurcation will never be so bluntly expressed now but has only increased given China’s growing economic stature combined with sharpening divisions with the US and the use of military force to assert its regional power claims.

The Albanese government was still determined to soften Australia’s political rhetoric to get the relationship “back on track”. Canberra also benefited from Beijing’s decision to use the election of a new government as a circuit breaker given the counter-productive failure of its strategy of retribution and “wolf warrior” diplomacy.

One result is Li Qiang’s visit, the first by a Chinese premier since 2017.

Co-operation under pressure

Of course, Anthony Albanese will also be under pressure from the Coalition to admonish Li over China’s military encounters involving Australia. He will be expected to raise human rights violations, including pressing for the release of Australian Chinese writer Yang Hengjun who was given a suspended death sentence.

But the overall tone is set to be one of co-operation wherever possible.

“Our objective has been to stabilise our relationship with China,” Farrell said on Wednesday. “At all times making sure that we defend our national interest and our national security but stabilising our relationship so that we can resume trade in all of those products that had previously been subject to impediments.”

The Business Council of Australia was similarly keen to promote the roundtable it will hold with Australian and Chinese chief executives in Perth next Tuesday.

According to the BCA’s Bran Black, the roundtable will focus on how businesses can capitalise on the energy transition, particularly in the area of green metals and clean energy technology.

“This dialogue will help identify impediments to be addressed, so both economies can better leverage the opportunities of the net-zero transition,” he said.

Yet bilateral opportunities in green metals and clean energy technology are among the most sensitive areas when it comes to the Australian government’s definition of national security.

China’s dominance of the processing of critical minerals, particularly rare earths, is now considered a security threat by the West with governments, including Australia, desperate to develop alternatives.

It’s why Jim Chalmers is tightening up foreign investment restrictions clearly aimed at China. And why there’s so much debate in Canberra about what level of Chinese investment will be permitted to access the government’s 10 per cent production tax credits for critical minerals processing.

Australian companies with more than 25 per cent ownership or supply agreements with China also risk being designated “foreign entities of concern” by the US. That could prevent access to the US market or eligibility for US financial incentives by potential US customers.

This is all still a work in progress.

Few alternatives to China on critical minerals

But it means the business politics of Premier Li Qiang’s visit to a South Australian winery and to Adelaide Zoo to emphasise China’s commitment to retaining the pandas will be considerably more relaxed than his visit to Perth.

Li is also expected to tour a lithium hydroxide processing plant that is 51 per cent owned by China’s Tianqi Lithium, for example, as well as visiting Fortescue’s hydrogen research and development centre championed by Andrew Forrest.

Chinese investment and expertise have been significant in the limited critical minerals processing so far underway in Western Australia. Many smaller miners also argue that China’s continued strong investment will be vital to any hopes of further developing a critical minerals industry.

Warren Pearce, CEO of the Association of Mining and Exploration Companies, warns there is little evidence of US investment to replace Chinese investment for mining projects.

“We’re feeling pressure to turn away foreign investment from China, particularly critical minerals projects,” he told The Australian Financial Review Mining Summit last month.

“The reality is that a lot of the product is going to China now and until the US sets up their processing refining industry, it’s going to be very difficult to take the product they can’t actually use.”

The prime minister has been deliberately vague on how best to address such policy dilemmas, reiterating on Wednesday that Australia would continue to export its valuable resources, including the critical minerals to power the global energy transition. But he argues his government also wants to “move Australia up the value chain”.

“We are in a very strong position,” he insisted.

So is China. Pandas plus.

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