China seems intent on using its economic heft to intimidate Australia — but the Government is eyeing off a new plan.

Extract from ABC News

Analysis

By political reporter Stephen Dziedzic

Posted Yesterday, updated Yesterday

Last month, Chinese authorities threw up new trade barriers against Australian barley, beef and coal.(ABC News: GFX/Jarrod Fankhauser)

When news started to spread that China's Government had warned students to reconsider studying in Australia, I picked up my phone and messaged a contact in the Federal Government.

"This seems bad," I wrote. My phone rang back immediately.

"It is bad. It is very bad," said the gloomy voice on the other end.

"And it's only going to get worse and worse."

Their pessimism is understandable. The pattern is now utterly clear and beyond dispute.

The Chinese Government seems intent on using its economic heft to intimidate Australia and shape its behaviour.

Last month, Chinese authorities threw up new trade barriers against Australian barley, beef and coal.

Beijing urged students to reconsider studying in Australia, again citing a surge of racial discrimination against Chinese nationals.(Unsplash: Rosalind Chang)

The announcements came just weeks after China's ambassador to Australia Cheng Jingye warned of a consumer boycott against Australia because of Canberra's push for an independent inquiry into the coronavirus outbreak.

This week, Beijing pivoted from goods to people. After warning Chinese tourists they could face racist attacks if they travelled to Australia, Beijing urged students to reconsider studying in Australia, again citing a surge of racial discrimination against Chinese nationals.

There is no immediate economic consequence — right now Australia's borders remain closed to the outside world thanks to the coronavirus pandemic.

But the pain might not be long delayed.

The relationship is mired in mutual suspicion

Last year, Chinese students and tourists collectively brought in more than $18 billion to Australia, boosting government coffers and propping up countless jobs.

The prospect of this revenue slowly draining away — just as the Morrison Government scrambles to resuscitate an economy ravaged by a once-in-a-century pandemic — is a frightening one.

More importantly, Australia's relationship with its largest trading partner is now mired in mutual suspicion and outright hostility.

Senior Australian officials and Government ministers cannot even convince anyone in Beijing to pick up the phone to discuss a rapidly multiplying array of disputes.

And this week, when Australian ministers protested that China's travel warnings were exaggerated and unreasonable, China's Ministry of Foreign Affairs accused them of ignoring discrimination and violence in Australia.

"We advise Australia face up to its problems, do some soul-searching and take concrete measures to protect the safety, rights and interests of Chinese nationals in Australia," spokeswoman Hua Chunying told reporters in Beijing.

Not surprisingly, the Morrison Government's patience is starting to wear very thin.

Let's call a spade a spade

When China first targeted Australian exports, Trade Minister Simon Birmingham was scrupulously careful to avoid escalation, insisting that he accepted Beijing's assurances that the mysterious regulatory hurdles suddenly facing Australian goods had nothing to do with the broader political disputes between Beijing and Canberra.

But this week senior members of the Morrison Government decided it was probably time to stop pretending this particular shovel-shaped digging implement was not a spade.

When China first targeted Australian exports, the Trade Minister Simon Birmingham was scrupulously careful to avoid escalation.(ABC News: Matt Roberts)

On Thursday, the Prime Minister Scott Morrison also used the "c" word — "coercion" — for the first time while fielding yet another question about the litany of sanctions unveiled by Beijing.

"We are an open trading nation," Mr Morrison said.

"But I'm never going to trade our values in response to coercion from wherever it comes."

Foreign Minister Marise Payne went even further, accusing Beijing of spruiking "disinformation" about Australia.

"It contributes to a climate of fear and division at a time, in a pandemic context, when what we need is cooperation and understanding," she told the ABC's Sabra Lane.

Not long after that, the Trade Minister finally abandoned his poker-faced civility, telling the Australian Financial Review that the ambassador's initial warning of a boycott was an "inappropriate indication of attempted economic coercion".

Naming the problem is only the first step

There's now a nearly uniform conviction in the Morrison Government that Australia's understandable rush to capitalise on Beijing's sustained and explosive growth has left it deeply exposed to retaliation.

That risk only escalates as the Chinese Government grows increasingly authoritarian and assertive. There's a nagging fear that some of our worst fears could easily — and quickly — come to pass.

But naming the problem is only the first step. It is very easy to declare that Australia is overly reliant on China and must rapidly diversify its export markets.

It is very hard to actually do it.

Right now the Morrison Government and Australian government officials are pouring plenty of time and energy into building up strategic relationships with the Asian middle powers whose trajectories will help to shape our region's future.

Last week, Mr Morrison held a "virtual summit" with India's Prime Minister Narendra Modi.

The video call had none of the impressive pageantry that would usually accompany a formal visit to India, which often includes an inspection of gloriously turned out regimental guards outside the vast colonial facade of Rashtrapati Bhavan.

But it was still a signal moment for Australian diplomacy. The two leaders signed a new comprehensive strategic partnership, along with agreements on cyber affairs, rare earths and military cooperation.

Drawing closer to rising middle powers like India and Indonesia not only brings immediate benefits; it might also make it easier for Australia to carve out new export markets there.

And Australia is not just searching for new friends. It's turning to old ones as well.

The world is changing — so we are changing too

It was probably no coincidence that both the Treasurer and the Prime Minister chose this week to declare that the so-called Five Eyes intelligence network — comprising the US, the UK, New Zealand, Canada and Australia — might soon morph into something distinctly different.

The five nations are inching towards a new agreement that will see the top Five Eyes economic ministers meet to discuss the path out of the coronavirus pandemic.

On Wednesday, the Prime Minister was surprisingly expansive on the topic, telling Coalition MPs that Australia was working to take the once top-secret network "into the commercial sphere" in order to "build trusted supply chains".

The Government hasn't said what goods might travel along these supply chains, but US Secretary of State Mike Pompeo gave a glimpse earlier this year when he said America wanted to turn to trusted friends for items "really central to American security" like rare earths, pharmaceuticals and nuclear material.

"We need to fundamentally review our supply chains and make sure that we know those supply chains and have control over them for moments just like this," Mr Pompeo declared.

The Morrison Government also believes that Five Eyes might provide a useful avenue to share valuable intellectual property.(AAP: Joel Carrett)

It's not just about buying and selling — the Morrison Government also believes that Five Eyes might provide a useful avenue to share valuable intellectual property that they want to protect from other nations.

There are even murmurs that Five Eyes nations might need to pour their collective energy and resources into building crucial future technologies where Beijing already holds a clear edge.

All this is a far cry from the conception of the world championed by Australian politicians for the past three decades, one where goods travel freely and mutual suspicions slowly ebb away as economies become more deeply intertwined.

But then again, the officials and politicians charting this course always believed that China would — very gradually — liberalise. But they were wrong.

Or as my contact on the other end of the phone remarked: "The world is changing."

"So we are changing too."