China has asked Australia to ‘increase mutual trust’ but what does that mean for Australian business?
For China-watchers in Australia, interpreting the public messages sent by Chinese leaders can be an art as much as a science.
Take the recent comments by Chinese Ambassador to Australia Cheng Jingye, who reportedly criticised the state of Canberra and Beijing’s relationship, warning that Australia needs to do more to “increase mutual trust”.
Ambassador Cheng Jingye told The Australian newspaper in April the risk of “a growing lack of mutual trust” between the countries could impact on trade relations.
“Unfortunately, over a certain period, especially starting from the latter half of last year, we have seen a kind of systematic, irresponsible, negative remarks and comments regarding China which has caused adverse impact on bilateral relations,” he was quoted as saying.
“It is detrimental to the image of Australia in the eyes of the Chinese public. It is something that neither side would like to see.”
It’s a worrying concern to be expressed by such a major trading partner — Australia’s largest for both imports and exports.
China has dominated our discussion of trade since 2009, when it became our top trading partner, taking over from Japan.
And, despite the imbalance in our size, Australia matters to China too.
We are China’s seventh largest trading partner, with two-way trade valued at more than $155 billion in 2015. Chinese investment in Australia has been growing strongly in recent years, reaching $87.2 billion in 2016.
So what should Australian business make of the latest comments?
As with many aspects of our complex relationship with China, there are a number of geopolitical forces at play.
Firstly, the comments have been interpreted as reflective of Chinese concerns about the Federal Government’s plan to initiate laws to limit foreign interference in politics.
China considers these laws to be aimed at the Chinese influence in politics both at state and federal levels.
In what would be a significant revision of our espionage and intelligence laws, the proposed set of laws would, among other things:
• Ban foreign donations to political parties.
• Set up a “foreign influence transparency scheme” of lobbyists working for foreign governments.
• Expand definitions of sabotage, treason, treachery and secrecy offences.
• Increase penalties for the theft of trade secrets.
While Prime Minister Malcolm Turnbull says the laws are not aimed at any one nation, he also cited concerns about Chinese influence when announcing the package — a red rag to Beijing.
The second issue that has been linked to the Chinese ambassador’s comments relates to Australia’s involvement in monitoring South China Seas issues.
Australia’s concerns about freedom of navigation have been well reported. It was only a day after the ambassador’s statement that Chinese naval vessels challenged Australian warships passing through the area.
Where does this leave Australian businesses?
As with any international debate, what transpires between governments has little immediate impact on the ordinary operation of trade.
For most importers and exporters, it will be business as usual — for now at least.
The ties between the countries are strong, the China Australia Free Trade Agreement is working well, and the opportunities for investment in both directions remain positive.
But it is a good reminder for businesses on both sides that just as trade enhances bilateral relations, good relations boost trade.
Investors in Australia and China will be hoping the ships of state sail into some calmer waters.
• Darryl Daisley is a trade expert at Pitcher Partners in Perth.