Australia and China: An uncomfortable, misunderstood relationship

By JENNIFER HOAR:

China is Australia’s closest economic partner. Our trade with China in 2012-13 was an estimated AUD$131 billion and as the epicentre of global economic power shifts to Asia, Australia is well-positioned to take advantage. But can we capitalise on the fact that our biggest trading partner is about to replace our second biggest trading partner as the world’s next economic superpower? And why does it matter? Jennifer Hoar speaks to Jingmin Qian and Professor Kerry Brown on why Australia needs to embrace Asia.

JINGMIN Qian is an expert on investment management and cross-cultural corporate strategy. Even over the phone she projects a well-grounded confidence and self-assuredness that is usually not achievable with one’s voice alone. She knows her stuff.

Born in Beijing, Qian has worked in the Chinese Ministry of Commerce, is an investment management advisor and is a Fellow of the Australian Institute of Company Directors. She has held executive roles on the boards of Boral Ltd, LEK consulting and Leighton Holdings. And she recently co-authored a paper on the investment relationship between Australia and China. She really knows her stuff.

Qian says that Australia and China are close friends because, “we have a complementary [trade] relationship”.

But what does that mean?

Well, Australia is a resource rich country and, according to Qian, we have more raw minerals than we need. China on the other hand, with a population of more than 1.3 billion people, is resource-hungry and needs minerals and energy to meet its infrastructure needs.

 

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Figure 1: how Australia’s exports to China have become dominated by our natural resources, especially minerals. Source: DFAT, 2012

 

According to a Department of Foreign Affairs and Trade report on our exports to China, Australia’s exports of minerals and energy – iron ore and concentrates, coal, crude petroleum, copper ores and concentrates, gold, copper and nickel ores and concentrates- all fall within our top ten goods and services exports to China. This accounts for 73.3% of Australia’s total exports to China.

China obviously has a need for raw mineral and Australia is well positioned to fill it.

But why us? Many other countries are also resource rich, including many countries with lower costs and less regulation on mineral production.

In their 2012 paper The Long March: The Australia-China Investment Relationship Qian and John Larum say higher labour costs in Australia make it more expensive to source minerals from Australia than other countries, such as Canada, but that our proximity means lower transportation costs and increased competitiveness. Larum and Qian also blame Australia’s Mineral Resource Rent Tax and the carbon tax for hindering increased Chinese investment in Australia’s resources and energy sectors.

But Professor Kerry Brown, Director of China Studies at the University of Sydney, says that it’s Australia’s political stability that makes us an attractive place to invest.

“Certainly the institutional strengths in Australia – the rule of law and clear regulations and robust democracy – these make a society stronger. I think those do make for a strong political, stable identity.”

Qian agrees and says picking a country to invest in is like investing in your neighbour’s house. She argues that you wouldn’t want to invest with someone that you didn’t trust, because you are relying on your neighbour to help you get a return on your investment.

Similarly, you wouldn’t accept investment from your neighbour if you didn’t trust them, because of the risk they would use their share to influence the way the investment is used.

In terms of being a neighbour’s house, Australia’s “institutional strengths” make the country a pretty safe investment.

China has a lot of money and it needs a reliable trade partner to supply it with the resources. China also needs to become the world’s global superpower and Australia fits the bill. “So”, you ask, “what’s the problem?”

Well, there are two problems. According to Professor Brown, Australia needs to work hard to develop a “more diverse and complex and deeper relationship, rather than just being about selling things to China”.

Professor Brown is talking about two things. Firstly, he is saying that Australia needs to diversify its economy so that when, “a long, long time ahead”, our mineral resources “dry up”, we still have goods and services we can sell to other countries. Secondly, Australia needs to pursue a relationship with China that is about more than just complementary trade – they need to become security partners as well.

The first point was summed up nicely by Julia Gillard in the Australia in the Asian century white paper, published by the government in 2012 during Gillard’s short stint as Prime Minister –

“In this century, the region in which we live will become home to most of the world’s middle class. Our region will be the world’s largest producer of goods and services and the largest consumer of them. Our nation has benefited from Asia’s appetite for raw minerals and energy. The challenge we must now address is how Australia can benefit from what Asia will need next.”

Basically, the Australia-China relationship is close now because we supply crucial goods – “raw minerals and energy”. In Professor Brown’s words, Australia, “will remain important because it’s not easy for [China] to get these resources elsewhere in the quantity that they need. But of course one day that will dry up, resources will run out one day. So becoming a service provider to China is going to be the big challenge.”

If Australia don’t stay relevant to China, and diversify its economy as China’s needs change, then they will be left behind.

But this problem can be rectified fairly simply, by identifying areas in which Australian expertise is at the forefront globally (research and development, governance and agriculture have already been pinpointed as potential areas to target) and ensuring government and corporate funding to help those areas grow, before our natural resources “dry up”.

The second issue is harder to address, as it requires a change in attitude.

Both Qian and Brown have identified a potentially greater problem; Australia and Australians are racist. Qian blames politicians, while Brown thinks the media is also to blame, but the fundamental issue is the same.

In their paper, Larum and Qian explain how a number of contacts in China feel that Australia discriminates against Chinese investment. They say that incidents in Australian domestic politics, such as Tony Abbott’s statement – “it would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business” – in July 2012, have been interpreted as discriminatory against China. It seems China doesn’t appreciate it.

So China has a lot of money, it needs a reliable trade partner to supply it with the resources it needs to become the world’s global superpower, and Australia fits the bill.“So,” you ask, “What’s the problem?”

It has long seemed apparent that Australians harbour a certain xenophobia towards our Asian neighbours – this is perhaps a throwback to the gold rushes of the 1850s or the communist threat of the cold war years. Speculating on the basis of this xenophobia would be another task in and of itself, but it is crucial to the understanding of the China-Australia relationship. It’s important to find out how Australians feel about China and whether Australians truly are xenophobic, because government and corporate policy are often founded upon public opinion.

In a survey conducted to answer these very questions, respondents answered a series of questions targeted at uncovering how Australians perceive China in relation to other Asian countries in the region, and other white, western nations. Based on the results of my survey (which were biased to an extent, as demonstrated below) Australians are both misinformed and xenophobic.

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Figure 1: Age, gender and heritage of respondents, which reveals my survey is not representative of the Australian population. My findings are, however, still valid, as they reveal some things about how Australians perceive China. Source: my own survey.

 

When asked people what words came to mind when they think about China, the results were superficial and, largely, quite negative. Answers like food, over-population and aspects of tradition and culture featured heavily, while other people’s perceptions of China seemed limited to what they had seen in the media – the Beijing Olympics, ping-pong and the marginalisation of minority groups.

 

china perceptions

Figure 3: the things my respondents associate with China, divided into the most mentioned categories. Source: my own survey.

All of these results are drawn from people’s own experiences with China through having travelled there, having had Chinese friends, engaging with the media’s disjointed narrative on China or, in the case of food, having gone out for dinner.

Australians trust the media in this country, and take a lot of what the media says for granted, including the narrative the media present about our biggest trade partner.

The biggest issue in the way the respondents perceived China is how predominantly negative the perceptions are: food – superficial; over-population – negative; economic powerhouse – positive but loaded with negative connotations for Australia being overtaken by Chinese investment; communism – negative, because it is presented as opposite to democracy; cheap manufacturing – negative, because it means cheap labour; pollution – negative; marginalisation of minority groups – negative; one-child policy – negative as it’s an infringement upon human rights; class divisions and poverty – negative; censorship – negative because it infringes upon people’s civil liberties. The only arguably positive perceptions were of Chinese history, tradition and culture and landmarks, which most respondents had no first-hand knowledge of anyway.

However, the respondents were also asked to rank countries (Japan, US, China, New Zealand, India, Indonesia, Malaysia, North Korea and South Korea) in relation to how close they thought the relationship with Australia was – China was ranked fourth overall behind New Zealand, the US and Japan. This illustrates that, while Australians largely buy into the way the media presents China, they are also aware, at least vaguely, of how much we rely on China economically.

So with so many superficial and negative perceptions of China in the Australian population, all while our two countries share such a close bond in terms of trade, could the relationship ever be more than that? Can Australia and China be security partners, and not just economic partners? In essence, could we ever be friends?

“In a long, long, long time, maybe.” Professor Brown says, historically, “it’s hard to think of a democracy and a non-democracy being particularly close”, and that Australia would need to see a shift in Chinese social, national and corporate governance first.

Qian agrees. She believes that compared to some other countries, Australia is doing a good job at bridging the cultural gap through student and corporate exchanges, and other mechanisms of making Australians more – in Professor Brown’s words – “China literate”.

For both Qian and Brown, this concept of China-literacy is key. Politicians need to create policies which promote increasing cooperation between our two countries, but before that can happen, they need to feel that public opinion is already halfway there. And for Australians to support increased investment by China, we need to have well-informed opinions about China. To do that, we need to understand China. As a lonely western nation in the world’s next economic powerhouse region – Asia – it is our job to understand China. They seem to already understand us very well. And as the world’s next superpower, the race is on to see which countries can win China over, by being China-literate, not China-ignorant.

It’s time for Australia – politicians, media practitioners and ordinary citizens – to wake up to reality. The West is falling and Asia is rising. Power is shifting. It’s shifting closer to us. But if we don’t take the necessary steps to seize some of that power, then it will be wielded without us.

 

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Bibliography

Brown, K. (2014, May 9). Original interview.

Brown, K. (2014, April 11). We still don’t know how to talk about China. Retrieved from http://www.abc.net.au/news/2014-04-11/brown-we-still-dont-know-how-to-talk-about-china/5382684

Craig, G. (2004). The Media, Politics and Public Life. Crows Nest: Allen and Unwin.

Commonwealth of Australia. (2012). Australia in the Asian century White Paper. Retrieved from http://www.asiaeducation.edu.au/verve/_resources/australia-in-the-asian-century-white-paper.pdf

 

Department of Foreign Affairs and Trade. (2014). Australia China Free Trade Agreement. Retrieved from https://www.dfat.gov.au/fta/acfta/

 

Department of Foreign Affairs and Trade. (2012). Australia’s exports to China: 2001 to 2011. Retrieved from http://www.dfat.gov.au/publications/stats-pubs/australias-exports-to-china-2001-2011.pdf

 

Hoar, J. (2014). Australian perceptions of the Asia-Pacific. Retrieved from https://www.surveymonkey.com/s/7P5YGMC

 

Larum, J. and Qian, J. (2012). A Long March: The Australia-China Investment Relationship. Retrieved from http://acbc.com.au/deploycontrol/files/upload/news_nat_fdi_report_oct.pdf

 

Norrie, D. (2013). Made in China, Mined in Australia: Interdependency and Business-Cycle Transmission between Chinese and Australian Industries. Murdoch University.

 

Qian, J. (2014, May 19). Original interview.

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