Fortnight of 3 to 16-ish June 2024
This is the free fortnightly(-ish) BCB newsletter. For readers looking for breaking analysis of major bilateral developments, BCB now also offers a paid subscription add-on. BCB in Brief provides quick assessments of the big stories shaping the Australia-China relationship. You can upgrade to a paid subscription here.
Pomp, protests, and practicalities
Prime Minister Anthony Albanese being interviewed on 96FM Perth on 19 June:
“Prime Minister: … Adelaide was all about the pandas.
Clairsy: We heard about that.
Prime Minister: All about the pandas.
Lisa: We wouldn’t say no to a panda.
Prime Minister: No, we’re pro-panda. We’re getting two.”
Quick take:
After more than seven years since the last visit to Australia by a Chinese leader, Premier Li Qiang’s recently concluded Australia trip featured a hefty dose of pomp and circumstance. As well as a ceremonial welcome and a State Lunch in Canberra, the visit included numerous smiling photo ops and confirmation that Adelaide Zoo will get a fresh duo of pandas—the only members of the species in the Southern Hemisphere. Beyond generating extensive news coverage, the panda pronouncement prompted a positive reaction from the Albanese government and enthusiastic anticipation from the Coalition opposition. During the visit, Premier Li and his delegation were also bussed around on a busy schedule of high-level calls, which included the Annual Leaders’ Meeting with Prime Minister Albanese and numerous engagements with Australian ministers, the Coalition opposition, community groups, state governments, and the business sector.
But beyond the choregraphed official portions of the program, the off-piste and unexpected events also generated much sustained public attention in Australia. Chinese officials on 17 June awkwardly sought to keep the cameras off Australian journalist Cheng Lei, who was released last October after years of detention in China. This episode caused controversy and criticism in Australia (here, here, here, here, here, here, here, and here). Although Prime Minister Albanese’s response to the incident was initially low-key, Australian concerns about the actions of the Chinese officials were subsequently raised with both the Chinese Embassy in Canberra and Premier Li himself. It was then revealed that Cheng was blocked by an Australian public servant from a Premier Li press event later that day, seemingly at the behest of Chinese officials. Although this latter event was apparently for photographers and camerapeople only, the rebuffing of Cheng’s request to join combined with the incident earlier in the day prompted much political and media scrutiny and argy-bargy.
Meanwhile, crowds variously lambasting and boosting China followed Premier Li to every city he visited. As well as Chinese government supporters, these demonstrations featured Falun Gong, Uyghur, Tibetan, Hong Kong, and other community activists decrying China’s human rights abuses and other authoritarian policies. Prime Minister Albanese and his guest tried to keep the visit agenda firmly on seeking “common grounds” and “addressing our differences without allowing them to define what our relationship is.” Yet the visit’s unscripted elements underscored just a small sample of the many areas of deep divergence between Australia and China.
Amidst all the drama and ceremony, Premier Li’s trip also saw practical outcomes. Australia will be added to the list of countries accorded 15 days of visa-free travel, albeit with likely intense misgivings from many Australians. A poll published just days before Premier Li’s visit found that some 73% of Australians believe that “the risk of arbitrary detention is a concern when considering travel to China.” Meanwhile, as I previously advocated elsewhere and floated in BCB earlier this month, the visit outcomes confirmed that the Australia-China Ministerial Dialogue on Climate Change will formally resume. Despite bilateral meetings in the climate change portfolio during the Albanese government’s tenure, this formal ministerial dialogue appears to have been in abeyance since 2014. (The 6th iteration of this dialogue took place in 2014 and the 8th edition will happen in 2024, though it’s unclear when the 7th dialogue occurred.) Beyond an as-yet uncertain plan for more bilateral military communication, the visit also produced a flurry of bilateral MoUs in economic policy, education, research, climate change, standards, and other technical arenas.
Live lobster restrictions likely to go
Minister for Trade and Tourism Don Farrell speaking to Sky News on 16 June:
“Look, on each of these occasions [meeting with Minister of Commerce Wang Wentao] I’ve raised issues, and they’ve subsequently been resolved. I’m very hopeful that that will be the case with lobster.”
Quick take:
Both the Albanese government and the Coalition opposition offered up optimism and ambition on the trade front in the lead up to and during Premier Li’s visit (here, here, here, here, here, here, here, and here). Minister Farrell was especially bullish, saying on 12 June (and reiterating the point in similar terms here): “last year our trading relationship with China resulted in $327 billion worth of trade. I can’t see why that figure can’t be $400 billion.” Not to be outdone, Peter Dutton, the leader of the typically more China-sceptical Coalition, said on 16 June: “I’d love to see the trading relationship [with China] increase two fold.” This followed Dutton’s 11 June comment: “Well, I’m pro-China and the relationship that we have with them. I want that trading relationship to increase.”
Not only were Australian politicians upbeat on the overall trade relationship, but they provided increasingly optimistic assessments about the removal of China’s last two trade restrictions on red meat and live lobster. Minister for Agriculture, Fisheries and Forestry Murray Watt said on 5 June before the visit: “We’re well on the way to restoring all trade links with our biggest agricultural trading partner, China.” And the positivity only intensified as Premier Li’s trip wrapped up. Regarding the trade restrictions on live lobster, Minister Farrell said on the ABC on 18 June: “I’m now very, very confident as a result of the meetings today and yesterday, that these final issues will be resolved, and resolved very quickly.” These comments came as Prime Minister Albanese expressed hope that the trade restrictions on live lobster would be removed “very soon” “in the next couple of weeks.”
This strong sense of expectation created by Prime Minister Albanese and his colleagues combined with the positivity about the visit from both the Australian and Chinese governments (here, here, and here) suggest that the trade restrictions on live lobster won’t last much longer. To be sure, these trade restrictions didn’t tumble during the visit and their removal isn’t guaranteed. But delaying their removal until after the visit was likely a face-saving manoeuvre by Beijing designed to make these trade restrictions appear more like scientific and technical barriers than political bargaining chips—an impression that Minister Farrell was willing to further feed after Premier Li left Australia. Regardless of the motivation for delayed removal, Beijing presumably understands that leaving these trade restrictions in place now would cause domestic political recriminations for the Albanese government, which would in turn make it harder for Beijing to persuade Canberra to embrace China’s goal of more bilateral “coordination and cooperation.” So, avoiding domestic political embarrassments for the Albanese government and keeping Canberra on side likely give China compelling grounds to quickly get rid of the trade restrictions on live lobster. And assuming that the blockages on the last two red meat exporters are also removed in the coming weeks, China’s more than four year-long campaign of economic coercion could come to a de facto end later this month or in early July.
A Chinese investment ban by any other name
Minister for Agriculture, Fisheries and Forestry Watt speaking to the ABC on 17 June:
“Yeah so, we don’t have a blanket ban on China or any other country investing in our critical minerals sector.”
Quick take:
Minister Watt was adamant on this point, repeating it elsewhere the same day. Despite denying a blanket ban on Chinese investments in Australian critical minerals companies, Minister Watt nevertheless emphasised that Australia thinks there are risks associated with China’s dominant global role in the industry. On 17 June, Minister Watt said in language reminiscent of past ministerial messages and Australian policy documents: “China absolutely dominates the world market” and that when Ausralia considers “individual applications, things like national security and the diversity of supply will always be taken into account.” When asked about Australia’s approach to investments from China in critical minerals, Minister for Foreign Affairs Penny Wong and Treasurer Jim Chalmers didn’t offer the same explicit denial of a blanket Australian ban. But they did also emphasise the “national security,” secure “supply chains,” and “national economic interest” imperatives driving Australia’s approach to assessing foreign investments in this space.
How should businesses, the public, and the rest of the world interpret these messages? My working assessment is that the Albanese government aims to keep significant additional Chinese capital out of Australian critical minerals miners and refiners. This doesn’t necessarily mean that the Albanese government is following confidential and explicit policy guidance stipulating the rejection of all additional big Chinese investments in critical minerals companies. (Although such formalised and presumably highly classified policy guidance is entirely possible.) But Canberra does at least appear inclined to reject future large-scale Chinese investments based on its assessment of the risks associated with further consolidating China’s commanding position in global critical minerals supply chains. In other words, Australia might not in principle reject all significant new Chinese investments in critical minerals, and yet it is likely to do so in practice because of the perceived risks of each additional injection of Chinese capital in this industry. Canberra likely sees this effort to keep large additional sums of Chinese capital out of its critical minerals miners and refiners as one of Australia’s key contributions to the multinational effort to build critical minerals supply chains that are less deeply dependent on China.
Does this mean that we’ll see more divestment orders like the one earlier this month? Not necessarily. That divestment order was probably a targeted response to an effort by investors to skirt a February 2023 investment rejection rather than being part of a broader plan to roll back established Chinese holdings. Treasurer Chalmers’ divestment order points to Australia’s willingness to issue such demands when investment rejections are flouted, and yet it doesn’t necessarily indicate an appetite to force the sale of previously approved Chinese investments. Of course, additional Chinese or China-linked divestments (either forced or voluntary) are possible in the Australian critical minerals industry. These could be prompted by the growing geopolitical sensitivity of some such investments and/or the scale of the US financial benefits associated with keeping Chinese holdings below a certain threshold. But while additional divestments of previously approved Chinese holdings are still TBC, Australia’s approach to new acquisitions in the critical minerals sector seems clear. Canberra doesn’t want substantial new investments from Chinese or China-linked entities in Australian critical minerals miners and refiners.
Could I be wrong? Absolutely. All the above is based on a small number of datapoints. Although the Albanese government might have indirectly rejected other Chinese investments in critical minerals by privately suggesting in advance that they wouldn’t be approved, we’ve only seen two direct Australian rejections (that I’m aware of) since the Albanese government was elected (here and here). Moreover, Prime Minister Albanese spruiked Australian critical minerals during Premier Li’s visit (here and here) and the Chinese leader toured the Tianqi Lithium processing plant at Kwinana during the Western Australian leg of his trip. And yet these positive Albanese government messages about shared critical minerals opportunities seem to involve China as a customer rather than an investor. Added to that, Canberra and a range of broadly likeminded capitals, including Washington, Tokyo, and Brussels, are determined to build critical minerals supply chains that don’t transit China or depend on large sums of Chinese capital. So, I’d expect Canberra to continue privately hosing down Chinese companies’ expectations of investment access in critical minerals, while also formally rejecting the large attempted Chinese investments that materialise. Even as some industry voices make the case for more Chinese capital, the Albanese government appears intent on keeping the brakes on.
One final addendum: If the above is roughly right, Canberra looks set to fight a two-pronged battle with both Beijing and Perth in the coming years. The Chinese and Western Australian capitals will likely push for more Chinese capital in Australian critical minerals companies. For Beijing, it’s probably about pursuing economic growth and security objectives, among others, and for Perth it’s likely more a matter of local jobs and growth. At the same time as there’s more of this pressure coming from Beijing and Perth, Canberra will be hoping to do its bit to support the “likeminded” push to create global critical minerals supply chains that are less dependent on China. These twin federal and international battles with Perth and Beijing, respectively, are likely to become fiercer as the competing priorities of more Chinese capital and less China-dependent global critical minerals supply chains rub up against each other. So, regardless of how stable the Australia-China relationship might be now, the fight over Chinese capital in the Australian critical minerals sector is likely to be a rough ride for Canberra in the years ahead.
As always, thank you for reading, and please excuse any errors (typographical or otherwise). Any and all objections, criticisms, and corrections are very much appreciated.
Beijing to Canberra and Back 