Australia must reduce its economic reliance on China

They purchase 35 percent of our exports and provide us with 24 percent of our imports. They own 3 percent of our agricultural land and they are our biggest customer for commodities, education and tourism. Put simply, Australia relies on China for its economic prosperity.

And this is dangerous.

Yes, Australia has experienced several benefits from China’s rise, but the risk of our tighter links to China have only become more stark in 2020, and as geopolitics post COVID-19 promises increased tension with the one party state, now is a vital time to consider decoupling from China and decreasing our economic dependence on them.

It has been quite the party, but it risks creating one mighty hangover.

Our reliance on China is clear from this table. In the past 40 years, Australia has virtually hedged its economic bets in one country above all others.

Once our biggest customers, the USA only accounts for 3.5% of our exports, while the United Kingdom is less than 2%. When it comes to a market for our products and services, Australia is heavily leveraged to China. China is our largest customer in regard to education, tourism, agriculture and mining.

What about imports? A quarter of our products come from China. They include clothing, communications equipment, computers, prams, toys, games and sporting goods, furniture and televisions, clocking in at a cool $47 billion in value.

Yet here’s the kicker. While our exports to China are worth 35 percent of our total exports, China’s exports to Australia are less than 2 percent of their exports. Put simply, China can issue trade threats that bite, but Australia does not have the same leverage. We are extremely vulnerable to China turning off the tap, and thus we must diversify our customers. In the short term, China needs our exports, but it would be foolish thinking to expect this will last long term, particularly as China looks to further diversify its trade networks.

In 2015 the Abbott government signed the China-Australia Free Trade Agreement, further deepening the trade relationship. On one level you can understand why. The economic windfall from China’s demand for our commodities helped usher us though the Global Recession and our education sector has experienced exponential growth during the past decade.

But now is the time to ask: at what cost?

The Chinese Communist Party is one of the most dangerous organisations in the world. It is responsible for grave human rights abuses, mass censorship of its own people, murder of dissidents and challenges to the sovereignty of other countries.

If it was any other country engaging in such actions, the western world would regard it as a pariah state, but because of the economic benefits of trade links with China, the repressive regime has been able to use the threat of economic coercion in order to evade meaningful global criticism.

Indeed, witness China’s Belt and Road Initiative, its economic and strategic agenda to provide cheap finance for infrastructure across Eurasia, Africa and the South Pacific. The initiative is a boon for developing countries looking for opportunities to develop their economies. Yet with cheap loans come consequences. In exchange for the largesse, China expects favourable treatment in multilateral forums and can threaten to take control of key infrastructure if a country cannot pay the loans back, such as what happened to Sri Lanka in 2017. China built the Hambantota port, yet Sri Lanka was unable to service its debts. In response, Sri Lanka leased the port China Merchant Port Holdings Limited (CM Port) for 99 years for $1.12 billion. So much for Sri Lanka’s sovereignty.

It is worrying that Victoria’s Andrews government bypassed the federal government and signed the state up to the Belt and Road. The allure of cheap money proved too irresistible for Dan, but make no mistake, the only thing cheap about it is the money. China demands Chinese workers partake in construction and it also expects geopolitical favours to come its way.

China has also used its economic links to manipulate international forums and divert global criticism. For example, China has committed grave human rights abuses against Uighur Muslims in Xinjiang province. Thousands of people have disappeared and been locked up in concentration camps that China calls ‘vocational training centres’. Xinjiang is subject to mass surveillance and control, where people are banned from travelling and from publically practicing their religion. To claim it is the worst religious oppression since World War Two might not be exaggerating.

Amnesty International and Human Rights Watch have condemned the camps, but the international community remains divided.

23 countries in the United Nations, including the United States, Canada, Japan and Australia, called on China to “uphold its national and international obligations and commitments to respect human rights,” as well as to provide access to Xinjiang for international monitors. Yet this was counterbalanced by 54 countries voicing approval of China’s “counter-terrorism” program in Xinjiang. Signatories included Burkina Faso, Russia, Cambodia, Philippines, Pakistan, and Myanmar, among others. It is no coincidence that these states are all involved in the Belt & Road Initiative.

Money talks.

And China is not afraid to use its significant economic power to get what it wants. It is not afraid to blatantly disrespect sovereignty either.

In the South China Sea, China claims its right to almost the entirety of the waters, citing the historical nine dash line as its sovereign boundary. It has blatantly violated international law, rammed fishing boats and dredged for oil in Vietnamese waters, threatened US ships conducting freedom of navigation exercises and built artificial islands around the Paracel and Spratly Islands claimed by Vietnam and the Philippines respectively. It has also frustrated ASEAN attempts to broker a Code of Conduct to settle disputes in the region, which comes as no surprise given that China flagrantly ignored an International Court of Arbitration ruling against it in 2016 that confirmed it had no historical claim in the region.

Twitter has banned Chinese state media from spreading propaganda messages on its platform, as the state sought to control the narrative on every issue from the South China Sea to the Hong Kong protests to the Covid-19 pandemic.

Make no mistake, the Chinese government is a coercive, manipulative, human rights abusing, propaganda spreading, international law flouting wrecker that must be held accountable for its actions.

But it is not. And we are partly to blame.

It is not accountable because countries like Australia have sowed the trade threads too tightly, making it awfully difficult to cut the ribbon. We have been happy to receive the cheap money, mass imports, high tourism and the general economic benefit of Chinese trade, but the cost is borne elsewhere.

If anyone wanted to witness the low regard China has for Australia, one should look no further than its actions last week. Australia’s fair and correct call for an independent global inquiry into the origins of Covid-19 has been met with derision, trade threats and blatant incursions on our sovereignty. Just ask Health Minister Greg Hunt, who watched on as China’s Victoria Consul used the minister’s own platform to denounce Australia and promote China’s message.

Australia must begin the process of decoupling and reducing our economic reliance on China. We must be firmer in our promotion of human rights, democracy and respect for international laws. We must look to diversify our trade network so not all roads lead to Beijing. Failure to do so will be a grave error. We must not choose short term economic gain for long term strategic weakness.

Part of this involves reviving our manufacturing centre and offering incentive to Australian companies to keep their work onshore. Bill Shorten is not right about many things, but when he called for the revival of Australian manufacturing in parliament last week he was on point. But he probably would not like one of the solutions to encourage that, which would be more competitive company tax rates, as a start.

Either way, something needs to change from any business as usual attitude with China.

Unfortunately, for the past twenty years Australia has chosen economic gain over values, defensive strategy and human rights. The money was cheap. The windfall was lucrative. And to be fair, there have been benefits.

Yet now the true cost of short term thrift is starting to reveal itself: that we are economically and defensively vulnerable to an assertive and belligerent country with no respect for international norms or human rights, and with little recourse to do anything about it.