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Yves here. Readers should take note of the larger significance of this story. Even though the US has become a more and more destructive hegemon in the post 9/11 era (and we weren’t all that considerate before) and Trump is widely credited with reducing America’s standing even further…China is so heavy handed and belligerent that it is managing to make the US look like the less ugly ally. And remember, this is despite the US having deposed an Australian prime minister, Gough Whitlam.

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Cross posted from MacroBusiness

he natural tensions between the Australian democracy and Chinese autocracy are back today. Via The Australian:

China’s ambassador to Australia has warned that the relationship between the two countries has been marred by “systematic, irresponsible and negative remarks” about China, and trading ties could be damaged if the situation is not repaired. In a frank interview with The Australian at the Chinese embassy in Canberra, Cheng Jingye said Australia needed to do more to “increase mutual trust” in its ties with China. “If there is a growing lack of mutual trust, in the long run it may have some undesirable impact (on trade relations with China),” Mr Cheng said. While the ambassador did not single out any area of trade that could be affected, he said there were already concerns that some Chinese students in Australia had been subjected to “irresponsible and malicious allegations” and “security and safety incidents”. Mr Cheng rejected suggestions that China was interfering in the political processes in Australia and said last year’s campaign against former Labor senator Sam Dastayari over his dealings with Chinese businesspeople in Australia had been “unfortunately manipulated as a pretext to smear China’s image”. Mr Cheng said Australians needed to decide whether they saw China as an opportunity or a threat. ‘Some Australians, a minority, always see China through coloured lenses — totally dark glasses,” he said. “If you have a deep-rooted prejudice against somebody or some thing, you may find everything in a twisted manner and you cannot come to a rational judgment.”

What should we do, Mr Ambassador. Round up the dissidents for re-education?

We don’t need to choose sides on China. We should simply see it for what it is: both an opportunity and a threat. As should everybody else. Via Reuters:

Beijing’s international trade representatives have held multiple meetings with their counterparts in leading European economies as China seeks support in its trade brawl with the US, according to Reuters. US President Donald Trump is threatening $150 billion in tariffs on Chinese imports. Beijing officials met ambassadors from France, Germany, the United Kingdom, Spain and Italy last Thursday and Friday to propose a firewall against Trump’s protectionism, the news agency reports, citing various sources. “The message was that we have to stand together against US protectionism in favor of free trade,” a European diplomat told Reuters. “China is showing confidence, but internally they appear quite concerned. They have apparently underestimated Trump’s resolve on trade,” the diplomat said, adding that Beijing is nervous that many of China’s trading partners could side with the US.

Europe should back Trump. China is cheating and in doing so giving rise to such things as…well…Donald Trump.

Australia’s own path of Chinese hedging should entail a four point response.

First, our economy must seek balance. To achieve that we will need a raft of new policies that aim to improve Australian competitiveness and get us out from under the commodity dependence. This is necessary anyway as China slows and changes and wants less dirt. We must reform energy, banking, and real estate to lower the currency, boost productivity and move from urbanisation growth drivers to tradables.

Second, we must engage strategically and diplomatically across our entire region. ASEAN is a natural partner to hedge Chinese influence. The Quadrilateral is also useful in bringing together allies. The US alliance must be constantly tended and revitalised. The Pacific must be treated as the good friend and partner that it is with significant aid and bilateral economic exchange, not the usual afterthought.

Third, Australian politics and society must be prepared and shielded to contain excessive Chinese Communist Party influence. This can easily be achieved via bans on foreign (or all) donations to political parties and the introduction of a federal ICAC. Society, too, is easy enough to protect if we have the will. There is no need, nor desire, for discrimination. We simply cut the permanent migration intake in half. It needs to be done anyway to take pressure off the east coast crush-loading. We should eschew both the cultural chauvinists of the Coalition and the “Asianising” influences within Labor. We are a multicultural democracy with liberal Anglophone roots. Let’s accept and protect it.

It’s time to manage the China relationship on the front foot.