Maritime industry can chart course on Australia-China ties

Maritime industry can chart course on Australia-China ties

Thu, 19/04/2018 - 15:28

The Belt and Road initiative is designed to drive productivity gains in global shipping.

When it comes to Australia-China relations, concerns over disparate security interests tend to overshadow economic interests that may be more complimentary in nature.

This is the opinion of Corrs Chambers Westgarth chief executive John Denton, who called on Australia to develop “a new narrative on the relationship with China”.

In a recent interview with The Australian, Mr Denton raised concerns about Australia’s precarious strategic partnership with China, saying we need to focus on developing a more balanced dialogue around Australia-China relations.

It is exactly the purpose of the Australia-China One Belt One Road Initiative to highlight the positive potential of more robust economic ties between Australia and China.

The initiative was established so help Australian businesses make sense of the opportunities arising from the One Belt One Road Initiative (also called the Belt and Road Initiative), which aims to increase the ease of trade on key trade routes between China and Europe, Africa and Oceania.

What is of particular interest to us at LNG Marine Fuel Institute, is the development of the ‘21st Century Maritime Silk Road’ that encapsulates China’s vision for maritime cooperation along three ‘blue economic passages’.   

The first passage runs from China through the Indian Ocean, Africa and the Mediterranean.  The second connects Australia and the Southern Pacific. The third passage links China with Europe via the Arctic Ocean.

China has made progress in bringing this vision of comprehensive ‘blue economic passages’ to life, and one of its marked successes relates to the shipment of LNG.

The Vladimir Rusanov, an LNG icebreaker jointly ordered by Mitsui O.S.K. Lines and China COSCO Shipping, was due to go into service in late March, travelling through Arctic waters from the Yamal LNG Plant in Russia and making its way through key blue economic passages connecting Chinese economic interests with both Europe and East Asia.

China National Petroleum Corporation has a 20 per cent stake in the Yamal LNG Project.

Further successes can be seen in China’s investment in, and ownership of, ports around the world.

By the end of 2017, both state-owned and non-state enterprises had invested in ports in 34 countries, including Greece, Netherlands, Egypt, Pakistan, Sri Lanka, Australia, and the US.

Chinese investment in Australian ports include a 99-year lease of the Port of Darwin by Landbridge (non-state enterprise), the approved purchase of a 50 per cent interest in the Port of Newcastle by China Merchants Ports (owned by state-owned China Merchants Group), and China Investment Corp’s (state-owned) 20 per cent stake in the Port of Melbourne.

At the moment, Belt and Road is a one-way street when it comes to Australian investment in maritime infrastructure.

Although Australia’s Department of Foreign Affairs and Trade reports that Australian business investment in China has grown by 41.2 per cent over the past five years, there is little indication it responds in kind to China’s interest in our ports. 

Part of the issue is the lack of clarity around whether foreign investment in Chinese infrastructure projects is practicable.

The Chinese government is certainly determined to open up, and has instituted a number of economic reforms to make this happen.   

During China’s Central Economic Work Conference late last year, President Xi Jinping emphasised the development of a “socialist economy with Chinese characteristics for a new era”.

The government welcomes investment in public private partnerships and appears to be directing foreign investment to the areas of technology and finance.

While port infrastructure development may not be directly articulated as an avenue for foreign investment, the increasingly technological nature of port logistics may present an opportunity for investment.

Further, China’s vision for maritime cooperation also focuses on supporting green development. There may be opportunities to link existing industry initiatives with China’s vision.

Innovative global green shipping initiatives, like DNV GL’s industry-supported Green Corridor, for example, overlaps with China’s vision of green maritime development.

Last year, the Green Corridor joint industry project indicated the commercial feasibility of iron ore and coal trade between Australia and China on LNG-fuelled ships.

By forcing strategic economic alliances across the Indo-Pacific, an increasingly conscientious global shipping industry could well be the driving force behind a new narrative of Australia-China relations.