Are China and Australia beginning to mend a frayed relationship?

Additions to Australia’s recently formed Cabinet have attempted to mend a somewhat fractious relationship between Canberra and Beijing, and economically, there is no relationship more important to Australia. But has the efforts of these ministers been a success, or will the negative actions taken towards China by Australia’s former government caused irreparable damage?

Australia’s sixth change of Prime Minister in eight years brought about a cabinet reshuffle. The recently appointed Foreign Affairs minister Marise Payne met with her Chinese counterpart Wang Yi in Beijing in a meeting that ran an hour longer than scheduled, a seemingly positive sign. Payne claimed, “we remain absolutely committed as a government to welcoming foreign investment into Australia. It supports jobs, it helps to increase living standards.” Foreign Minister Wang echoed the sentiments, stating “I think the most important outcome of this dialogue is that we have reaffirmed the course of this relationship.”

Payne’s visit followed Australia’s trade minister Simon Birmingham attending the China International Import Expo in Shanghai, bringing to an end a year long diplomatic freeze by Beijing on visits by Australian officials. Minister Birmingham spoke warmly of the event, claiming “The CIIE is an incredible opportunity to highlight the strength of the Chinese economy since it began to open up to the world.” The expo was an opportunity for Australia to showcase its best products to Chinese markets, with around 150 Australian companies sending representatives. Businesses from Down Under will have “the added benefit of many products entering tariff free from January 1 next year, an attractive proposition for the thousands of domestic buyers attending the Australian stands”, exclaimed AustCham Shanghai chief executive Jack Brady.

Key indicators show how crucial a positive diplomatic relationship between Beijing and Canberra is to Australia. In 2017, Australia’s trade with China was valued at $US133 billion, up 16 percent on 2016 figures, accounting for 24 percent of Australia’s total trade, making it Australia’s biggest trading partner in terms of exports and imports.

The superpower’s presence can be felt throughout various sectors of Australia’s economy. And while the property investment and luxury consumer good sales have had contrasting fortunes recently, they give a snapshot of the magnitude of Chinese activity taking place.

Although the level of investment in the property market has fallen by 26 percent in the financial year 2016/17, leading Chinese global property investment portal, Juwai.com, reported that $US 17.4 billion was still ploughed into the Australian real estate market. The two main factors for the decline have been due to capital controls from Chinese regulators limiting the amount of money that can leave the country, and the introduction of a fee by Australia’s Foreign Investment Review Board on property investment applications. These measures have also resulted in a sharp decline in residential real estate application approvals from 40,149 in the 2015/16 financial year, to 13,198 in the following financial year.

The luxury consumer goods market has brought about tangible changes felt across high-end shopping districts in Australia. Industry insiders estimate Chinese shoppers are responsible for two-thirds of sales in the sector. Tim Starling, head of commercial property services company CBRE’s Australian retail occupier team, claims, “Over the past 12 to 18 months we’ve seen this push towards Australia, a lot of that’s being driven by the success of the stalwarts – Louis Vuitton, Chanel and Prada – who have been here for quite a long time.” A $US 517 million redevelopment to Australia’s largest shopping centre in Melbourne’s east saw the number of luxury brands double to 38, with concierge and in-store customer staff featuring a number of Mandarin speakers and shoppers in stores such as Gucci and Chanel speaking Mandarin. The shopping centre’s tourism manager Anita Donnelly also estimates visits from Chinese tourists doubled in 2017, from 102,400 in 2016, highlighting another burgeoning industry with a Chinese presence – tourism. Examining these industries helps to understand the scale of China’s significance on the Australian economy.

Additionally, the geopolitical tensions of territorial disputes in the South China Sea, along with the US trade war with China has meant the relationship and predictability of future actions by Beijing are as sensitive as they have been since the end of the Cold War.

The cause of tension between the two countries began in earnest at the end of 2017, when then-Prime Minister Malcolm Turnbull announced legislation to counter foreign influence in domestic affairs, including a mandate for foreign governments to identify themselves on a pubic register. Turnbull admitted his decision was influenced by “disturbing reports about Chinese influence”, an assertion strongly denied by Beijing.

Naturally, this lack of credibility was viewed negatively by their Asian neighbours, with China’s ambassador to Australia, Cheng Jingye, warning that a “Cold War mentality” would undermine relations. In May, disdain was also shown when Australia’s then-Trade Minister Steve Ciobo’s attempt to meet with his Chinese counterpart was rebuffed.

With efforts to ease tensions by the newly appointed ministers, does this indicate diplomatic relations between Beijing and Canberra are on the mend? Not exactly – in late August, Canberra denied the right for Chinese tech giants Huawei and ZTE involvement in the national rollout of 5G telecommunications upgrades taking place in Australia. Minister Payne defended the decision prior to being sworn in as Foreign Affairs minister, citing the protection of Australia’s national security as the motive, as Chinese law requires organisations and citizens to support, assist and cooperate with intelligence work, making Huawei’s equipment a conduit for espionage. Chinese foreign ministry spokesman Lu Kang claimed that China expressed “serious concern”, adding that “Australia should not use excuses to artificially erect barriers.” Chinese state media echoed these sentiments, describing it as a “stab in the back” to Huawei, and “disappointing and poisonous” to bilateral cooperation.

So will the olive branches extended by these ministers simply be in vain? Only time will tell.

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