Government needs to set China policy or it will lose control

By Peter Jennings

Three big recent developments threaten the federal government’s control over its most difficult strategic policy challenge — the direction of Australia’s China policy. While Canberra worries about how it’s statements play in Beijing, the States and Territories, businesses and universities, are quickly driving their own engagement with China.

Unless our Federal government better explains the national security risks, Australia’s relations with China will be driven by groups interested in economic engagement not national security.

Consider recent examples of this trend. First, on 25 October, Victoria signed a Memorandum of Understanding with Beijing’s ambassador in Canberra, supporting President Xi Jinping’s so-called Belt and Road Initiative.

Second, we saw the arrival in China on 26 October of a large Australian business delegation, headed by Malcolm Broomhead the Chair of explosives manufacturing company Orica, and Chair of the ‘Australia-China Belt and Road Initiative’ — a private entity supporting more Belt and Road business ties and which assisted Andrews on the MOU.

Finally, on 16 October a group known as the Australian Technology Network of Universities signed an ‘Australia-Sino Engineering Partnership’ with nine Chinese technology universities, the better to facilitate more and deeper exchanges of science, technology, engineering and maths students and encouraging ‘industry-focussed research collaboration between the two countries.’

Business delegations and university agreements involving China are nothing new, but the Victorian MOU is in a class of its own for State governments rushing into international agreements without understanding or being constitutionally empowered to handle the national security implications.

According to Premier Daniel Andrews the MOU will make ‘Victoria the first and only Australian state to reach an agreement on the Belt and Road Initiative with the Chinese government.’ The MOU itself appears not to have been released, so it’s unclear what Victoria has really signed up to beyond the claim that it ‘will ensure we are best placed to capitalise on the investment opportunities possible through the Belt and Road initiative, meaning more trade, jobs and investment for Victoria.’

The rhetoric is overblown and inaccurate. In 2015, the then Northern Territory Government made the guileless claim that the 99 year lease of the Port of Darwin to a Chinese company was aimed at positioning the Territory to be part of the Belt and Road money flow. Never get between a State or Territory and Chinese money.

Frankly, the Victorian MOU is a disturbing development. How is it that Victoria has a published China strategy while Canberra lacks one? The answer, of course, is that the States and Territories have no responsibility for national security and little or no access to the intelligence information that inform national judgements about Beijing’s strategic aims.

In the last few years Federal governments have started to push back against Chinese Communist Party covert and overt influencing in Australian public life. It’s hardly surprising that Beijing has concluded that State Governments are softer targets.

Opportunities for what, on the surface, seems easy Chinese money are being grabbed by State governments with breathless enthusiasm. But it’s the federal, not the state governments, that have to manage the risks of Chinese espionage, cyber-hacking, subversion and undue domestic influencing. And it’s only federal Defence, Home Affairs and intelligence agencies that track the negative impact of China’s actions domestically, on our alliances and on Asia-Pacific security.

Something has to give between Federal and State views of the balance of risks and opportunities presented by China. Right now, the China aspirations of some State and Territory governments, and of many universities and businesses either ignore, dismiss or just don’t register the deeper national worries about Beijing’s trajectory to disrupt regional security.

The national position on the BRI, with broad bipartisan support, is that Australia will consider investment proposals on a case by case basis but will not provide blanket endorsement to the scheme.

Federal governments are hesitant to provide blanket support first, because it’s increasingly clear that initiatives aren’t purely economic and second, why should a sovereign country be told to sign up to another country’s political agenda? The BRI advances China’s strategic aim to make weaker countries more dependent on Beijing, to lock out competitors and weaken US alliances in the Asia-Pacific.

From the Horn of Africa, where China located its first overseas military base in Djibouti, to the growing presence of the Chinese military in the Indian and Pacific Oceans, it’s clear that where the Belt and Road invests, a Chinese defence interest follows.

In the last months of his Government, Malcolm Turnbull promoted a plan to provide Australian, Japanese and United States investment finance for Asia-Pacific infrastructure development as an alternative to the BRI, while the then Foreign Minister, Julie Bishop, expressed public concern that BRI funding risked locking small Pacific and Indian Ocean economies into debt trap financing that, like Sri Lanka, could see state infrastructure handed to Beijing to cover huge construction debts.

Many Australian businesses are also keen to hitch their wagons to the BRI. Malcolm Broomhead, of Orica was highly critical of the federal government’s handling of China relations at a business forum on 8 October 2018, reportedly saying: ‘I think the relationship [with China] in the past 18 months has been terrible, it's been perplexing and it's been deliberate on our part. … For some reason the recent government chose to go out of its way in rhetoric to almost insult the Chinese.’

On 26 October 2018, Broomhead led a large business delegation to Beijing, involving BHP, Rio Tinto, the Downer Group, Orica, Metro Mining, KPMG, McKinsey, Elders, Wesfarmers, ANZ, Minter Ellison, Resource Capital Funds, the Minerals Council of Australia, and the Victorian and West Australian governments, discussing how to quickly facilitate business agreements. Broomhead is reported to have said: ‘It’s much easier to progress a project … which comes under the BRI umbrella, because it is then part of an officially sanctioned process.’

According to exclusive reporting by Rowan Callick in The Australian, Orica’s business partner in China is the State Owned Enterprise, Poly Group, an opaque conglomerate originating in defence industry and described by the Beijing media outlet Caixing Global as a ‘military giant.’ In 2013 the United States sanctioned the group’s Poly Technologies firm for violations of the US ‘Iran, North Korea, and Syria Nonproliferation Act’ a claim Poly disputed. The sanctions expired in February 2015.

Whether collaboration with Poly Group represents a fantastic opportunity for Australian business remains to be seen. But it’s surely important to understand the connection in the broader context of Beijing’s defence and security agenda. For example, last week President Xi toured China’s southern military region, which is responsible for the People’s Liberation Army planning and military activities on the South China Sea and Taiwan.

According to Hong Kong’s South China Morning Post, Xi told his military commanders that it was necessary to strengthen their mission and to ‘concentrate preparation for fighting a war.’ That’s a noteworthy and new use of language by Xi given high international tension in the South China Sea.

China’s more offensive military posture in the Asia-Pacific, rapid growth of high-technology weapons and continuous cyber spying on Australia’s private and public sector should surely be a reason for not to get too close to PRC State Owned Entities.

Similarly given the importance the Australian government is placing on growing Defence industry capabilities and the science, technology mathematics and engineering education needed to grow this work force, Australian universities should pause building their China connections to consider if their headlong engagement runs counter to our long term security needs.

States and Territories, businesses and universities would be somewhat justified to demand that the Federal Government must set the right framework for engaging with China. As the keeper of the intelligence and security keys, it’s only the Federal Government which is able to explain why there should be limits to building economic dependence on an authoritarian state focussed on being a dominant military power.

And regrettably, this is precisely what Federal governments have found almost impossible to do. In countless speeches and statements over the last decade, our political leaders refuse to clearly say what they know to be true about Beijing’s authoritarianism, cyber spying and internal subversion efforts.

Pragmatic Minister’s sensibly avoid unnecessary diplomatic arguments with the People’s Republic. But emphasising the prospects for cooperation simply masks the strategic trends working against Australia’s interests. The risks must be articulated.

Scott Morrison’s address last Thursday to the Asia Briefing Live conference in Sydney points to some encouraging change in Government messaging about China, as well as to Canberra’s agonising about what to say publicly.

Morrison’s speech makes a powerful claim to locate his foreign policy as drawn from ‘our character, our values’: ‘we are more than the sum of our deals. We are better than that.’ He sets out essential Australian objectives — free and open markets, freedom of speech and thought, association and religion and peaceful liberal democracy.

If these values mean anything, they will quickly run up against the reality of PRC authoritarianism. On China, Morrison’s is cautious: there ‘must remain room for dialogue and cooperation’ but he worries that Beijing ‘is exercising unprecedented influence.’

Now, Scott Morrison should articulate sensible curbs on State, Territory, business and university open-slather engagement with China. A failure to do so takes China policy out of the hands of federal government and into the control of those with priorities not driven by national security.