Sailing China’s Red Seas

Can Pacific allies like Australia rely on the United States?

Red flags flying in Tiananmen Square
Red flags flying in Tiananmen Square
Photo by Zachary Keimig on Unsplash

The rise of China poses deep strategic issues for smaller countries and middle powers who rely on China economically but do not share the values of its communist government. For a country like Australia, China is both a major trading partner and a strategic opponent that is fast morphing into a geopolitical foe akin to the Soviet Union during the Cold War. Balancing the China relationship is made even more difficult by the pressure exerted on the Australian government by the United States, which ardently wishes to see Asia-Pacific countries doing more to block China’s ambitions.

Part of the challenge of managing China comes down to a classic power struggle, one that has been documented throughout history, including by the first historian of the Western world, Thucydides, who documented the Peloponnesian War fought between Sparta and the parvenu power of Athens. The emergence of a new power — especially one with strikingly different cultural and political systems — will inevitably result in considerable tension and reactionary policies from the established power. Undoubtedly there is an element of this classic tale playing out with China and the West, however, for countries like Australia, falling back on such a relativistic view misses some important facts about how the Chinese regime behaves, and the political chasm that divides China and democratic nations.

Australia has in recent times maintained good relations with both China and the United States. In 2014, the Australian Prime Minister and Chinese President agreed to describe the relationship as a “comprehensive strategic partnership”, encompassing economic, political, and cultural relations. There is a significant Chinese diaspora in Australia, and many Chinese who have adopted the Australian way of life and call the country their home.

Previous Australian governments have been tempted by Chinese economic gambits, the most recent of which is the Belt and Road Initiative (BRI). In 2015, Australia signed up to the Asia Infrastructure Investment Bank (AIIB) — a multilateral development bank spearheaded by China — ignoring pleas from the Obama administration to stay away. Similarly, when the US asked Australian to participate in freedom of navigation operations in the South China Sea, it politely declined. Rustling China’s feathers was a bad idea when the economy was at stake.

Australia cannot walk and chew gum with China and the US

More recently, Australia’s relations with China have deteriorated significantly. Australia has called for an investigation into the cause of the Covid-19 virus in Wuhan and challenged China’s legal claim to most of the South China Sea. Both were seen by China as intolerable provocations, prompting one particularly erudite representative of China’s foreign ministry to describe Australia as “chewing gum stuck on the soles of our shoes.” Australia’s tacit support for the Hong Kong protesters, its condemnation of Chinese cyber attacks, and its insistence on raising the issue of human rights abuses against the Uighurs have led to Australia being frozen out of the Chinese orbit.

It was not always thus. Australia, along with other Western nations, took the liberal, optimistic view of Chinese development. Economic growth would lead to a burgeoning Chinese middle class that would eventually demand political reform, greater transparency, and more rights from its government. Chinese communism would gradually evolve into a socially democratic system, possibly one where other political parties were able to challenge the single party model. Australia has always distinguished between the Chinese government and the people of China, whose rich tradition of self-expression is something keenly admired.

Unfortunately, this view may have been misguided, at least in terms of the time frame. While China has made some steps to being a more liberal and open country, it has gone backwards under its current leader Xi Jinping. China’s Marxist-Leninist ideology is being used to reinforce Chinese exceptionalism and strengthen the power of the central government. Meanwhile technological advances, which the West saw as another pillar of liberalization, has been turned against the Chinese population and used to establish a mass-surveillance state.

For decades, Australia’s bipartisan policy has been to maintain a strong working relationship with China — one based on Australia’s own national interest independent of the United States. This pragmatic approach served Australia well and appeared to work while China was on its liberalizing course. China buys 48% of Australia’s exports by volume, including around 80 percent of its iron ore exports and a third of its LNG. The reason Australia fared so well during the financial crisis of 2008–09 was unequivocally due to China and its massive fiscal stimulus measures, which kept demand for Australian commodities strong. Whatever Australians think of China, there will no market that can replace it.

The US is lacking a consistent game plan in the Pacific

Now Australia is finding it much harder to walk the tightrope of maintaining strong bilateral relations with both major powers. Australia has far more in common with the United States than China. However, even if Australia wanted to decouple economically and disengage politically from China, it would need to rely on its greatest ally — the United States — to do the same. This is where things become murky.

Under the Trump administration, US policy towards China has been erratic. While Trump does not fear insulting the Chinese, he has stopped short of tearing up the phase one trade agreement, which constitutes one of his key political achievements. Secretary of State Mike Pompeo has upped his rhetoric against China, while prominent figures in US international relations such as John Mearsheimer have hectored allies who might believe they can have things both ways. Yet the US itself is prepared to do a deal with China.

“You can sell your soul for a sack of soybeans, or you can protect your people,” said Pompeo, urging Australia to stand up for itself and call out China’s behavior. Australia was effectively told it should avoid making trade deals that legitimize China’s economic tactics. However, as part of the conditions struck during Trump and Xi’s negotiations, China conferred on US abattoirs the right to export to Chinese markets for the first time, while America’s soybean farmers — upon whose votes Trump’s presidency relies — were among the primary beneficiaries.

This poses a serious dilemma for Australia. It is possible that America, in entering the next phase of trade negotiations, will get countries like Australia hot and bothered over Chinese practices, only to turn around and slip into a deal with Beijing that sees Australia lose out. This possibility makes it harder for Australia to rely on US rhetoric and forces the Australian government to revert to a policy of pragmatic diplomacy.

Few Australians express confidence in Trump’s leadership. But how would a Biden presidency benefit Australia? Will America provide the leadership that is really needed in the Pacific? Hopefully, once the presidential election is done and dusted, regardless of who leads, America can provide a consistent and principled approach to China that provides the appropriate cover to its allies while also demanding that others step up and take China on. The US cannot do all the heavy lifting, but it also needs to signal strongly that it is not prepared to wheel and deal with China for the sake of a quick political win.

Australia should not compromise its values

Australia should make its own way as it has always done, but it should not compromise on its values. Australia’s dependence on China is a two-way street. China is dependent on Australia for iron ore and other commodities. If China decided to punish Australia and go to Brazil to buy iron ore, others who buy from Brazil would come to Australia. Perhaps the biggest problem is the extent to which Australian consumers rely on China.

The issue is not that Australia sells to China, but that Australians buy all manner of cheap finished goods from China. Decoupling from China would be painful because these everyday consumer goods would become more expensive. However, as disruptive as this would be for the Australian economy, it may not be as disastrous in the long-term as some believe.

Will China try to become a superpower and take over Asia? Every action has an equal and opposite reaction. When a power overreaches, its neighbors seek to contain it. China’s insensitive approach to dealing with other Asian countries is already starting to result in a shift in attitudes, especially from India and Vietnam (another former Cold War foe). The skirmishes on the China-India border in the Himalayas are concerning, but also underline India’s preparedness to confront Chinese power in the cold light of day.

The Australian government is also becoming bolder in challenging China. Australia’s foreign minister Marise Payne said China’s conduct in the South China Sea is indeed illegal. This raises the possibility of Australia’s involvement in freedom of navigation exercises, which may yet become a reality. Australia cannot expect the US to be the only country that upholds international norms. Sailing within 12 kilometers of a highly militarized artificial island is a bold move, but perhaps Australia should be prepared to do it.

China may yet have a future of increasing openness ahead of it. The strident authoritarianism of the current regime may be a symptom of underlying panic and a desperate attempt to hold onto power. Chinese authoritarianism may be in its death throes, but it is still alive and kicking. The world should be optimistic, but in the meantime Australia should make it clear that it does not hold to the Chinese government’s view of the world, and that it supports the rights of the Chinese people to live and work in a free and prosperous country. To do this, it will need the support of its most important ally, the US.

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Writer and analyst based in Melbourne, Australia. Investing, markets, politics, history of economic thought. More at:

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