Economic Challenges in Australia-China Relationship

Discuss about the Australia and the World for Trade and Investment.

This essay aims to discuss regarding the relationship between Australia and China. It will revolve around the question- “Are the biggest challenges in Australia’s relationship with China principally economic ones, matters of defense, or are they more about differences in values?”. The relationship of Australia with China is among the most important issues of foreign policy. Economic growth has been maintained by China as it entered a period of political ambiguity. The economical development of this country has made itself as an important partner regarding trade and investment for Australia. The China-Australia relationship has traditionally been governed by global geopolitical as well as strategic concerns, however, since the previous years, joint and regional interests together with strong economic associations have been having been built up by these countries. However, being a rising world power, the individual bilateral associations with respect to the extensive world issues. Particularly, the alliance of Australia with the United States of America means that the relations of Australia with China are directly linked with the relationship of US and China (Thomas, 2015, p.846).

Their bilateral political commitment is widespread; however, both of them have diverse political systems, societies, and histories. In spite of the unstable political condition of China, it is trying to maintain rapid economic growth.

According to, Wang (2016, p.23), Australia has been one of the biggest readymade markets for Chinese manufactured products. Australia is considered to be the sixth largest trading partner of China and Australia imports 25% of the consumer products from China. Since 1996, the relationship between Australia-China was compromised as Australia’s foreign policy on China received severe criticism (“Australia’s Relations with China: What’s the Problem? – Parliament of Australia”, 2016). The difference in the political and cultural system of China and Australia is one of the major causes of tension between the two nations. The recent changes in the economic policy of China pose a significant challenge in the matter of foreign investment in the country. Due to the financial crisis of 2008-09, Australia had to suffer, and their foreign policy with that of China changed hugely. However, during this period, the Foreign Direct Investment in China increased four times. With the development of the manufacturing units in China, Australian products have to face tough level of competition in the global market. The Australian consumers are also choosing the Chinese products as they are much cheaper than the products of the Australian brands (He, 2012, p.53). The economic relation between Australia and China has undergone massive changes in the recent years. It has been enormous challenge for both the government of both the country to maintain healthy economic relationship within them.

Defense as a Sensitive Area in Australia-China Relationship

After the fall of the Soviet Union, China established itself as one of the biggest economies in the world (McDougall, 2012, p.11). Hence, they were able to develop economic relationship with all the major nations of the world. This compromised the economic relationship with Australia, who was China’s major commercial partner since 1980s.

The defense is another sensitive area, which is responsible for the weak relationship between Australia and China.  The connection of United States with both the country had direct impact on Australia-China relationship. Australia supported the US action of sending navy into the Taiwan territory, due to the response of the China’s missile test on during the time of election in Taiwan. This action of Australia was strongly criticized by the China. The defense dialogs between US and Australia has also been a major area of concern for the Chinese government. In 1996, Australia and US signed new policy on the matter of security of the two nations. Moreover, the US Secretary of Defense stated that Australia and Japan as the southern and northern anchors for the United States. This growing link between the Australia and US harmed the relation with China. Moreover, one of the major defense strategic challenges of Australia has been faced from China. The rise of the geopolitical power of the China and the increase of the strength of the Chinese military has been one of the leading causes of concern of the Australian government. On the other hand, Australia is buying military aircraft, submarines and long-range missile from US government. The Chinese government feels that the US and Australia and trying to put pressure on China to the several defense agreements within themselves. The Chinese officials also firmly believe that Australia is responsible for the rise of conflict between the US and China (Shambaugh, 2013, p.11).

The visit of the Dalai Lama in Australia in the year of 1996 also has been a cause of tension between Australia and China. The Dalai Lama is infamous within the officials of China ever since his announcement of the movement of the freedom of the Tibetan region. The Australian Prime Minster held personal meeting with Dalai Lama and supported his movement. Hence, they had to face strong critics from the Chinese officials as they claimed that Australian government is trying to interfere in the internal matter of China. The Chinese officials even issued official report of displeasure for the meeting of the Dalai Lama with the officials of the Australian government (“The China Australia relationship: Recognising the challenges, grasping the opportunities | The Treasury”, 2016).

Political and Value Differences

In the recent times, Australia had to face major challenge to deal with the rise of the emerging power of the China. The rise of the Chinese power is also responsible for weak economy of Australia in the recent days. The political and defense is not the major cause of concern for the relation of the Australia and China. Nevertheless, the growing power of China as one of the major economic nation of the world had hugely affected their relation with Australia. The economic growth of the two nations was highly dependent on each other, and they and both the nation complemented each other. Nevertheless, as China is able to receive direct investment from all the nations of the world, their relation with that of the Australia surfed heavily. The low labor cost in China attracted many European and American companies to set up their manufacturing units in China. The global economy has seen huge improvement in the past two decades and the rise of the Chinese economy has a major contribution in that. The GDP and the per capita income of China have increased 17 times since 1980. On the other hand, the GDP of Australia has just increased two times during the same period. The Australian companies had to face greater competition both in the domestic and international market due to the cheaper Chinese products. The labor market in Australia suffered greatly due to the rise of China’s economy. The exporters are easily attracted to perform their business activity of China due to the lower exchange rate. China is also able to attract plenty of tourist from all across the world and hence, able to boost the tourism industry of the country. The population of China is also 17 times more than that of Australia. Hence, China is able to make better use of the manpower compared to that of Australia. The working culture of China has also posed greater challenge to the economy of Australia, where the working culture is quite different (Pan, 2015, p.308).

On the other hand, the financial reform of Australia in the past few years has been the major reason for their huge economic progress. Australia is able to make these reforms due to lessons they leaned from the China. During 2013, the Australian government had established firm relationship with Japan and even signed many trade agreements (Lee, 2013, p.22). The Australian government even announced that they want to make Japan their closet alley within Asia. Both the countries want to elevate their bilateral relationship with and also form a special strategic partnership. They even signed agreement, which is related to the transfer of technology and military equipment between the two nations (Schreer, 2016, p.37). Many global experts firmly believe that this healthy relation between Japan and Australia was primarily responsible for the rise of tension of Australia with that of China. As Australia formed closed alley with that of Japan, the officials in China thought that the Australian government is trying to make an ally against China. On the other hand, Yu (2016, p.12), mentioned that the uncertainty of the China’s foreign policy had forced the Australian government to strengthen their trade policy with that of Japan. The assertive behavior from Beijing had during the last few years has driven the Australian government officials to take the path of convergence with that of Japan. Moreover, the China’s decision to directly attack Australia has also increased the tension between the two nations and forced Australia to support Japan in their foreign policy (Satake, 2016, p.25).

Hence, the economy and the foreign policies of China and Australia are the biggest challenges for establishing stable relationship within the two nations. As the economy of China grew strong within the last few decades, they became an international competitor of China in the global market. On the other hand, the growing relationship between Australia and the US and also with that of Japan is primarily responsible for the rise of tension between the two nations.   

Reference

Australia’s Relations with China: What’s the Problem? – Parliament of Australia. (2016). Aph.gov.au. Retrieved 27 September 2016, from https://www.aph.gov.au/sitecore/content/Home/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/CIB9697/97cib23     

He, B. (2012). Politics of Accommodation of the Rise of China: the case of Australia. Journal of Contemporary China, 21(73), 53-70.

Lee, C. J. (2013). China and Japan: new economic diplomacy. Hoover Press.

McDougall, D. (2012). Responses to ‘Rising China’in the East Asian Region: soft balancing with accommodation. Journal of Contemporary China, 21(73), 1-17.

Pan, C. (2015). Cross-cultural literacy as social knowledge: implications for Australia’s understanding of China. Australia and China: challenges and ideas in cross-cultural engagement, 308-327.

Satake, T. (2016). The Japan-Australia contribution to a liberal and inclusive regional order: beyond the ‘China gap’. Australian Journal of International Affairs, 70(1), 24-36.

Schreer, B. (2016). Australia’s ‘special strategic relationship’with Japan: another ‘China choice’?. Australian Journal of International Affairs, 70(1), 37-49.

Shambaugh, D. (2013). China goes global: The partial power. Oxford University Press.

The China Australia relationship: Recognising the challenges, grasping the opportunities | The Treasury. (2016). Treasury.gov.au. Retrieved 27 September 2016, from https://www.treasury.gov.au/PublicationsAndMedia/Newsroom/Speeches/2011/The-China-Australia-relationship

Thomas, N. (2015). The Economics of Power Transitions: Australia between China and the United States. Journal of Contemporary China, 24(95), 846-864.

Wang, Y. (2016). Australia-China Relations Post 1949: Sixty Years of Trade and Politics. Routledge.

Yu, L. (2016). China–Australia strategic partnership in the context of China’s grand peripheral diplomacy. Cambridge Review of International Affairs, 1-21.