Shortcuts / 17 September 2020

The Australia-China Relationship

It seems like every week, there’s a new low in the Australia-China relationship. From trade disputes to diplomatic arguments – these have been some of the biggest news stories of the year. But it wasn’t always like this. So in this episode of Squiz Shortcuts, we’re taking a look at how Australia’s ties with China were established, how we’ve thrived together – and how we’ve recently hit some very choppy waters.

Where did the relationship between Oz and China begin?

We don’t have to go too far back – it was 1972 when Australia established diplomatic relations with the People’s Republic of China – so almost 50 years ago. And we were one of the first western nations to do that. China was known as the ‘far east’ and while not that far away from us geographically, it couldn’t have been further away from Australia culturally. But that isn’t to say there was no contact between us.

There was Chinese migration to Australia most notably in the 1800s gold rush era. By 1861, around 40,000 Chinese people had settled in Australia. And there was official Chinese representation in Melbourne in the early 1900s – something many Chinese wanted because of the introduction of the White Australia policy. But that consul-general’s office seemed to be more focused on trade than advocating against racial discrimination.

What was Australia’s reaction when the People’s Republic of China was established with Chairman Mao as leader in 1949?

Australia did not recognise the new government. Australia’s formal position was the previous government that was kicked out by the communist revolution – the Republic of China set up by Chiang Kai-shek that was in exile in Taiwan – was the legitimate government. But that all changed though with the election of the Whitlam Government in 1972.

What happened after Gough Whitlam became PM?

Things actually started changing a bit earlier than that. Gough Whitlam visited China in 1971 as opposition leader and one of the first things his newly elected government did in 1972 was to formally recognise the People’s Republic of China. Australia did that some years before other Western nations did the same.

What is the official relationship between Australia and China?

While trade and the money side of things is a significant part of the relationship between China and Australia, there’s a lot more to our official relationship. “Both sides acknowledge that Australia and China have different histories, societies and political systems, as well as differences of view on some important issues.” That’s how the Department of Foreign Affairs and Trade puts the general approach of our two nations towards the relationships. That acknowledgement underpins an economic, cultural and regional plan to work together on our shared interests.

And there’s also a lot of informal connections to the relationship, and those have evolved over time, and in 2014, Prime Minister Tony Abbott and Chinese President Xi Jinping agreed to describe the relationship as a “comprehensive strategic partnership”. Over the last almost 50 years, both nations have put significant effort into promoting cultural awareness and mutual understanding. Whether it’s music and the arts, sport, the sister cities program, the aim was to establish understanding and trust through the personal links between Australians and Chinese citizens.

How does that affect Chinese migration here?

A lot of Australians’ understanding of China and the Chinese has come from their migration here – in quite large numbers. Per capita, Australia has more people of Chinese ancestry than any country outside Asia. Australian residents identifying themselves as having Chinese ancestry made up about 5% of the population at the 2016 census that’s more than 1.2 million people.

What happened to the relationship during the 90s?

It hasn’t always been smooth sailing between Oz and China, with discussions on some of the sensitive topics – like human rights – particularly becoming an issue. The government crackdown on pro-democracy protestors in Beijing’s Tiananmen Square in 1989 is a good example of that. The PM of the day, Bob Hawke, was distressed by the news that thousands had been killed, and he made the decision to let the 27,000 Chinese students present in Australia at that time stay. China didn’t welcome the intervention or criticism.

And it was Paul Keating’s government from the early to the mid 90s that looked to further economic and cultural ties with Asia. There was a push during that time to mature the relationship into something more business-like rather than ‘special’. And with the election of the Howard Government, there was a delicate shift again with Australia becoming closer to the US – something China was sensitive about.

How reliant is Australia’s economy on China?

There’s no other way of putting it – China is crucial to Australia’s economy. It is our largest two-way trading partner in goods and services, accounting for 26 per cent of our trade with the world. The latest numbers from DFAT say two-way trade – that is imports and exports – reached a record $235 billion in 2018–19. That was up 20.5% on the previous year. Our exports accounted for a lot of that – $153 billion worth driven by demand for Australian iron ore, coal and Liquified Natural Gas. That’s up from $73.8 billion in 2008 – and a lot of eggs in one basket. But we’re not insignificant to China either. Australia is China’s sixth largest trading partner.

What are we trading with China?

Australia is the most China-reliant economy in the developed world, with about a third of our exports going there. For quite some years now, China has been a big destination particularly for our raw commodities. That’s been driven by its economic surge to become a global powerhouse. China has changed significantly in the last 30 years. The proportion of China’s total population living in urban areas rose from around 19 per cent in 1980, to more than 60 per cent today. Australia was well placed to help them build their cities, infrastructure, and industries with our steel, coal and LNG. That resources boom helped Australia’s economy surge until the late 2000s – and it largely protected us from economic shocks. When the Global Financial Crisis hit in 2009, we were one of the few nations able to continue to grow their economies – and not go into recession – because of the ongoing demand from China for our mineral resources.

China is also a big agricultural market for Australia – as a growing nation it needs food and fibre. China is the world’s 2nd largest agricultural goods importer, and for Australia, our strong reputation for quality and safety has delivered success across meat and seafood, grains like wheat and barley, as well as wool, dairy and wine.

Along with our resources, a couple of other big sectors have had big support from China, including education and tourism. More than 205,000 Chinese students came to Australia in 2018. And in tourism, Australia had more than 1.4 million Chinese visitors in 2018–19. Both of those sectors are now very reliant on that business, with Chinese nationals making up roughly 38% of our foreign students and 15% of our tourists.

But it isn’t just what we export that relies on support from China – it’s imports too. 25% of Australia’s manufactured imports come from China. They are particularly hard to beat on price.

Why did tensions start to rise between Oz and China in recent times?

China has become more forceful in our region in recent years – and that push has caused some issues. Like many nations, we’re concerned about the way China goes about things because we don’t share the same values of democracy and freedom. There’s been accusations of Beijing seeking to interfering in our domestic affairs and of hacking businesses and public institutions. Canada, Japan and South Korea – among others – have also seen economic pushback from China, allegedly for those same sort of political reasons.

Then, not long after the Morrison Government called for an investigation into COVID-19’s origins – a move that Beijing labelled “politically motivated” – China warned we would be economically punished. That happened then it imposed an 80% tariff on Australian barley. China then suspended some major Australian beef imports and launched investigations into our wine industry. And it’s warned students and tourists against travelling to our country, calling us “racist”.

And there’s been other diplomatic issues too. In June, an Australian man was to death for drug smuggling. Cheng Lei, an Australia citizen and anchor at a Chinese state TV network, was detained for very vague reasons. And there was a run in with two of our foreign correspondents having to be rushed home. And Dr Yang Hengjun, an Australian citizen and pro-democracy supporter remains in detention with no access to legal advice after he was seized last year. Australia’s push for that coronavirus investigations is focused on as the start of this – but actually it was the straw that seemed to break the camel’s back.

What is Australia doing to address the issue?

The fact the Australian economy is very reliant on China isn’t a new revelation to the government or our exporters, and work to form close relationships with other nations has been underway.

India is a big target for us. It’s considered one of the emerging superpowers of the world and it’s currently the world’s third largest after the United States of America and the People’s Republic of China. It’s also a democracy, which makes things easier for us culturally. We’ve also been schmoozing Indonesia, Japan and South Korea. But with so much of our economy underpinned by the relationships into China that we already have, some experts say it’s not as simple as finding a new market. But some experts think this year – not just because of our political differences but because of the coronavirus affecting the world more broadly – is a live-action test for our economy. The students and tourists can’t get here. Many of our imports from China and exports into China are delayed. And that means our businesses need to diversify their customer base and look at other options. So we’ll see what that looks like when we emerge from the health crisis.

Squiz recommends:

Chinese President Xi Jinping’s address to the Australian Parliament (2014)

Inside StoryWhitlam in China

Squiz Shortcuts - A weekly explainer on a big news topic.

Get the Squiz Today newsletter

It's a quick read and doesn't take itself too seriously. Get on it.