Multipolar World

The dilemmas of balancing Sino-Australian relations

Jorge Costa Oliveira

Australia has a sui generis evolution — from being Terra Australis Incognita to a penitentiary settlement, to “the lucky country” (due to an abundance of resources and distance from past wars). From a cultural and civilizational viewpoint, it is a Western country, with a liberal democracy based on an Anglo-Saxon political and electoral system, a member of the Commonwealth and with strong ties to the U.K. and the U.S.

Given its geographic setting, successive Australian governments have long assumed a strategy of Asian integration, both in terms of population composition and in economic terms.

In terms of population, in 2020 there were 7.6 million immigrants living in Australia, comprising about 30% of its population. The second- and third-largest contingents of immigrants came from India and China (721,000 and 650,000, respectively). In 2016, 13.4% of the Australian population had been born in an Asian country (compared to only 5.5% in 1996), constituting almost half of the foreign-born population. In 2016, 26% of births in Australia had at least one parent born in Asia.

With regard to foreign trade, a China-Australia Free Trade Agreement (ChAFTA) was signed in December 2015. By 2020, 31% of Australia’s exports in goods and services were bound for China. Australian foreign direct investment (FDI) in China reached $7 billion in 2020; in turn, China is the sixth largest direct investor in Australia, accounting for about 4% ($44 billion in 2020) of total FDI in Australia (excluding Chinese capital flows via Hong Kong, Singapore and other financial hubs).

In terms of external security, in 1951 Australia formed, with the U.S. and New Zealand, a joint defensive military alliance in the South Pacific: ANZUS. In September 2021, Australia developed its alliances further by forming another three-party military alliance with the U.S. and the U.K. – AUKUS.

Over the past two years, China has imposed high tariffs and punitive measures on some Australian products (such as wine, lobster and barley) as a result of criticisms made by the previous Australian government. These sanctions would appear to be merely a warning, not least because several of these products eventually found their way into the Chinese market via Southeast Asian countries or Hong Kong.

This situation is all the more bizarre because the economic interdependence between the two countries is clear. For example, China is dependent on Australia for some key raw materials, such as iron ore, without which the production of steel and many other products in China are compromised. Without steel (and China cannot quickly find an alternative supplier) the Chinese construction sector would collapse, and with it a significant part of the Chinese economy.

Australia and several countries in Southeast Asia (Philippines, Singapore and Thailand) and the Far East (Japan, South Korea) have for several years managed a balance between external security partnerships with Western countries, most notably the U.S., and economic integration with China. This balance seems frail and dilemmatic, but is proving to be sustainable and should remain so – everyone has much to gain from the status quo, and much to lose by altering it.

Categories Multipolar World Opinion