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How do we account for the growth in importance in Australia’s relationship with China? Is it a ‘good’ thing?

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Table of Contents

1ISSUE 1.0.




5Concerning Economic Growth and Political Uncertainty 4.1.

6Concerning Sino-Australian Economic Relationship 4.2.


7Option A: Special Strategic Relationship 5.1.

8Option B: Dialoguing better Strategic Relationship 5.2.

9Option C: Build on the Strategic and Economic Development for Australia 5.3.



Policy Brief: Importance in Australia’s Relationship with China

  1. ISSUE

As Australia moves focus from investment in physical infrastructure to developing socio-political infrastructure, and as the country moves from export driven growth to political alignment and consumption-driven growth, there is a need to assess Australia’s relationship with other countries, specifically China. For instance, in June 2015 Australia’s Minister for Trade and Investment, Hon Andrew Robb AO MP and Chinese Commerce Minister Gao Hucheng signed the China-Australia Free Trade Agreement known as ChAFTA (Abbott 2015). This agreement was an example of a representation of a significant tie between the two countries seeking to explore opportunities created not only by the ChAFTA but by both governments. Currently, China is moving into its next phase of development meaning that the country’s demand is likely to shift from raw materials to mostly transformed services, manufacturers, and expertise (Government of Japan National Security Strategy 2013). A probable result is that Australian Dollar is likely to fall, a partial reversal rise in living standards which is contrary to popular perception. Based on such uncertainties, there is a need to account for the growth in importance of Australia’s relationship with China.


In early 1960s Chinese growth was characterized by growth in manufacturing, urbanisation and investment in infrastructure. This shift in economic production created demand for energy and electricity, transport, building materials, and manufacturing for Australia. Ayson (2012) argues that Australia was placed to meet some these demands as it was offering a ready market for Chinese manufactured goods. In 1972 the People’s Republic of China and Australian Government established diplomatic relationships (Bowman et al. 2015). From that agreement, Australia-China relationship has developed into the most significant socio-political and trade partnership. In recent decades, Brown (2015) reports have noted that there has been an exponential growth of the population of the People’s Republic of China which has, in turn, led to a corresponding need for social, political and trading partners across some industries and sectors. Chinese demands for different services and resources were a major stimulant of Australia’s ‘boom in mining’ between the 1990s and early 2000s.

As Abbott (2015) rightly put it while addressing China-Australia Free Trade Agreement signing ceremony, background information between the two countries has traditionally been dominated by strategic and global geopolitical concerns. However, since the late 1970s, the two nations have managed to build some common regional and bilateral interests, which have included strong economic ties. However, the path has not been smooth for the two countries. Beeson and Fujian (2014) noted the deteriorated relationship between the two countries especially in 1996 where China believed that Australia was changing its policy considered to be pro-US. This was triggered by Australia’s support for the US who dispatched naval forces into Taiwan Straits in retaliation to missile tests during the elections in Taiwan. The rift in relationship saw the Australian Government abolishing Development Import Finance Facility (DIFF) aid. The relationship between Australia and China remains one of the most important factors in Australia’s foreign policy. As an emerging power, Australia has continued to develop as a significant economic relationship. Just like it was the case with DIFF, there has been recurring friction in China-Australia relations which marked better part of the one-China policy which tilted Australia’s commitment to further engagement. In particular, new Australian Government’s quick support for United States’ China military exercises in Taiwan weakened the relationship between 1996 and mid-1998 (Hewitt 2015). Concerned with the further fallout, Australian Government through Mr. Howard made an announcement in November 1996 that it was ready to ‘work in close collaboration with China following the election of a Coalition Government’ (Jiyong 2015: 35). Howard took advantage of APEC summit held in Manila to discuss the issue with the then Chinese President, Ziang Zemin. The discussion was positive thus prompting Chinese Foreign Ministry to offer the following statement:

The Government of China sees importance of the statement of the government of Australian Coalition Government regarding placing emphasis on Sino-Australian relations, committing to a one-China policy and being against containtment…therefore, we would like to have a long-term development, stable affairs with Australia on the basis of mutual relationship and respect, non-interference in each country’s internal affairs, and gaining common ground while reserving the existing differences.” (Joye 2015: 73).

This statement resurrected ties between Australia and China prompting regular high-profile visits. Vice President Xi Jinping visited Australia in June 2010 to promote bilateral trade, President Hu Jintao visited Australia in 2007 for the same reasons, Vice Premier Li Keqiang visited in October 2009 to promote inter-border movement, Prime Minister Julia Gillard visited China in April 2011 to foster development and education review programmes, the Governor-General, HE Ms. Quentin Bryce visited China in June 2011 with an attempt at promoting trade, employments, and exports (Joye 2015). Ms. Quentin Bryce visit culminated into the launch of Year of Australian Culture in China.

Concerning benefits that have been accrued between the two countries, the bilateral relation has generated different benefits for the two countries. Between 1992 and 2008 the link between China and Australia made China overtake Japan to become Australia’s largest trading partner (Lee 2015). Between 2010 and 2014 the tie between the two countries resulted in economic benefit for China. Australia represented 4.7 percent of China’s total imports which was valued at $90,833 million (Lee 2015). On the other hand, the report further indicates that minerals and other resources dominated Australia’s exports to different parts of China. Specifically, exports and ore concentrates were valued at 384,483 between 2003 and 2014. These benefits have cut across sectors such as education, financial services, agriculture, health and biotechnology, wine and spirits, and infrastructure.


The growth in importance of Australia’s relationship with China remains contentious for policy makers. From the one hand, Australia’s Minister Robb and Minister Gao Hucheng on 17 June 2015 noted a need for policy formulation that assesses benefits and challenges that are inherent in the relationship between the two countries. On the other hand, economists argue that the legislation of policies such as ChAFTA will enable about 85 percent of the value of Australia’s exports to China which they term as ‘due free to the benefits of Australians’ (McCarthy and Xianlin 2015: 327). From this perspective, the problem is to critically assess the benefits and challenges inherent in the growing relationship between the two countries.


    1. Concerning Economic Growth and Political Uncertainty

Stakeholders’ analysis and representation of the present situation in Australia indicate that the tie between Australia and China brings mixed benefits. The growing significance of the relations for Australia and China policy-makers is expected to continue since China has continued her economic development in as much as it is entering a period of political uncertainty especially after the death of Dend Xiaoping. The economic and political development in China, with Australia’s greater relative economic involvement in the Asia-Pacific region, has contributed to a twenty percent average yearly increase in Australia’s overall exports to China. McCarthy and Xianlin (2015) indicate that the economy in China has created opportunities for Australian investment, particularly when it comes to services and primary industry. Currently, policy makers in China, led by State Government Victoria1 are conducting foreign relations in regional territorial disputes such as the Spratly Island. ChAFTA has interpreted this move as one aimed at guaranteeing material basis for greater Australian prominence. The debunking of Maoist ideology after the rise of Deng Xiaoping has cast doubt among stakeholders in Australia regarding the future partnership between Australia and China now that Chinese Communist Party has been criticized by recent parliamentary settings in Australia led by Abbott.

The developing political and economic position in China should be assessed keenly for future ties between the two countries. Recently, Australian Prime Minister announced a White Paper that looked for Australia’s association with Asia. This position shows that Australia needs to become even more Asia-literate so that it can understand China’s relationship with all its dimensions. This position was conceptualized by former Australian Prime Minister Tony Abbott who told Angela Merkel in November 2014 that Australia’s relationship with China was a mixture of «fear and greed» (Abbott 2014: 21). The Australia China Business Council prepared a report titled, “How China trade Benefits Australian Households” and in the report, the stakeholders indicated that Australia-China business relationship ‘kills local industry.’ Such reports have been posted amidst ongoing skepticism within some political and community circles. Hewitt (2015) further suggests that government needs to step forward and assist the tie between the two nations by helping local industries and transformation in the Asian Century. This position is further supported by Australia’s stakeholders in the Asian Century White Paper. Australia’s stakeholders argued that the tie between the two countries need to be moderated so that Australia can be in a position to identify opportunities necessary for broadening the country’s economic base as the country seeks to diversify further into exports of manufactured and agricultural goods and services such as tourism, education, financial services, architecture, logistics and design (Lee 2015).

    1. Concerning Sino-Australian Economic Relationship

The Sino-Australian economic relationship was once termed as ‘deep but narrow—extensive in its volume’ (Lee 2015: 182). This comment shows that when the tie is assessed keenly, it is overwhelmingly dominated by little resource commodities. As former Senator Reg Withers argued, what the Sino-Australian economic relationship is offering Australia is a lack of diversity which in turn exposes Australia to different economic risks. A clear case of Reg Withers position is the downturn with regard to volatile global resource markets such as that of iron ore that Australia has witnessed since 2014.2 The dwindling pace of China’s processes of industralisation that has been blamed on Xi Xinping’s policy of ‘new normal’ economic policy enacted in 2014 further threatens Sino-Australian economic relationship because the Xinping’s policy is already threatening the buoyancy of Chinese economic resources and markets on which the Sino-Australian economic pact is premised.3 This situation is complicated by a consistent lack of investment ties outside mining sector which poses challenges for other technical services—to penetrate markets in China subject to high levels Chinese trade protection.

Based on the position the tie between the countries brings, Australia through its policy formulation has to make a clear decision regarding whether or not it will continue having the relationship it does with China, both for exports, imports, education, employability, diplomatic ties and overall trade. The extent to which Australia will cut links with China is something that has been debated widely by different stakeholders. One thing that is certain, however, Australia’s traditional approach in doing business with China is changing with other economic superpowers such as the United States coming in picture. Furthermore, Australia’s overreliance on exports of its iron ore to China is taking different dimension due to the Sino-Australian economic relationship which has been deepening.


    1. Option A: Special Strategic Relationship

Despite calls for the relationship between Australia and China to be reviewed, the approach the government has taken has been ‘cold’ according to Lee (2015). While stakeholders are worried about complete withdrawal from the relationship or what is termed as ‘Sino-Australian’ relationship, there is the need to review the extent so that an adoption of special strategic relationship can be adopted. In July 204, the Prime Minister, Tonny Abbort called for adjustment of the relationship to one which could focus mostly on the intensification of defense technology, submarine space so that the entrapment in the Sino-Australian tie can be reduced. In the context of this, Prime Minister Turnbull in August 2015 argued that the relationship between China and Australia should be based mainly on ‘in an epic struggle for the survival of our own nations’4

This approach will ensure that Australia has a policy framework that strikes a balance between her ambitions as a middle power working with other similar-sized countries and bigger countries in the Indo-Pacific regions. The report that was released by United States-Australia Joint Declaration on Security Cooperation noted that adoption of special strategic relationship with China will allow for Australia-America strategic cooperation (McCarthy and Xianlin 2015).

    1. Option B: Dialoguing better Strategic Relationship

After adopting the strategic option recommended in Option A above, incorporation of dialogue will be another essential step for Australia. In consideration of how to advance the relationship with China, there is a need to promote dialogue that will protect interests and suspicions currently held by Australia. For instance, the 2014 Comprehensive Strategic Partnership5 dialogue that agreed to build robust bilateral trade on iron ore is what Australia requires. The China-Australia Free Trade Agreement was an example of Foreign and Strategic Dialogue and a Strategic Economic Dialogue6 between the two countries provided an avenue for advancing Australia’s social, political and economic needs.

If option A and B are adopted concurrently Australia will be able to take a leadership role in championing for economic and trade ties in a number of industries now that ChAFTA’s entry into force is already facilitating growth in sectors such as education, agriculture and health and biotechnology. Option A and B if adopted will be in line with the Australia in the Asian Century White Paper7 which the Gillard Government released in October 2012. According to the report, the best approach Australia was going to streamline its ties with China will be to adopt comprehensive dialogue that factored tenets of ChAFTA.

    1. Option C: Build on the Strategic and Economic Development for Australia

Taking an assumption of the workability of options A and B, in fronting a formula for a continued tie between the two countries, building on the strategic and economic development for Australia is two-fold. Australia is already showing interest in the Asian Infrastructure Investment Bank and the G20 (McCarthy and Xianlin 2015). Amidst this interest, involving Australia’s Treasurer and Trade and Investment Minister for strategic economic development will ensure that markets for Australia’s iron ore are expanded. Secondly, there is a need to explore existing opportunities in northern parts of Australia, including the benefit of the Asian Infrastructure Investment Bank and Australia’s Northern Australia Infrastructure Facility. This option should be explored when Australia’s delegates will be meeting in December 2016 for the ratification of Investment Cooperation Framework that was first discussed and signed in November 2014.

If this option is adopted Australia will be able to promote investment in her new sectors and identify different investment roadblocks. This option proposes that Australia negotiates relationships that incorporate additional component for value.


The approaches suggested above have been based on different policy recommendations that have been provided by different stakeholders with an aim of providing the level playground for Australia as far as the relationship between China and Australia is concerned. For this position to be attained and still preserve the common interests the two countries have, the solution therefore, lies between Options A and C, with a possibility of ratification of investment cooperation framework remaining as the most viable aspect that should be integrated from Option B. There have been critics of Department of Foreign Affairs and Trade that have been leading high-profile visits to China in an attempt to find a different pacts that suit different demands of Australia. The complaints have been a representation of the Prime Minister and Cabinet offices in Austrade, Industry and Education without finding people’s agenda to present in the discussions. Adopting news pacts and agreements with other countries such as the United States will not compromise the mutual agreements China and Australia have been having since 1972 but will also compromise the already fragile industries in Australia which have been supported by China. However, the significance of prospective and inclusive socio-economic development and investment Australia will be exposing herself to after entering strategic partnership should not be overshadowed by China’s interests. In light of current position, Australia puts herself; renegotiating the strategic relationship with China is long overdue.


Premised on policy recommendations and high-profile debates that the country has had, Department of Foreign Affairs and Trade and other relevant state agencies adopts Option A and C as provided. These options have been recommended as they integrate tenets of Option B and further ensuring that any ratification of the current deal with respect and uphold interests of both countries stemming from 1972.


1 State Government Victoria, ‘Engaging China – Strengthening Victoria’, Department of State Development, Business and Innovation [Victoria] [website], September 2012, available at <http://dsdbi.vic.gov.au/corporate-governance/environmental-management> accessed 15 October 2015.

The Latest Iron Ore Price Slump: Causes and Effects’, Forbes, 14 March 2014.

Angang Hu, ‘Embracing China’s “New Normal”’, Foreign Affairs, vol. 94, no. 3 (2015), pp. 8-12

Malcolm Turnbull, ‘ChAFTA and rebalancing of Chinese and Australian economies: speech to Australia-China Business Forum’, Malcolm Turnbull [website], 6 August 2015, available at <http://www.malcolmturnbull.com.au/media/China-Business-Week> accessed 4 September 2016. At the time, Mr. Turnbull was Communications Minister, not Prime Minister.

5 ASEAN, ‘Our people, our community, our vision’, Joint communiqué from 48th ASEAN Foreign Ministers’ Meeting, Kuala Lumpur, Malaysia, 4 August 2015, ASEAN [website], paragraph 150, available at <http://www.asean.org/images/2015/August/48th_amm/JOINT%20COMMUNIQUE%20OF%20THE%2048TH%20AMM-FINAL.pdf> accessed 4 September 2016.

6 Julie Bishop, ‘Australia-China Foreign and Strategic Dialogue’, Foreign Minister [website], 8 September 2014, available at <http://foreignminister.gov.au/releases/Pages/2014/jb_mr_140908.aspx?ministerid=4> accessed 1 July 2015; also Andrew Rob, ‘Ministers to visit China for inaugural Strategic Economic Dialogue’, [Australian] Trade Minister [website], 20 June 2014, available at <http://trademinister.gov.au/releases/Pages/2014/ar_mr_140620.aspx?ministerid=3> accessed 4 September 2016.

7 Australian Government, Australia in the Asian Century White Paper, October 2012, available at <http://www.defence.gov.au/whitepaper/2013/docs/australia_in_the_asian_century_white_paper.pdf> accessed 4 September 2016.