A foreign government accused of infiltrating schools, the legislature and the media, using its agents to monitor students and influence politicians.

It looked like a campaign of espionage and interference that a top intelligence official warned could “cause serious harm to the nation’s sovereignty, the integrity of our political system, our national security capabilities, our economy and other interests.”

Forget, for a moment anyway, Russia meddling in the 2016 U.S. presidential race. This was China meddling in Australia.

The reports last year suggested that the Communist Party was taking extreme measures to extend influence beyond its borders. The strains between the two countries illustrate a tension many Western powers now face: how to engage with an increasingly powerful, one-party state without sacrificing their democratic interests or stirring up xenophobia.

The conflict threatens to blow up relations between China and Australia.

Here’s a primer on the situation:

What happened?

In June, Fairfax Media and the Australian Broadcasting Corporation, two of the country’s most influential news organizations, published a five-month investigation detailing China’s campaign.

The stories described threats against parents in China for their sons’ involvement in democracy protests in Australia, the detention of a Chinese-born academic during a visit there, donations from pro-Beijing businesses to the campaigns of Australian senators, and the party’s grip over Chinese-language media on the island.

The country’s domestic spy chief, Duncan Lewis, told lawmakers in June that espionage and foreign interference were occurring at “an unprecedented scale” and were a threat to the country’s institutions, politics and economy.

In the fallout, anti-China sentiments have blossomed.

“In Australia, if you’re not being strident or anti-China, your commitment to Australia is almost being questioned,” said Merriden Varrall, director of the East Asia program at the Lowy Institute, a foreign policy think tank in Sydney. “We haven’t been able to talk in the public domain.”

In December, Australian Sen. Sam Dastyari resigned after reports that he’d warned a political donor with Communist Party ties that his phone was likely tapped by government agencies. Dastyari also lauded China’s efforts to build islands in the South China Sea, countering his party’s position.

Are China’s influence operations different from those of other countries?

Countries regularly try to project positive images of themselves abroad, from international broadcasts to funding for educational institutions. But under President Xi Jinping, an emboldened China appears to be setting new standards.

Beijing has spent more than $6 billion to modernize and expand its sprawling propaganda apparatus, which includes a global television channel and state-run news bureaus throughout the world.

Perhaps more importantly, the party agency known as the United Front Work Department embeds partners into community associations, universities and other institutions to promote China’s interests, according to John Fitzgerald, a professor at the Swinburne University of Technology in Melbourne who studies Chinese civil society.

“The most important feature of China’s propaganda operations is not content production or information dissemination but efforts at content control and suppression,” he said.

“China’s party leadership is quite explicit that one of its enemies is liberal democracy, another, the universal values that underpin democracy,” he said. “It will strike down enemies when and where it can.”

Researchers at the National Endowment for Democracy — a Washington nonprofit funded partly by Congress to promote democracy abroad — label China’s methods “sharp power.” Such behavior seeks to influence through manipulation or distortion rather than soft power attempts to win “hearts and minds.”

How did China respond to the accusations?

China’s Foreign Ministry summoned Australia’s ambassador last month to decry the accusations.

"We have no intention to interfere in Australia's internal affairs or exert influence through political donations,” Geng Shuang, a foreign ministry spokesman, said at a news briefing.

State media called the allegations an attack on Chinese people, a standard response that immediately transforms the issue into a racial one. But the backlash also underscored Chinese concerns that global powers seek to undermine its rise.

“In the past, China was always learning. Now China is saying, ‘Can we share something? Can we contribute?’ and that’s seen as a threat,” said Wang Huiyao, founder of the Center for China and Globalization, a public policy think tank in Beijing.

Nearly 60% of Chinese polled by the Global Times, a Communist Party tabloid, now consider Australia the least-friendly country to China.

How does this affect international relations?

Australia relies on China as its largest trading partner. China is the destination for more than a third of Australia’s exports, and its hunger for iron ore and coal helped spare Australia from the withering effects of the 2008 global financial crisis.

The scandal comes amid uncertainty over what role the United States — Australia’s most important military ally — will play in the region with a Trump administration heavy on protectionist rhetoric.

“This is the first time in our history that our dominant trading partner is not also a dominant security partner,” Prime Minister Malcolm Turnbull said in November.

That concern rang out clearly when he recently announced vast foreign interference legislation that the Parliament is expected to vote on later this year. The new laws would ban foreign political donations in Australia.

In his announcement, Turnbull mentioned no specific country, but he alternated between Mandarin and English and played off a phrase used by Mao Tse-tung when he founded modern China.

“The Australian people,” he said, “have stood up.”

Concerns about Chinese influence also cross into New Zealand. A University of Canterbury professor recently detailed how the party seeks to install pro-Beijing associates in community associations and steer political donations.

The Financial Times and New Zealand’s Newsroom revealed that a top Parliament member failed to disclose his Chinese military intelligence background when he immigrated to New Zealand. The politician, Jian Yang, acknowledged his past experience but denied spying.

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