Don't expect a reset in Australia-China relations anytime soon

In December 1972, the newly elected Labor government in Australia established diplomatic relations with China. Fifty years later, instead of marking a significant milestone, Beijing and Canberra are finding the relationship, in the words of Geoff Raby, a former Australian ambassador to the PRC, at their "lowest ebb". With Labor returning to power after the elections on 21 May, will there be a reset in bilateral ties?

Several factors will affect whether a reset will take place, but when it does, the nature of the bilateral relationship will likely have undergone significant changes. While the extensive economic interdependence remains an important anchor in Australia-China relations, the once touted "comprehensive strategic partnership" will likely fade away.

A quick review of five decades of Australia-China relations suggests that Australia's alliance with the US, domestic politics within Australia (in particular, the two major parties' approaches to China), and economic ties are important factors.

For over five decades, bilateral relations between Australia and China have evolved into extensive ties of economic interdependence, social and cultural contacts, and growing diplomatic and security exchanges.

In 2014, the two countries termed their relationship as a "comprehensive strategic partnership". This was followed in 2015 by the signing of a bilateral free trade agreement and Australia's joining of the China-sponsored Asian Infrastructure Investment Bank (AIIB) despite Washington's objection.

A turning point in bilateral relations began in 2016, due to both domestic and external developments for Australia and China.

In Australia, concerns over growing Chinese influence and investments in critical infrastructure led Canberra to pass legislation on foreign influence and greater scrutiny of foreign capital. At the same time, the Australian government has been more vocal in publicly expressing its concerns and criticisms of issues ranging from the mistreatment of the Turkic Muslim population in Xinjiang to the enactment of the controversial national security legislation in Hong Kong.

In recent years, Canberra has shifted from its previously neutral position on the South China Sea territorial disputes to stepping up its rhetoric against PRC's 'invalid' claims. In April 2020, Canberra infuriated Beijing by calling for an independent international inquiry into the origins of the Covid-19 pandemic. A year later, the Morrison government, using the recently passed Foreign Relations Act, cancelled the MOUs that the Victoria state government had signed with China's National Development and Reform Commission on the Belt and Road Initiative (BRI).

Australia's China policy has been influenced significantly by its alliance with the US. Formed during the early years of the Cold War, the alliance (officially known as The Australia, New Zealand, United States Security Treaty, or ANZUS when it was established in 1951) has endured major changes in international politics and regional geopolitical alignments over the past seven decades, but remained one of the key pillars for security and prosperity of the two democratic countries.

The steady deterioration in US-China relations since the Trump administration came into power in 2017 has continued with the Biden administration, and has had significant impacts on Australia's China policy.

Canberra has supported the US strategy in the region, in particular with regard to securing a rules-based order and strengthening Australia-US security cooperation. These include endorsing the Trump administration's "free and open Indo-Pacific' strategy", supporting the rules-based (and US-led) order, actively participating in the Quadrilateral Security Dialogue (the Quad), and most recently, the AUKUS, a security pact between Australia, the UK and the US.

There has been significant bipartisan support for the alliance. However, Australia's political parties tend to place different emphases on and display divergent preferences for the alliance's role in Australia's overall foreign and security policy, particularly pertaining to such critical questions as middle power diplomacy, regional multilateral institutions and multilateralism in general, and China.

Australian Labor Party (ALP) places more emphasis on multilateralism and seeks to maintain a better balance between alliance solidarity and active, middle power diplomacy. The Liberal-National Party (LNP) governments, on the other hand, have been more inclined to place the alliance as a key pillar of Australian foreign policy.

Canberra's strong reaction to the security agreement between China and Solomon Islands has been a recent instance of how Australia and the US are coordinating their policies toward the South Pacific.

While differences remain between the major political parties regarding middle power diplomacy, multilateralism and alliance, there is growing convergence to recognise the significant implications of China's rise and Beijing's more assertive foreign policy in the region.

The Morrison government sought to politicise the issue by suggesting that the ALP was Beijing's preferred party. This allegation was rejected by Anthony Albanese, leader of the opposition, who argued that on national security issues, there is no daylight between the ALP and the ruling coalition. He emphasised the three pillars of an ALP foreign policy would be the alliance with the US, engagement with regional partners and multilateral forums such as the UN.

Likewise, Senator Penny Wong, opposition shadow foreign minister, has argued for a careful and nuanced approach to managing Australia's alliance relationship with the US and dealing with the rise of China by engaging and promoting the region's multilateral institutions. On numerous occasions, she has criticised the Morrison government's unnecessarily provocative posturing, alarmist rhetoric and "drums of war" with reference to China, which she charges that the coalition exploits for electoral politics.

Finally, despite the deterioration in bilateral relations, two-way trade in the past two years has demonstrated strong growth, largely due to the historically high commodity prices from iron ore to liquified natural gas (LNG), of which Australia's share of total Chinese imports represents 60% and 44%, respectively.

However, Chinese investments in Australia have experienced a steep decline from a record year of US$16.2 billion in 2008 to only US$585 million in 2021, due largely to Canberra's greater scrutiny of foreign investments and the Covid-19 pandemic.

The incoming Labor government's priorities will be domestic issues, from climate change, and minimum wage, to inflation and gender equality. Albanese and Wong will attend the Quad summit in Tokyo on 24 May, where the new Australian prime minister and foreign minister will meet their counterparts from the US, Japan and India.

With the Biden administration focused on strengthening regional alliances and partnerships in meeting the China challenge, it is unlikely that Canberra will be out of step with its closest allies and partners. There is little prospect for a near-term reset in Australia-China relations as the Labor government's China policy will be marked by principled pragmatism, a focus on policy deliberation rather than rhetoric, and reciprocity.

An initial version of this article was first published as an East Asian Institute Background Brief.

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