Aug 30, 2018 08:12 PM

Opinion: Australia’s Status as ‘Middle Power’ Undermined by China-Bashing

The struggle between Beijing and Washington for influence in the Asia-Pacific is causing divisions within one of the region’s more-developed democracies — Australia.

Australia has always been careful not to offend the United States, for its status as a middle power is conferred on it largely by Washington. It has also been slow to conceive of itself as more than a white-European enclave at the bottom of Asia, and to recognize that its future prosperity depends on its proximity to the world’s fastest-growing region. Australia is viewed throughout Asia, often unfairly, more as the U.S.’ strategic proxy than a nation with independent foreign policies.

As the American empire recedes, Western countries talk of a power vacuum in Asia. China, Japan, South Korea, Indonesia and the other nations of the region are more focused on managing the dynamic interaction of their own economic and strategic interests than fearing a vacuum.

As China’s economic prowess increases, it is understandably expanding its presence. China’s “rocks and reefs” strategy in the South China Sea has been met with alarm in Washington and created some unease in the region, but its significance is small compared to the vast American military presence in Asia, particularly in Japan and South Korea. It would be better for all if an agreement could be reached between China, India, Japan and the U.S. to balance and limit military deployments in Asia to prevent an extravagant, empty and dangerous arms race. Any true balance would require the U.S. to reconsider its vast Asian military footprint.

In the 19th and early 20th centuries, Western powers colonized countries in order to secure resources and cheap (sometimes free) labor, and to assure trade routes, shedding a great deal of blood and marginalizing people across the world. Some European and American analysts have charged that the Belt and Road Initiative is a colonial endeavor with an internal program of “debt trap” diplomacy that risks pushing smaller debtor nations into insolvency. This is unlikely, for China is trying to be a catalyst for stronger regional growth to support the development of an Asian middle class that can buy Chinese goods and services, and to contribute to general regional stability that benefits China. China also knows it can ill-afford to fund projects that are likely to increase bad debt. China’s investment in the region, and beyond, in Africa, combined with the establishment of the Asia Infrastructure Investment Bank and the Belt and Road Initiative, are expressions of its growing soft power.

A sizable cohort of Australian politicians and the country’s military and intelligence establishments appear to be working to demonize China in order to demonstrate their loyalty to Washington and appeal to the rising forces of Australian populism and nationalism. Casting China as a threat to the region allows politicians to argue for larger defense and intelligence budgets, and helps distract voters from domestic political problems. Over the last few years, the Australian media seems to have accepted allegations that Chinese spies were coercing Australian politics, and that Chinese firms backed by anti-competitive state-owned interests were infiltrating the Australian economy.

The Australian government faces complex issues managing foreign investment evenhandedly to ensure that it is not simply extractive and speculative, but contributes to national common wealth. Politicians and media have singled out Chinese interests as unwanted agents of social change, stirring up racist sentiments in Australia. This contradicts a culture that values the principle of fairness and, despite intermittent tension arising from waves of immigration over the last three generations, has striven to be open and inclusive. It also exposes a lack of understanding in Australia of the source of its considerable prosperity over the last two decades.

Australia has enjoyed a 15-year economic boom due to Chinese demand for its raw materials. This, in part, helped Australia to escape the worst effects of the Great Recession. The Chinese mainland has become Australia’s largest source of tourists, their spending increasing 273% over the last decade, and now exceeding that of any other country. In 2017, there were over 100,000 Chinese citizens studying in Australian schools and universities, providing vital revenues for Australian universities to remain among some of the most respected in the world.

Although the mineral resources boom may be over, China continues to build and maintain its infrastructure and expand its property sector, requiring raw materials for decades to come. China’s middle class now exceeds 300 million by most measures, and it continues to grow, driven by steady, relentless urbanization. Chinese urban-dwellers have become avid consumers of Australian beef, seafood, produce, dairy products and wine. China is Australia’s largest wine market, consuming A$2 million ($1.46 million) worth of mostly red wine a week. China will become increasingly dependent on quality food imports as its urban population grows, and Australia remains a trusted source of quality products.

The national security legislation promulgated in Canberra last year, prohibiting foreign influence in politics and the economy, was clearly aimed at China. Citing security concerns, the Australian government’s denial of Chinese global telecommunications company Huawei Technologies Co. Ltd.’s right to participate in the development of national communications infrastructure was another snub to Beijing. The United Kingdom and New Zealand have assessed that there were no security issues and welcomed Huawei. By these actions, Australia revealed a misplaced lack of faith in its own institutions and its ill-considered complicity in American aims to contain China.

The United States views its and its allies’ resistance to China’s efforts to develop high-technology capabilities as a key instrument in containing China’s rise. Empires that have tried to use such tactics have usually failed. Despite extensive efforts, China lost the secret of the propagation and production of silk in the sixth century. Following the American Revolution in the late 18th century, Britain tried in vain to prevent its textile engineers from leaving the country in case they assisted the then largely-agrarian United States to industrialize. This too, failed. In the 1920s, Washington tried to prevent Radio Corporation of America from sharing its marine radio technology with Britain, for the U.S. had surpassed Britain as the global financial power during World War I and also wanted to surpass it as the global naval power. Britain developed the technology anyway.

By aligning itself with the strategies of the shrinking American Empire, Australia is wasting an opportunity to build precious political capital in Asia, the region that will define its economic prosperity and future security. Like its smaller neighbor New Zealand, Australia is a relatively young country. It will need to be adaptable to fulfill its full multicultural and economic potential as a middle power in Asia.

David Mahon is executive chairman and Charlie Gao is a partner at asset management and corporate advisory firm Mahon China.

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David Mahon

David Mahon is the executive chairman of Beijing-based asset management and corporate advisory firm Mahon China Investment Management Ltd.