Future Directions for Australia-China Directions

My reason for accepting Peter Hartcher’s invitation to speak at the release of his essay today was that, given the current state of the fetid debate on Australia-China relations (in fact, more often like a screaming match than a debate), I thought it might be useful to offer my own personal perspectives on the past, present and future of the relationship. I’m less predisposed to comment on the crisis of the day, be it real or imagined. I’m more concerned with how we navigate the relationship over the next 30 years.

For the record, it’s now 43 years since I first went to the ANU to study Chinese language, history and politics. It’s 39 years since I wrote a dissertation on the Communist Party’s suppression of the Democracy Wall movement, including my translation of the transcript of the trial of its leader, Wei Jingsheng. It’s 35 years since I first went to work at the Australian Embassy in Beijing where my job was analysing Chinese politburo politics and China’s political economy. 30 years ago I was in Tiananmen Square for several days just before the crackdown where I spoke with literally hundreds of Chinese students. And since then I have visited China well over a hundred times as a state government official, running my own business, as a federal MP, Shadow Minister for Foreign and Affairs and Trade, later as Prime Minister and Foreign Minister, and more recently as a scholar researching Xi Jinping’s worldview as well as now the head of an American Think Tank where my principal focus for the last five years has been the future of US-China relations. That’s why, for example, I was in Beijing last Friday, together with Henry Kissinger and Hank Paulson, in a meeting with General Secretary Xi Jinping.

The predictable reaction to all this from much of the Australian political class, and what passes for much of the Australian commentariat, is a lot of eye-rolling, offering further proof of the received wisdom that Kevin is still totally up himself.  So let me not do anything today that might disturb your deepest prejudices.  The truth is, for better or for worse, I’ve been reflecting, writing and working on the Australia-China question for most of my adult life, and long before it was fashionable to do so. My remarks today are drawn from these reflections. I don’t claim any monopoly of wisdom on this subject, as many relative newcomers to the current debate seem to do. Just as I’m acutely conscious of the fact that it’s been some time since I’ve seen the product of the Australian and allied intelligence community, which I have generally held in high professional regard. There are limits, therefore, to what I can add on some of the more recent developments in the relationship, including the reporting of the least few days.

Managing the China relationship has always been difficult. It was so when I was prime minister. So it is for prime minister Morrison, which is why I went and spent time with him at Kirribilli after his re-election in May to offer my own private reflections on the way forward. And for Australia’s sake, I wish him well. But Australia is not Robinson Crusoe. Every democracy in the world today, particularly those in our own region, are experiencing similar challenges. That’s because of two underlying factors: first, China is a one-party state that regards liberal democracy as its ideological enemy; second, whereas once this was a matter for China’s domestic political arrangements alone, as China becomes more powerful strategically, economically and technologically, and more assertive in the prosecution of its national interests abroad, these two sets of conflicting democratic and authoritarian values are now coming into greater conflict around the world.

China’s National Interests

To understand where Australia fits in the wider scheme of things, it’s important to begin by understanding the political and policy priorities of Xi Jinping’s China. I see them as a set of ten concentric circles. It helps to understand what the world looks like when viewed from the weekly meeting of the Standing Committee of the Politburo, before we then decide what our best strategy should be in response.

Number one, keep the party in power and never yield to any argument that it should transition to more democratic forms of governance;

Number two, sustain and secure the unity of the motherland,  hence the unyielding approach in Tibet and Xinjiang, anxiety over Hong Kong, and the great unfinished business of Taiwan;

Number three, grow the economy to become a fully advanced economy and the world’s largest economy within the next thirty years, as the basis of China’s long-term national power, and continue to improve people’s living standards along the way in order to sustain party legitimacy;

Number four, ensure China’s relations with its fourteen neighbouring states are as benign as possible, and ultimately as compliant as possible, to China’s stated core national interests, including the fundamental strategic transformation of the relationship with Russia to that of a de-facto security and foreign policy alliance;

Number five, because of large scale environmental pollution during the first 30 years of unconstrained economic growth, resulting in large-scale popular unrest, to entrench sustainable development (including climate change action) as an additional economic and planning discipline for the future;

Number six, modernise the Chinese military, using fully integrated operations, information warfare as well as classical power projection capabilities, to return Taiwan by force if necessary, assert China’s other unresolved territorial claims, and begin articulating China’s aspirations to be a global great power;

Number seven, on China’s maritime periphery to the east, push US forces back behind the second island chain, fracture US alliances in Asia, thereby enhancing China’s future Taiwan contingencies;

Number eight, on China’s continental periphery to its west, to deploy the Belt and Road Initiative to turn wider Eurasia into a new zone of economic opportunity and foreign and security policy influence for Beijing, extending to Western Europe, South and South East Asia and the Middle East;   

Number nine, to build on half a century of aid diplomacy in Africa and Latin America to secure new markets, as well as political support for China’s multilateral interests whenever needed;

Number ten, to begin the gradual refashioning of the global rules based order in a manner more compatible with China’s interests and values, through personnel, institutional and cultural change within existing multilateral institutions, while at the same time creating a new set of arrangements beyond the UN and the Bretton Woods system.    

It can be seen that all ten of these strategic priorities impact Australian interests, albeit some more directly than others. For those who may be interested, there is a longer treatment of these priorities in my address to West Point cadets in March 2018. They reflect my long-held views on China’s long-term strategy. And these are much the same views I held a decade ago as we developed the 2009 Australian defence white paper. China’s trajectory has been much the same since then. What has changed under Xi Jinping has been the urgency, intensity and overt assertion of that trajectory in what is now called “the new period” of Xi’s leadership.

Will China’s Strategy Succeed?

Will Xi Jinping succeed in the execution of this strategy? That depends on multiple variables, both domestic and foreign. On the domestic front, Xi’s major vulnerability remains the economy, where his move to the left has been acutely felt by China’s heretofore seemingly unstoppable private sector, causing growth to slow well in advance of any immediate impact from the recent trade war with the US. China’s political economy for the last 30 years has been a balancing act between state planning and the market, between SOEs and private firms, between ideology and the buccaneering spirit of China’s entrepreneurial class. This balance has changed under Xi as he confronts afresh the central dilemma faced by his predecessors but begins to deliver a different, less private sector-friendly answer.

The major external variable impacting Xi Jinping’s China is of course the United States. China has long-assumed that the US is in a process of slow decline, accelerated by its interminable wars in the wider Middle East, and the wounding of its economic and its global prestige through the Global Financial Crisis. The election of President Trump, on balance, is seen as accelerating America’s decline as Beijing sees the emergence of an increasingly isolationist, protectionist and populist America, damaging the global brand of democracy itself, as well as fracturing the historical solidarity of US alliances both in Asia and Europe.

On balance, while the trade war is seen as unwelcome in Beijing because of its capacity to compound China’s growth problems going into 2020, this is still seen as a lesser problem than the greater strategic gain for China’s wider national interests from the continuation of the Trump presidency. Besides, China does not believe Trump will stay the course on trade, let alone a wider economic decoupling with Beijing, because of the damage this would do to US economic interests in an election year.

Certainly a number of American friends and allies around the world are beginning what can only be seen as the Great China Hedge. There is clear evidence of this already in Tokyo, Delhi, Seoul, Singapore and the Gulf as governments begin to ponder whether the regional balance of power is beginning to shift under their feet, and how long the US will continue to be a reliable long-term strategic partner, with the capabilities and political will necessary to balance China’s rise. Beijing follows these trends acutely and acts accordingly, often with remarkable speed, dexterity and effectiveness. And as for the global and regional multilateral system, the palpable absence and sometimes physical withdrawal of the US from the field (they couldn’t even be bothered to show up at the East Asia Summit) has left the multilateral door wide open to an increasingly activist China.

Australian Policy

So where does all this leave Australian policy towards China, bearing in mind that we are one part of this wider strategic jigsaw?

As I indicated earlier, China’s strategic posture began to change during Hu Jintao’s second administration from 2007-12, as China sensed a deeply wounded America from the unfolding financial crisis. Indeed in office, we found ourselves dealing with a much more assertive China than was the case before.

That’s why our government developed Australia’s first national China strategy though Cabinet as we found ourselves under pressure across multiple fronts – from foreign investment, to national security to human rights. The core principle of that strategy was simple: “China respects strength and is contemptuous of weakness.” That’s why:

We launched a program for the long-term enhancement of the RAN in the 2009 Defence White Paper, citing China’s changing behaviour in the South China Sea as our rationale.

We rejected China’s determined efforts to take over Rio Tinto;

We rejected the use of Huawei hardware in the roll-out of the NBN on national security grounds ;

We disagreed with China robustly in Copenhagen because of its joint blocking strategy with India to prevent the Copenhagen Accord on climate change from being adopted formally by the conference;

We spoke in opposition to human rights abuses in Tibet; provided visas for visiting Xinjiang activists; and defended the legal rights of incarcerated Chinese Australian Stern Hu;

We declined China’s express interest in designating the Australia-China relationship as a “comprehensive strategic partnership”, a request quickly assented to by the Abbott Government;

We enhanced ASIO resources to deal with the re-emerging challenges of state-sponsored espionage, resources which had been drastically run down during the Howard years because of the total reallocation of resources to Islamist terrorism, leaving Australia virtually undefended against efforts by states.

We declined to back down on key negotiating positions to protect and advance Australian interests in the Australia China FTA negotiations, positions again subsequently conceded by Abbott so that they could proclaim political victory by having secured an agreement.

We worked with the Obama Administration on the “pivot,” including the deployment of US marines to Darwin, and

We helped persuade the Administration to launch the negotiation of the Trans Pacific Partnership to establish the economic pillar of the pivot.

At the same time, we managed a balanced political and economic relationship with Beijing where we were still able to maximise Australian national interests. Trade and foreign direct investment expanded markedly over the six years of our government. Student and tourist numbers continued to grow. China did not interfere in the South Pacific, in part because my government doubled our aid flows to the region and because the region trusted us to represent their position in global climate negotiations. Ministerial visits between Beijing and Canberra proceeded at pace. I attended the opening of the Beijing Olympics and was seated next to Premier Wen Jiabao at the banquet for dozens of visiting heads of government and state.  We had put in place enhanced policing measures to protect the Olympic torch during its Australian progress, successfully preventing the sort of violent protests that had happened in London and Paris. Finally, our collaboration with China within the G20 was particularly close. Indeed China had actively supported Australia’s membership of the body established to replace the G7, whereas other countries were trying to keep us out. And in the lead up to the critical decisions taken on global stimulus at the London Summit in 2009, we worked seamlessly with Beijing, Washington, Berlin and our British hosts on the final communique that re-stabilised financial markets and prevented the global economy from spiralling into depression.

During this period, the government pursued a considered, deliberate, balanced strategy towards China. We were crystal clear with our Chinese counterparts that our alliance with the US was the cornerstone of our security and would never change. We were equally clear about our commitment to universal human rights as defined in the UN Universal Declaration, which had also been ratified by China, and which was an articulation of who we Australians were as a free people. Just as we were clear that within the constraints of these two fundamental principles, which our Chinese partners did not necessarily like but nonetheless recognised, Australia and China should expand all other domains of bilateral economic, regional and global collaboration. And that’s what we did. That’s what we meant by a balanced strategy. It worked.

The Liberal Party did all they could to break bipartisan political consensus on China policy during the period of our government. First they tried attacking from the right, accusing me of being the Manchurian Candidate because I spoke Chinese, neglecting to note that I had never studied in China, only Taiwan, or what was then called “Free China”. They then decided the best means of attack was from the left, i.e. we had been disrespectful to Chinese interests. Turnbull attacked our Defence White Paper as a relic of the Cold War. He also challenged our decision on Huawei and proposed to the company that there would be a review of our ban if they were elected to government. The Liberals’ accommodating approach to Huawei was enhanced by the extraordinary decision by Downer to take a paid position on the Huawei Advisory Board. And when John Faulkner and I tried in 2009 to change the political donation laws to ban all foreign donations to Australian  political parties, and place a maximum dollar cap of $1,000 on any future donation from individual Australian citizens, Turnbull refused to support the legislation in the Senate.

Prime Minister Abbott did everything he could to ingratiate himself with the Chinese leadership. As I said, he capitulated to China’s request for Australia to be designated China’s “comprehensive strategic partner” and conceded critical Australian negotiating positions in order to rapidly conclude a China FTA. The high-level business delegation he took to Beijing in 2014 were dutifully briefed to go out and attack the previous government’s China policy, the central critique being that we had been insulting to China by lecturing them on human rights, thus compromising Australian commercial interests. Kerry Stokes and James Packer led the charge on Abbott’s behalf. Abbott also collapsed Australia’s aid effort in the South Pacific, virtually cutting it in half from our period in office. In doing so, the Liberal Government opened the door to the region for China. This was an utterly reckless act with long-term national security consequences for Australia.

Prime Minister Turnbull sustained this uncritical approach towards China between 2015-17, consistent with his earlier critique of our government’s approach to defence and Huawei while he was Leader of the Opposition. It was also on Turnbull’s watch that the Australian government allowed a Chinese corporation to take out a 99-year lease on the Port of Darwin, the entry point for US marines and their equipment entering Australia as part of the agreement our government reached with the US under the pivot in 2012. The Americans were horrified. The Chinese couldn’t believe their luck. So much for national security rigour.

But then Turnbull decided to radically change course as he entered his last year in office, changing course 180 degrees. By late 2017, Turnbull was under direct challenge for the leadership from Dutton and the far right of the Liberal Party. Turnbull also believed the Labor Party was vulnerable on China because of the Dastyari Affair. Turnbull had also been briefed on a broader Chinese influence campaign within Australia and concluded that he could make a public policy case for this radical U-Turn in government policy. He also believed he could use a wholesale assault on the Chinese government to consolidate his political position against the far right of his party for whom China, as in Trump’s America, had become highly campaign-able. And on top of this, he saw it as a means to advance his political standing against the Labor Party which he attacked as being soft in China. All this culminated in Turnbull’s public proclamation, in execrable Chinese, that “the Australian people had finally stood up against China”, deliberately mimicking a statement from Mao at the proclamation of the People’s Republic in 1949 that the “Chinese people had stood up.” It was this statement of policy, ostensibly about foreign interference, but in large part driven by domestic and internal Liberal Party politics, that defined the future of the relationship over the following two years.

Future Directions

As for future directions for Australian China policy, I would like  to recommend the following principles:

Develop, agree and regularly update a classified, cabinet-level national China strategy. China has one for the US and all its allies. The US is beginning to develop one towards China. It would be negligent for Australia not to have our own. Such a strategy should be cabinet-driven. It should be crystal clear about our national objectives in relation to China, just as it should be clear in its understanding of what China’s objectives are in relation to Australia. It should be brutally pragmatic about how we go about realising those objectives over time by the full deployment of all arms of Australian statecraft. It should also be shared as appropriate with our principal allies. And it should be subject to systematic annual review.

Australia’s national China strategy should be anchored in three core understandings: first, China respects strength and consistency and is contemptuous of weakness and prevarication; second, China too has net strengths and weaknesses of which Australian strategists should be aware in framing our own strategy; third, Australia should be equally aware of our own strengths, weaknesses and vulnerabilities.

Australian strategy should also understand the difference between operational and declaratory strategy. One of the failures of the current government is to shoot its mouth off about everything and believe that this somehow adds up to a strategy. It doesn’t. In fact, it’s just political self-indulgence, driven by its perception of domestic political opportunity rather than advancing our interests with China. Australia in this respect should learn from Japan and India. Both countries have fundamental security problems with China, including significant contested territory. But both manage to be able to prosecute a balanced strategy towards China which protects their security interests, advancing their economic interests and doing so with regular summitry. That has eluded the current Australian government. Australia needs a more mature approach to managing the complexity of the relationship than having politicians out-competing one another on who can sound the most hairy-chested on China. Such an approach might make for great domestic politics. It might make for great media coverage. But it gets you nowhere in advancing your core security and economic interests.

Maintain domestic vigilance against any substantive rather than imagined internal threats to the democracy, our political institutions and our critical infrastructure. China does this for its own country. We should do the same for our own. I fully support the Foreign Influence Transparency Act which was passed with bipartisan support. Indeed I wonder what would have been the result for the Port of Darwin had the Abbott/Turnbull/Morrison government brought this in a little earlier. The port might still be in Australian hands.  However, a word of caution about foreign influence. It’s very easy for this to translate into a form of racial profiling. I will be the first to the barricades if this national security legislation becomes a political vehicle for Hansonism and a return to the days of the yellow peril. These new arrangements on foreign influence transparency  should be given effect as a legal and administrative process, not as a populist witch-hunt.

Regionally, Australia must once again become the international champion of our friends in the South Pacific. The current government’s posture on climate change has undermined our standing with island states and provided a further opening for China. This is the exact reverse of where we were in 2009 when we were the global voice for small island developing states in Copenhagen and their existential demand for a temperature ceiling of 1.5-2 degrees centigrade. The so-called “Pacific Step-Up” is hollow. Without credible climate leadership from Australia, it will be a dead letter. And on the aid side of the “step-up”, bear in mind that the quantum this year has still not returned to the levels we had when I left office in 2013.

In South East Asia, Australia should join ASEAN. I first raised this with Indonesia in 2013. Turnbull mentioned it in 2016, and the Indonesian President appeared supportive. There will be some resistance. But we should work through these challenges over time. Australian membership would enhance the strength of this critical regional institution at a time when it is coming under considerable internal and external pressure. It would also help Australia manage its long term relationship with Jakarta once Indonesia becomes a larger economy than Australia and the power relativities between the two countries change.

Australia must diversify its international economic engagement. Peter speaks to this in his essay. We have become too China-dependent. We need to diversify further to Japan, India, Indonesia, Europe and Africa – the next continent with a rising middle class with more than a billion consumers. We must equally diversify our economy itself. I have written on this at length recently in my own long essay released earlier this year entitled “The Complacent Country.” On India, Morrison should use his visit to Delhi in January to conclude the FTA with that country (the CEP) whose negotiations I launched a decade ago.

Australia must continue to consolidate its alliance with the United States. This should be matched with consistent Australian defence effort for the long-term – of the type outlined a decade ago on the 2009 White Paper. The alliance remains an enormous force multiplier for Australia at every level. It remains a critical factor impacting China’s long term strategic perceptions of Australia. It creates greater respect in Beijing for Australia, not less, given that China continues to recognise the formidable capabilities of the US armed forces and the closeness of the alliance relationship Canberra has with Washington. The alliance will also continue to generate its own frictions with Beijing. But this comes with the territory. As for the Quad, Abbott’s recent re-writing of history on this ignores the fact that when we were elected in late 2007, neither India nor Japan wanted to proceed with it. The Bush Administration at the time was also at best half-hearted.  It would have been passing strange to join something when you would be the only active member. Ten years later the Quad is meeting at foreign ministers level. But India for its own curious reasons continues to exclude Australia from the Malabar naval exercises held with Japan and the US despite six years of Australian requests to do so. I predict India may change its posture in January when Morrison visits Delhi. But Australia should be deeply realistic about the long-term reliability of India as a robust defence partner given Delhi’s competing priorities elsewhere.

Australia should make no apology for its support for universal human rights as defined in the Universal Declaration of 1948 and the other UN covenants. China is also a signatory. These are the international standards we should all be held to. Australia as well.

Australia must also look to mid-century when we may increasingly have to stand to our own two feet, with or without the support of a major external ally. Trumpist isolationism may only be short term. But how these sentiments in the American body politic translate into broader American politics with future Republican and Democrat administrations remains unclear. Australia must plan for a big Australia. A big and sustainable Australia of the type I advocated while I was in office. That means comprehensive action on climate change and broader environmental sustainability. Again, as I have argued in my essay on ‘the Complacent Country’, only a country with  a population of 50 million later this century would begin to have the capacity to fund the military, security  and intelligence assets necessary to defend our territorial integrity and political sovereignty long term. This is not politically correct. But it’s yet another uncomfortable truth.

Conclusion

Peter Hartcher concludes his essay by saying that “history is forcing us out of our complacency.” I hope he is right. Because he must be right. For too long we have been the complacent country on the retooling of our economy, with both a government and a private sector remarkably disengaged from the structural economic challenges and opportunities unfolding across our region and the world. I increasingly fear we will be left behind. For too long we have also been the complacent country on climate change despite the existential dangers now staring us in the face and a government just hoping to keep it all out of the news while the country literally burns. And for too long we hav been complacent in anticipating and responding to the profound geo-political changes now washing over us with China’s rise, America’s ambivalence about its future regional and global role, and an Australia which may one day find itself on its own.

These are speaking notes as drafted and may differ from those on delivery.