New world order: a bridge to China

The Treasury spokesman for Australia’s main opposition party Labor, Chris Bowen, seized attention last month when he raised the possibility of China becoming involved in the Northern Australian Infrastructure Fund via its One-Belt, One -Road initiative.

Labor insiders tell bluenotes this was not an off-the-cuff proposal but one which had been canvassed among a kitchen cabinet of Labor frontbenchers, including Foreign Affairs spokesperson Penny Wong.

" How such investment – and collaboration – might fit with the BRI project is unclear." - Tony Walker, former international editor AFR

The Bowen initiative has the imprimatur of the opposition leader Bill Shorten. The $A5 billion Northern Australian Infrastructure Fund was established under the ruling Liberal and National Party Coalition government, but has yet to disburse funds.

What makes Bowen’s proposal potentially significant is a Labor government would consider engaging more directly in what is regarded as the signature geo-economic initiative of the Xi Jinping administration.

The term ‘geo-economic’ is used advisedly to describe China’s ambitions to use its growing geopolitical heft and its economic weight to advance a highly ambitious foreign policy agenda.

In this latest phase Beijing has embarked on what can only be described as a determined push to assert itself across a vast swath of countries bordering the Indo-Pacific and beyond.

Where this OBOR initiative, now more officially known as BRI, involving a global network of infrastructure projects will end up is impossible to predict but it would be mistake for a country like Australia to ignore its economic potential.

Framework

Commentators are having some difficulty defining BRI but in simple terms it is a framework initiative, announced in 2013 by Chinese President Xi, which aims to link China and Europe via the countries of Eurasia and the Indian Ocean. The initiative also proposes to connect Africa and Oceania.

“On land, the plan is to build a new Eurasian land bridge and develop the economic corridors of: China-Mongolia-Russia; China-Central Asia-West Asia; the China-Indochina peninsula; China-Pakistan; and Bangladesh-India-Myanmar,” China says of its ambitions.

“On the seas, the initiative will focus on jointly building smooth, secure and efficient transport routes connecting major sea ports along the belt and road.”

The “belt’’ refers to the ’land bridge’ and the “road’’ to maritime linkages via a series of ports to facilitate China’s trading ambitions.

Formally, OBOR emphasises five key areas of cooperation: coordinating development polices; foreign infrastructure and facilities networks; strengthening investment and trade relations; enhancing financial cooperation; and, deepening social and cultural exchanges.

Beijing’s bet on soft power is an important part of this process via its investments in international media and China-sympathetic cultural institutions.

China’s Landbridge company’s purchase of part of the Darwin port fits with ambitions to provide China with ports and hubs across the Indo-Pacific.

In his remarks to the Asia Society, Bowen was careful not to commit a Labor government to involving China in infrastructure projects in Australia’s under-developed north but he indicated openness to the idea.

“The Chinese economy continues to undergo very rapid change,’’ he said. “President Xi’s Belt and Road initiative will have profound ramifications for years to come.’’

“We will come to office if we win the next election with an open mind as to how Australia and China can best collaborate on the Belt and Road Initiative, with a clear-eyed approach to our respective national interests.

“We will consider proposals on a case by case basis including considering how the Northern Australian Infrastructure Facility and the Belt and Road initiative can best complement each other.’’

Bowen did not provide details but it does not require a lot of imagination to identify projects which might benefit from an injection of Chinese capital and know how in areas like food security and transport, including port development.

How such investment – and collaboration – might fit with the BRI project is unclear but the fact Labor is willing to countenance closer economic collaboration with China beyond an everyday commercial partnership is significant in itself.

This is more so in view of the enormous shifts taking place in a regional power balance against a background of a US administration which seems unsure of its priorities, including its commitment to a continuing process of globalisation.

Filling the vacuum

Beijing has not been reticent in its efforts to fill a vacuum which arises from the uncertainties about American global leadership under a Trump administration.

The BRI aligns with China’s determination to take advantage of diplomatic opportunities, as they arise.

All this has implications for an internal debate within the Labor Party about how to reposition a theoretical Labor government towards the US and China.

Labor strategists argue Australia needs to move beyond a simplistic formula which separates the country’s foreign policy interests into two columns, one security and the other economic.

Clearly, the choices facing Australia in this next period are no longer binary as China’s power rises and America’s recedes.

The question is to what extent an Australian government seeks to give itself more ‘wiggle room’ between its security imperatives linked to its treaty relations with the US and its economic interests dominated by China.

Labor spokespeople are groping towards a formula which would enable greater flexibility without jeopardising a cornerstone security arrangement. Bowen’s remarks are part of this delicate process.

Unsurprisingly, he had his critics among hawkish conservative commentators who espouse a hedging policy acknowledging China’s rise but see Australia’s best interests being served by persisting with efforts to contain its ambitions.

Giving voice to these reservations in particular was Peter Jennings, executive director of the Australian Strategic Policy Institute (ASPI).

“Here we have a speech that does not mention North Korea, the word nuclear, the word missile, or the South China Sea,’’ Jennings wrote in The Australian.

“It mentions security twice and defence once, but only in talking about domestic Australian ministerial arrangements. This is a speech completely absent of the big strategic issues of the day.’’

NCCPC

As China’s most important political gathering - the five-yearly National Congress of the Communist Party of China – prepares to meet in Beijing this week, the cornerstone economic and diplomatic initiative of the Xi presidency is certain to figure in discussion and communiques.

What then should be made of what some might regard as a grandiose scheme whose ambitions seem almost limitless?

On the eve of a global gathering in Beijing in May this year to discuss the BRI, China announced some 50-state owned companies had invested in nearly 1700 projects since 2013.

Easily the biggest project thus far is the $US46 billion China-Pakistan corridor aimed at providing China with land and sea access to the Indian Ocean. Other big ticket projects include a 3,000km high-speed railway connecting China and Singapore and pipelines across central Asia.

In all, some $US500 billion in projects and merger and acquisition deals were announced in 2016 alone across seven infrastructure sectors, including utilities and telecoms in OBOR countries.

Funding is coming from China’s mountain of foreign exchange reserves - in excess of $US3 trillion - and is being disbursed predominantly through the two Chinese policy banks, the China Development Bank, and the Export and Import Bank of China.

China is also making use of the Beijing-based Asian Infrastructure Bank (AIIB) to fund projects along with the Shanghai-based New Development Bank.

No one needs to kid themselves Beijing is providing such funding for altruistic reasons. Of course, it is not, but Labor’s Bowen has a point when he raises the possibility of Australia benefiting.

The question needs to be asked: what might be in all of this for Australia’s vast underpopulated northern region which has, for too long, been starved of infrastructure investment?

Whatever trade-offs might be required to secure Chinese capital should be judged on their merits according to the national interest.

Tony Walker is a Vice Chancellor’s Fellow at La Trobe University and a former international editor for The Australian Financial Review