Prime Minister Malcolm Turnbull may get some sense of just how much Chinese leader Xi Jinping is willing to push the country’s growing dissatisfaction with Australia’s reasonably tough stance on China’s outrageous strategic island-building exercise in the South China Sea when he meets him in Beijing today.
China is also none too pleased with the move to station US marines near Darwin, nor with Australia’s quickly growing military relationship with China’s two identified enemies in Asia — Japan and the Philippines. The bad blood with Japan dates back millennia; the Philippines on the other hand has had the temerity to take China to the international arbitration court.
There has already been an oblique warning this week in the Communist Party’s English-language mouthpiece, China Daily, which said Turnbull needed to be “careful and considerate about Canberra’s stance on the South China Sea”.
Australia also risks further ire from China if Japan is chosen over France or Germany to build the 12 submarines identified in the defence white paper.
China has had a chance to see Australia’s military ties with the Philippines up close in recent weeks. The 11-day exercises with the US and Philippine navies wrap up today, and US Defence Secretary Ash Carter said yesterday that the US would send troops and combat aircraft to the Philippines for regular, more frequent rotations, and would conduct more joint sea and air patrols with Philippine forces in the South China Sea.
Carter also disclosed that US ships had carried out sea patrols with the Philippines in the South China Sea — perhaps it’s only time before Australia does too?
Analysts believe that China’s next island building move will be in the Scarborough Shoal, a group of rocks only 400km from the Philippines, which China seized. They have also predicted that China might introduce an Air Defence Identification Zone (ADIZ), forcing passing aircraft to identify themselves to Chinese authorities.
Australia’s reaction to China’s introduction of an ADIZ over the East China Sea garnered an unprecedented public dressing-down for Foreign Affairs Minister Julie Bishop in Beijing.
There are two views on the Turnbull government’s strategy on China regarding regional security. More hawkish members of Australia’s Defence Department and diplomatic officials reckon that Australia has not been tough enough, soft-pedaling the messages because it fears some nameless trade retribution.
Others, such as former China ambassador Stephen FitzGerald and ANU Professor High White, believe that Turnbull has flubbed the chance of carving out the independent foreign policy he once explored in opposition, instead falling meekly into line behind the US.
Still, for now Australia and its quarries are still far too important to China for there to be any serious attempts to use trade as a threat to attain ends that are more, shall we say, diplomatic — albeit, China’s intentions are often quite the opposite. But China is continuing to try to diversify its supply chain to reduce its reliance on major suppliers like Australia that are not prepared to toe the line. It will welcome the news that India has resumed iron ore exporting after a government-enforced breather.
And this week’s sudden introduction of new cross-border e-commerce regulations sent a shudder through Australian dairy and health supplements companies, which are all relaying on China for their growth. Such moves show that China can change the playing field for its markets with a stroke of a pen — China-watchers believe that we will be seeing more of this, and it’s worth remembering that China plays the long game in business.
But Turnbull could hardly have been more effusive in his set-piece speech on trade with China in Shanghai yesterday:
“Today, of course, the modern Shanghai skyline has sprouted more than 1300 steel-reinforced skyscrapers, more than any other city in the planet.
“And Australia has helped shape this skyline, all that steel was made with help, in many cases of Australian architects, Australian engineers and of course, Australian iron ore. And this demand for Australian resources, across this great nation of 1.4 billion people, has underpinned the greatest run of unbroken prosperity Australians have ever known.”
Although under some pressure from the federal opposition, he did bite the bullet on China’s steel dumping during his meeting with Chinese Premier Li Keqiang in Beijing last night.
“I met yesterday with the head of Baosteel and inspected their premises and we did discuss the global oversupply of steel, and I understand that the Prime Minister’s discussions with the Premier also saw this topic come up,” Resources Minister Josh Frydenberg told ABC radio.
But even that message was tempered. “China consumes 90% of their production for domestic use. So the biggest exporter of steel to Australia is actually not China, but Japan — Japan has 48% of the imports into Australia of steel and China only has 16%.”
At present, the way the China good cop/bad cop routine works is that the Foreign Minister — or some other appropriate senior government member — is sent to Beijing some time ahead of the prime ministerial visit — as Julie Bishop was — to catch all the flak. The PM can then show up, smile for photos, review troops and banquet away — seemingly having his cake and eating it.
It looks very nice, except underneath the calm surface things are beginning to bubble.