When China's Xi Jinping (then vice president) visited Canberra with a delegation of about 200 party and government officials, state enterprise executives and private business leaders in June 2010 as BCA president I had an opportunity to engage him in private conversation. The conversation made the most profound impression upon me. During our talks he told me that he planned to take his delegation to Darwin on his way back to Beijing the next day. I commented that Darwin was a relatively small city and I wondered why he would make a stop there. His reply was revealing: he wanted to visit Kakadu National Park because he had an interest in Aboriginal paintings sparked by a recent gift by the Australian government of a number of paintings to the government of China. And then he added "It's the only Australian capital on the mainland I have yet to visit."

Insights

This conversation gave me two important insights into the way China thinks about its relationship with Australia. Clearly, President Xi Jinping views our relationship in more than simply trade terms. He has a cultural curiosity and interest in Australia that goes beyond diplomacy and business promotion. What other world leader has taken a delegation of government and business leaders to an Australian indigenous community?

And what other Asian leader has visited every Australian mainland capital? What European or North American leader could say as much?

Clearly, China wants to have a deeper trade relationship with Australia and was therefore prepared to negotiate a trade treaty which gives seriously privileged access to its growing domestic market to Australian businesses across hard commodities, soft commodities and traded services. But equally clearly in my view, China's leadership is looking to forge a close and respectful relationship with a non-threatening, friendly nation with a shared strategic interest in the peace, good order and prosperity of the south-east Asian region.

As I reflected on the evident importance President Xi placed upon China's relationships with our country, two further insights from skilled China watchers put President Xi's words into context. First, Australia's former ambassador to China Geoff Raby explained that China's leadership is just beginning to come to grips with a profound change in its national strategic outlook. For the first time in its long history, China must rely on the rest of the world for much of the vital commodities it now needs. Its traditional self-sufficiency has been overwhelmed by the rapidity of its economic growth. This is a profound and unsettling challenge to China's leadership.

Kissinger

Second, in his insightful book On China, Henry Kissinger explains how deeply imprinted in China's DNA is a deep-seated fear of strategic encirclement: a fear of being surrounded by strong but unreliable neighbours who have the potential to threaten China's vital supply lines. This DNA explains much in China's recent history, including its 1976 invasion of North Vietnam, its détente with America even during the Vietnam War, and its stance in the South China Sea.

Against this aspiration for China-Australia relations, a rejection by Australia, a well-regarded and important supplier to China, of a hard-fought trade agreement runs a serious risk: it risks encouraging China's leadership to turn inward again, to reduce its dependency on buying what it needs from the rest of the world, and to focus again on self-sufficiency at any cost. If China cannot feel confident in the reliability of well-disposed nations like Australia, it may well focus its resources on protecting its less efficient domestic producers at our expense.

Scorning the FTA would not only run this risk, but would forego huge market access benefits that have so much to offer Australia in so many sectors, including agriculture, value-added food products and high-value services. The FTA offers not only privileged access but most favoured nation benefits. And beyond the words of the treaty, China's agreement to the FTA signals an explicit seal of approval by the government of China that state-owned enterprises and private firms are encouraged to invest here. As the chief executive of the BCA, Jennifer Westacott said recently: "It is truly bewildering that Australia would risk kicking the biggest economic 'own goal' in its history by not supporting this agreement." Her sentiment is dead right. But her analogy is imperfect. 'Own goals' are accidental. This would be more akin to deliberate sabotage of our national interests.

Graham Bradley is a former president of the Business Council of Australia.