Australia’s China policy: consensus and contestability in a complex world

By Jane Golley, Economist, Crawford School of Public Policy – the Australian National University (ANU)

With the trajectory of China’s economy — and many other dimensions of its power — shrouded in great uncertainty, finding the right policy response requires a more contested and open debate, writes Jane Golley.

In the lead up to the federal election, there appears to be a broad China consensus between the Coalition government and Labor opposition, in which China is framed as the “primary strategic challenge” to our national security, while discussions about our future engagement with the world’s second-largest economy are largely missing in action.

This may be an optimal pre-election strategy for both parties. But, as Allan Behm describes it in No Enemies No Friends: Restoring Australia’s Global Relevance, this bipartisanship is a “killer of conversation” that limits contestability “to the margins”. Beyond the election, contestability should instead be front and centre of renewed national conversations that take into account the immense complexities and unresolved debates surrounding one of the most significant foreign policy issues of our time: the rise of China.

A wide range of “China narratives” in Australia and beyond, which range from evidence-based assessments of China’s economic growth to more subjective appreciations of China’s suspected global intentions, are highly relevant to answering this question.

For starters, the future of China’s economy remains hotly contested, two decades since Gordon Chang first declared its “coming collapse”. Political scientists Michael Beckley and Hal Brands are among those who have recently joined this “collapsist” narrative, declaring the “end of China’s rise” despite Beijing “moving aggressively to forge a Sinocentric Asia and replace Washington atop the global hierarchy”.

Just one month later, Jude Blanchette, trained in modern Chinese studies and economics, presented a counter-argument, challenging the “China decline” argument for failing to weigh Beijing’s weaknesses against its strengths, including its effectiveness in achieving “rapid results via targeted political, ideological, and regulatory campaigns”, such as its engineering of a rapid economic recovery in 2020 while “the rest of the global economy languished”.

Xi Jinping, Davos address via videolink
Chinese President Xi Jinping provides a special address via videolink to the annual World Economic Forum meeting in Davos, Switzerland - January 24, 2020. Image credit: World Economic Forum, Flickr. 

Yet this is not an “economists versus political scientists” debate. In their March 2022 report, Lowy Institute economists Roland Rajah and Alyssa Leng argue that “China will struggle to avoid a future of significantly slower longer-term growth”, projecting that its annual economic growth will slow to about 3 percent by 2030 and 2 percent by 2040. They conclude that “the outlook implied by our projections is another world compared to that implied by the conventional ‘rise of China’ narrative in which average growth rates as high as 6% are considered feasible for decades to come”.

Put simply, there is no consensus regarding the future trajectory of China’s economy, either within or across disciplines. This trajectory matters deeply for Australia, not only insofar as it impacts our own economic prosperity, but also because of what it might imply for the broader issue of China’s rising power.

On this front, too, there is much to debate. One narrative — termed the “geoeconomic narrative” by Anthea Roberts and Nicholas Lamp in The Six Faces of Globalisation: Who wins, who loses — “takes Sino-American great-power rivalry as its premise”, highlighting the “security and strategic vulnerabilities caused by inter-dependence” with a techno-authoritarian China that is “the villain”. Applied to the Australian context, it follows that our government should align with like-minded allies to contain China’s power, while encouraging trade diversification to mitigate against its economic coercion, and limiting Chinese investment to prevent willing (private or state-owned) actors from advancing their government’s national interests, and correspondingly diminishing our own.

There are multiple counter-arguments challenging various aspects of this narrative as well. A recent paper by six Australian political scientists, for example, contests what they identify as the “global right” position, that containment of China is either achievable or “the only means of sustaining Western influence”. Their “progressive realism” instead combines a realistic diagnosis of global dynamics with a progressive focus on power redistribution, one element of which acknowledges the upward trajectory of China’s global economic weight. This alternative provides the basis for new conversations about Australia’s foreign policy in the 21st century, including what a “progressive realist” approach to China might be.

US, UK, Japanese, and Australian maritime forces transit in formation through the Bay of Bengal
Ships and aircraft from US, UK, Japanese, and Australian maritime forces transit in formation through the Bay of Bengal - October 19, 2021. Image credit: US Indo-Pacific Command, Flickr.

On China’s economic coercion, more nuanced conversations are also needed. Some analysts stress the resilience of Australian firms to China’s economic coercion and their successes in diversifying away from it. Others highlight the potential for significantly higher costs from losing access to the Chinese market in the future, noting that, despite expressions of solidarity provided by our “strategic friends”, their exports have in fact replaced ours as they become even more integrated with China, not less. In terms of who we might identify as our “common enemies and instinctive friends”, as Yun Jiang succinctly puts it: “The reality is never this simple”.

This is evident in the research of Weihuan Zhou and James Laurenceson, who explore the range of Chinese trade measures applied against Australia since 2020, juxtaposed with the Australian government’s own efforts to restrict Chinese imports and inbound investment in the preceding five years. Whether either side has breached their international obligations under World Trade Organisation (WTO) rules in each of the myriad of individual cases “cannot be determined without a detailed legal analysis based on evidence”. And yet, the blocking of new appointments to the WTO’s Appellate Body by the United States has meant that its dispute settlement mechanism, the “jewel in the crown” of the multilateral trading system, is dysfunctional. The Regional Comprehensive Economic Partnership (RCEP), which entered into force on 1 January this year with Australia and China both founding members, seems unlikely to offer solutions either.

This adds further layers to a plot that is far more complex than that conveyed by the “Chinese economic coercion” narrative and, as Zhou and Laurenceson conclude, “might raise questions about whether the [Australian] government’s approach has been optimal”.

The optimal policy framework for assessing individual Chinese investments is no less complex, nor any less contentious. For example, when the Foreign Investment Review Board screened Chinese company Mengniu’s takeover bid of Lion’s Dairy & Drinks several years ago, it found nothing objectionable in terms of the five factors used for its national interest test for foreign investments: national security, competition, government policies (including tax), economic and community impact, and investor character. Yet Treasurer Josh Frydenberg blocked the deal declaring it to be “contrary to the national interest”. This was a “good decision”, according to the Australian Strategic Policy Institute’s Michael Shoebridge, “even if the officials who advise the Foreign Investment Review Board may not have been as clear-eyed as the treasurer was on the matter”. Not everyone concurred.

Likewise, a Department of Defence report released in November 2021 found “no national security grounds sufficient to recommend intervention” in the leasing of the Port of Darwin to the Landbridge Group, a Chinese investment that has been highly controversial since it was first approved in 2015. Following a string of Security Legislation Amendments (Critical Infrastructure Protection Bill), most recently in February this year, there remains the possibility that the Home Affairs Minister, responsible for Australia’s ‘critical infrastructure’ will overrule this finding as well.

These examples raise serious questions about the enhanced powers of our politicians to overrule the advice of our bureaucrats and independent agencies, once tasked with providing frank and fearless advice to the government of the day. With no less than our democratic system at stake, these matters deserve scrutiny, at least.

In their highly-acclaimed book, Roberts and Lamp argue that “narratives provide the tool to contest the old normal and establish the contours of the new”. They call for an empathetic approach to understanding the narratives of others based on “complex integrative thinking”, involving a “willingness to accept that there are different ways of looking at an issue” and an “ability to draw insights from each so as to integrate them into a coherent understanding or approach”. Following the federal election, and regardless of which side wins, this approach offers an ideal starting point for national conversations that would draw on the narratives presented above, and many more besides, to inform creative, flexible and, quite possibly, partisan “China Policies” that offer different alternatives for Australia’s future.

Professor Jane Golley is an economist at the Crawford School of Public Policy at The Australian National University (ANU).

Banner image: Australian and Chinese flags waving in the wind. Credit: Shutterstock.

This article was contributed as part of an Asialink Insights series on the China policy challenge facing Australia, 'China: the road ahead'.