Australia’s Economic Dependence on China

The Coalition certainly attaches great value to the US alliance. But Australia’s relationship with China is much more complex than, for example, Canada’s. With nowhere near the same degree of dependence on the Chinese economy, Canada had few reasons to refuse US pressure to arrest a Huawei executive last year.

In contrast, as recently as 2018, Morrison said that Australia wouldn’t choose a side as tensions escalated between the US and China — and for good reason. Australia’s economic miracle of the past three decades was bolstered by demand from a rapidly growing Chinese economy.

When North America and Europe were mired in the Great Recession over a decade ago, Australia’s economy avoided a similar contraction. Continued demand from China for its resources was a contributing factor, and recent tensions haven’t put a stop to that.

Thanks to Chinese stimulus spending and high iron ore prices, in June 2020, 48.8 percent of Australian goods exports went to China. Although this figure constituted an all-time high, it still wasn’t enough to save Australia from going into recession for the first time in three decades as a result of the pandemic.

China’s growth gave Australia a major economic incentive to cozy up to the nearby superpower and supply it with all the resources it needed to build new housing, infrastructure, and industrial capacity. Given the power of extractive capital over the Liberal Party in particular, this approach was not a hard sell.

But as China has grown, it has also sought to extend its own influence around the world. This has included Australia itself and the South Pacific, a region that Australia has historically regarded as its own sphere of interest.

Scott Morrison’s escalation is connected to the long-running conservative campaign against Victorian Labor premier Daniel Andrews and his agreement to support Chinese infrastructure investment in the state, as part of the Belt and Road Initiative. Universities have also come under fire for their links with China — Chinese students make up around 37 percent of Australia’s lucrative A$26 billion higher-education export industry.

Neo-Colonialism in the Pacific

Australia has a long history of seeking to control the South Pacific region as part of what was once called a “Monroe Doctrine for Australia.” Aspects of this strategy included its long colonization of Papua New Guinea and the extension of its racist White Australia Policy to the island, as well as similar policies of political and economic domination in Fiji, Nauru, and Vanuatu.

Take Nauru, for example. Australia has dominated the island for decades, in the course of which the nation’s rich phosphate resources were carved up between Australia, New Zealand, and Britain. Sovereignty wasn’t restored to Nauru until 1968, when the phosphate had been almost entirely depleted, leading to an economic collapse in the following decades. Australia then offered a new income stream to the small island, as a penal colony for the asylum seekers Australia bars from its own shores.

Australia’s recent military buildup should be understood as a response to Chinese economic and geopolitical ambitions. A good example is the Belt and Road Initiative, a vehicle for Chinese infrastructure investment that aims to secure access to global markets. While China’s focus on Africa has received a lot of attention, it’s also been spending more money in the South Pacific.

This has compounded the fear of the Australian ruling class that its regional hegemony will be jeopardized. Australia’s power in the South Pacific has also granted domestic companies, especially in the extractive sector, significant economic opportunities that could be placed in jeopardy if China’s influence grows.

This is why, after long taking the region for granted, Australia has recently been on a charm offensive that it calls the “Pacific Step-up” to combat Chinese influence. It includes a number of initiatives designed to improve Australia’s relations with Pacific nations and additional aid to offset China’s growing investments.

A History of Exploitation

Former Labor prime minister Kevin Rudd suggested last year that the Coalition is responsible for China’s rising influence in the South Pacific. According to Rudd, when Australia slashed aid budgets and failed to act on climate change, Pacific nations sought other partners. China simply filled the gap.

Although there is some truth to Rudd’s argument, the problems didn’t start when the Coalition returned to power in 2013. In the nineteenth century, Australian sugar plantations relied on indentured laborers kidnapped seasonally from their Pacific island homes — a practice known as “Blackbirding.” An estimated fifteen thousand laborers died as a result. Although the White Australia Policy ended this practice, there was no justice for the victims and reparations were never paid.

Today, Australian horticulture still relies on seasonal laborers recruited from Fiji, Kiribati, Nauru, Papua New Guinea, Samoa, Solomon Islands, East Timor, Tonga, Tuvalu, and Vanuatu. They are often paid far below the minimum rates, housed and forced to work in appalling conditions, and denied basic rights.

The memory of Australia’s leading role in the 1999 United Nations–sponsored occupation of East Timor, and its subsequent return in 2006, is also still fresh. Australia had hoped to coerce East Timor into honoring a 1972 border agreement made with Indonesia — East Timor’s former occupier — that would have handed Australia valuable oil and gas fields in the Timor Sea. This came after decades of Australian support for the brutal Indonesian occupation.

Instead of acquiescing to this pressure, East Timor launched an almost two-decade dispute in The Hague over its maritime border with Australia. Australia finally backed down in 2016 after years of Chinese overtures to East Timor and a separate ruling over China’s claims to the South China Sea that made Australia’s diplomatic position untenable.

South Pacific nations also remember the environmental and social destruction that Australia has inflicted upon their countries over the course of many decades, as the examples of Nauru and Papua New Guinea illustrate. With rising sea levels posing an existential threat to some Pacific nations, they have rightly begun to see Australia as an enemy.

Although Scott Morrison referred to the Pacific island nations as Australia’s “family” last year, his country’s commitment to resource extraction — especially coal — places it in sharp conflict with Pacific nations which are among the most vulnerable to climate change in the entire world. At a Pacific Islands Forum in Tuvalu, the Tuvaluan prime minister confronted Morrison: “You are trying to save your economy — I am trying to save my people.”

Australia also wishes to secure lucrative economic contracts for the future. For example, mining companies are looking at new opportunities in Papua New Guinea, including Bougainville Island, which has a history of fighting Australian resource projects. Although Australia wasn’t able to impose its desired maritime borders on East Timor, Australian resource giants are still poised to make billions on the oil and gas below the Timor Sea.

Spheres of Influence

Australia attaches greater priority to its relationship with the United States than to its ties with China, especially under a Coalition government. But that doesn’t mean the US embassy in Canberra is telling Morrison what to do. As Chinese power grows, Australia is worried that China will challenge its influence on the now-independent countries where these resources are located. For Australian capital, that means those extractive opportunities could be lost to Chinese companies.

After letting its guard down in the Pacific, Australia has found that the superpower whose growth has helped to sustain the Australian economy is now staking its own claim to a region it perceives as its own. Australia’s resource giants have long enjoyed the best of both worlds: a vast Chinese export market and privileged access to resources in the South Pacific. But now both privileges are in jeopardy, and Australia is struggling to formulate a response.

After three decades of a China-fueled economic boom, the bust may have deep and dangerous consequences — especially for Pacific island peoples who find themselves, once again, caught in a game where no matter who wins, they lose.