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China’s squeeze on Australian coal nothing to do with Huawei’s 5G ban. Really?

With all eyes on whether Beijing will cede ground to Donald Trump in the ongoing US-China trade war, it is easy to forget there may be another trade skirmish occupying Beijing’s mind – and one in which, this time, China holds most of the aces.

Over the past month China has been targeting Australian coal imports with increased restrictions – what Beijing claims are quality checks – that have delayed their passage through northern ports. Given Australia’s coal industry is deeply dependent on its exports to China, which account for 3.7 per cent of Australia’s GDP, this has prompted much media speculation that Beijing is punishing coal companies as retribution for political acts by Canberra, one of Washington’s closest allies.

Beijing is thought to be smarting over various issues: Australia’s blocking of the Chinese telecoms firm Huawei from building its national 5G network; accusations that China has been involved in spying on its parliament; and the denial of Australian citizenship to billionaire political donor Huang Xiangmo.

Officials in both countries have tried to quash such speculation. Last week, China’s foreign ministry said there were no bans on Australian coal imports via ports in the north-east region of Dalian but admitted there had been quality checks on some shipments. Australia’s Trade and Investment Minister Simon Birmingham, meanwhile, conceded there had been delays in clearing Australian coal through northern ports, but rejected the notion these delays were politically motivated.

But such comments have done little to sway sceptical minds and may even have helped fuelled the fire by giving oxygen to the media speculation.

The former Australian ambassador to South Korea and Vietnam, Richard Broinowski, is among those who believes China is sending a political message to Australia. He points out the Australian media has been highly critical of China recently on many fronts, particularly on human rights. “It is sending a warning message that we have to be careful if we want to continue the very profitable coal trade,” he told This Week in Asia.

But he also recognises there are limits to what Australia can do in response. Referring to media speculation that China was behind a recent cyberattack on MPs and parliament, Broinowski said it was a “concern” and that Australia “should object if that happens”, but he also warned that China could be “fairly aggressive in the way they pursue their foreign relations”. He said Australia should be able to withstand that, “but we don’t want to antagonise them unnecessarily”.

Even if China’s measures against Australian coal are politically motivated, as Broinowski and others suspect, Canberra must tread far more carefully than its American ally has been doing in its own trade conflict as Australia is far more reliant on Chinese cash.

As the Sydney Morning Herald’s international editor, Peter Hartcher points out, Australia has the highest level of income dependency on China of any developed nation: 30.6 per cent of all Australian export income came from China last year, equivalent to A$123 billion (US$87 billion). That is twice the trade volume with Japan, Australia’s next biggest trading partner. “The last time Australia was so dependent on one country for its income was in the 1950s when it was a client state of Britain,” Hartcher said.

Still, the dependency works both ways, according to Roland Rajah, director of the International Economy Programme at the Australian think-tank Lowy Institute, who warns against jumping to conclusions and sees a trade war between Australia and China as “very unlikely”.

“China ultimately needs Australia’s commodities, just as much as Australia needs the Chinese market,” he told This Week in Asia, adding, “Beijing already has its hands full with Trump, and it would be careless, though not inconceivable, for it to open up another front with Australia”.

And even if China does hold the whip hand in the economic relationship, Australia may have an edge in other areas. Naren Chitty, the inaugural director of the Soft Power Analysis and Resource Centre at Macquarie University, says Australia has an enormous amount of soft power that it can use to manage its relationships with China. Evidence of this, he says, are the many Chinese seeking to migrate to the country. “They want to come here because there is something attractive about it. There is rule of law, lifestyle, economic conditions … all that is an attractive place to migrate to,” he said.

It’s a description of the country probably lost on Chinese billionaire Huang Xiangmo, who after his citizenship application was rejected last month made a scathing attack on Australia’s pretensions to democracy and fair play. Given he had donated millions of dollars to Australian political parties, it’s no major surprise he felt miffed, but the same donations Huang might have hoped would ingratiate him into Australian society may also have been the reason for his rejection: Australia’s intelligence service ASIO had investigated him over concerns he was a clandestine lobbyist for the Chinese Communist Party.

“It is profoundly disappointing to be treated in such a grotesquely unfair manner,” Huang had said at the time. “The decision to [cancel my visa] was based on unfounded speculations that are prejudiced and groundless. This is not the Australia that I believe in, the Australia of freedom, democracy, rule-of-law and fairness”.

Still, whether Australia deserves its reputation for freedom and democracy is one thing; whether Australia can leverage its soft power to manage its growing relationship with China, another.

Chitty at Macquarie points out that following a Senate hearing on public diplomacy, the Australian government initiated a soft power review last August with a report due later this year.

“Australia wants to have close relations with both the US and China. The US is its strategic partner and China is a trade partner,” Chitty said.

Key to balancing those interests, according to Chitty, is treating all parties equally.

Broinowski agrees, saying that by not participating in US-led “freedom of navigation” exercises in the South China Sea, Australia might be striking the right balance.

“We are treading a fairly delicate and careful path,” he said, adding that he is confident the “lucrative trade in iron ore and coal” between Australia and China will continue.

“A couple of shipments held up at one port is not a trade war,” he said.

Not yet, at least.
Source: South China Morning Post

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