Australia in the China Century Conference

Speech, E&OE, (check against delivery)

14 September 2012

It's 41 years, Mr. Chairman, since your father-in-law upstaged Henry Kissinger in Beijing.

On Monday July 5, 1971, Gough Whitlam had his historic meeting with Premier Zhou En Lai – a very public affair, in the great Hall of the People, from 9pm to midnight, before a large audience of Chinese officials and Australian journalists.

Four days later, in deepest secrecy, Dr. Kissinger arrived in Beijing for his own talks with Premier Zhou. He rightly reported back to President Nixon: "Our announcement will shake the world."

Gough was, typically, more modest.

When President Nixon revealed all, on world-wide television on July 15, the most he would claim was "at least it made Australia look less flatfooted, less imitative".

Mentioning these events of 41 years ago – perhaps the Chinese might say a mere 41 years ago – I don't want to assert some kind of political ownership of Australia's China Policy.

Indeed, the continuity under successive governments, Labor and Liberal, underwrites its success.

But I make two points:

The Whitlam visit of 1971 cleared the way for Australia's recognition of the People's Republic of China on the basis of the clear and firm undertakings spelt out on that night in the Great Hall of the People

And second, the visit, and the interview with the Premier Zhou En Lai, expressed certain fundamentals about the relations between China and Australia which grow in relevance by the year.

The first of these fundamentals was, simply, facing the realities of China's existence, its place in the region and the world as the home of a quarter of the world's population and a unique civilisation.

The second fundamental was that China could and should return to its rightful place as a constructive member of the international community.

The third fundamental was that China's return would open immense opportunities – mutual opportunities – for the region, by no means limited to trade.

In 2012, all this may sound trite.

It certainly wasn't 40 years ago.

One of the great achievements of the Nixon-Kissinger initiative was to strip away the Cold War attitudes which saw China merely as an extension of a communist monolith from the Baltic Sea to the South China Sea.

The more powerful and decisive precisely because the initiative came from Richard Nixon, with peerless Cold War credentials.

Let me state a fourth fundamental which was clearly put forward by Whitlam in Beijing in July 1971.

It is the primary importance of our relationship with the United States and of a strong American presence in Asia and the Pacific.

Remember that the United States and Australia were still in Vietnam.

Australia had entered that war on the spurious argument advanced by Sir Robert Menzies that it was "part of the downward thrust of China between the Indian and the Pacific Oceans".

My party's opposition to Australia's involvement was based partly on the belief that defeat or humiliation would weaken, not strengthen, America's position in the region.

In Beijing in 1971, Premier Zhou did in fact – very skilfully and politely – invite Whitlam to repudiate the alliance by "suggesting that America would prove an unreliable ally" as the Soviet Union was proving an unreliable ally for China.

We sometimes hear echoes of this argument today from Chinese commentators.

But note Whitlam's immediate reply – and remember this was back in 1971 –

"I must say with respect I see no parallel in the Sino-Soviet Pact and the ANZUS Treaty. There has been no similar deterioration between Australia and the United States as between China and the Soviet Union".

I mention this only to emphasise – as I have emphasised to Chinese interlocutors – that the Australia-US alliance is a very long-term, fundamental fact of life.

Those fundamentals must include a prospering and outward-looking China and a confident and forward-looking America.

Australia is well-placed to help effect those outcomes in our region.

In charting our future course, we will draw on our very positive experiences of the past 40 years.

We are accumulating resources of experience and knowledge over a wide range – in business, diplomacy, education, health services, technology, agriculture, language and the arts – which will prove as important, in their own way, as the minerals and the products we export to China.

We talk about 40 years ago and call it history.

The Chinese, of course, take a longer view.

In my own visits to China, not so spectacular but always rewarding, I've been struck by how quickly conversations with officials in government and people in the capitalist sector turn to the parallels of Chinese history.

On one occasion, a party official spoke to me about how 'China had opened to the world', and the world had opened to China.

He was talking about what happened during the Tang Dynasty 618-907.

Coming to more recent times that parvenu Westerners might be more familiar with, Chinese officials will refer to the 19th century – the years of the Opium Wars, the unequal treaties and territorial concessions forced by the European powers on the Ching dynasty in its fatal decline.

And this is important for anyone who wants to understand China today.

China will never again submit to the humiliations, the unequal treatment, the crushing indignities, and the loss of sovereignty that came from the weakness of the Chinese State and the impotence of its rulers in the 19th century.

This remains a very real factor in Chinese thinking.

But, of course, the overwhelming factor for us to consider today is the Chinese revolution.

Not Mao's revolution.

Not the Cultural Revolution, its dire effects still at work when Nixon and Kissinger and Whitlam made their first visits.

I mean the revolution set in train by Deng Xiaoping after 1978.

And, in particular, by the new impetus given to reform policies by Deng's southern tour of 1992.

The Chinese themselves recognise its historic significance.

They marked its 20th anniversary this year.

China's revolution and integration with the modern world

I've called it, with deliberate provocation, Deng's revolution of 1978, the only successful revolution of the 20th century.

But just look at its scope.

It has resulted in a faster and longer modernisation, urbanisation and industrialisation than anything before it in history.

More dramatic than Europe's Industrial Revolution beginning in Britain in the 1780's

It's a faster industrialisation on a bigger scale than that of the United States in the 70 years after the Civil War.

China is truly globalising, becoming part of the world around it.

A huge middle class is emerging. A consumer market bigger than anything world has ever seen.

By 2030, China should have approximately 1 billion middle class consumers compared to 365 million in the U.S. and 414 million in Western Europe.

Of course – its transformation is still underway – and change is patchy. But many of the material changes in peoples' lives are dramatic.

We can see those changes through our four diplomatic missions in China – Beijing, Shanghai, Guangzhou, and Hong Kong.

I asked each of our diplomatic posts to provide me with a picture of what's occurring on the ground – this is what they sent back.

Twenty years ago, one powerful image of China was cities like Beijing and Shanghai teeming with millions of bicycles in the streets.

In 1978, private cars were unheard of.

By July 2012, according to the China Association of Automobile Manufacturers, 5 million people in Beijing had their own car.

In 2007, the Chinese high speed rail system didn't exist.

By mid-2011 – the space of only four years – there was nearly 10,000km of high speed track.

Guangzhou will build more than 300 kilometres of metro railway over the next decade.

The pace of economic and social change in China is intense.

China's massive urbanisation – a faster rebalancing of the city/rural divide than the world has ever seen – has made moving to find work a way of life for many Chinese.

In 1994, there were only 2.64 million internal migrants in China, according to the Chinese Academy of Social Science.

But by the end of last year, there were 250 million.

It's the details that fascinate:

Shopping habits have changed too – driven by the emerging middle class that will, at some point, dwarf the American consumer.

In less than 10 years, the volume of fine art sales at public auctions in mainland China has rocketed from next to nothing to 41 per cent of the global market.

Travel is playing its part in China's opening to the world.

Tourism in and out of China has soared.

There are now as many Chinese tourists abroad as there are foreign tourists in China.

Many more international visitors now go to Shanghai – from just 240,200 international visitors in 1978 to 8.5 million in 2010. (In 2000, this figure was 1.8 million).

In 2011, mainland visitors numbered more than 1.7 million and constituted nearly a third of the total foreign visitors to Taiwan that year.

Mainland tourists have revitalised Taiwan's tourism industry and there are now more than 550 flights per week between the Mainland and Taiwan.

Life expectancy has grown dramatically.

Women in Hong Kong now have the second highest life expectancy in the world – nearly 87 years.

In Shanghai average life expectancy has grown from 73 in 1975 to 82 in 2010.

Sport is perhaps the clearest emblem of China's integration with the world.

In just 12 years, we have seen China emerge as an Olympic powerhouse.

And Australia helped.

The Australian Olympic Committee gave generous support to China to ensure the success of the 2008 Beijing Games.

Before the Sydney Olympics, China was simply not in the race.

What a different story in London.

Sport has become an increasingly important part of everyday Chinese life.

The Asian Games were held in Guangzhou in 2010.

Fifty three facilities were built or refurbished for competition, 17 for training.

They have now become part of the Guangzhou's sporting landscape, including China's first cricket stadium.

I recalled that Neville Wran established a sister-province relationship between NSW and Guangdong, back in 1979, when Guangzhou, the capital of Guangdong was known as Canton.

It was a world first.

I might point out that Guangzhou provides an interesting example of the increased openness in China.

In July, Guangzhou broadcast the Municipal People's Congress Standing Committee meeting live, the first broadcast of its kind.

The webcast was on the official website of the Guangzhou city People's Congress, as well as several other local websites.

Live broadcasts will help citizens better understand the People's Congress system and increase government transparency.

Guangzhou plans to webcast 15 such meetings this year.

Small steps, but China is opening up.

China's economic gains are certainly impressive, but as the World Bank warned earlier this year, China by 2030 risks falling into the "middle-income" trap –languishing on low incomes and low rates of growth.

To avoid this trap, the World Bank callsfor a burst of economic reform to strengthen the foundations of a market based economy – enhancing human capital, protecting the environment and creating the systems, rules and policies to increase competition.

The most important of these reforms will be to integrate the Chinese financial sector into the global financial system.

China is already taking the necessary first steps – in August the government handed out US$1.34 billion of new quotas to allow foreign fund managers to invest in Chinese financial markets.

If it can accelerate these reforms, China will achieve the goal of high-income status by 2030.

Australia and China

So where's Australia in this picture?

Everybody knows about Australia's resources trade with China.

But we are working together in other areas as well.

As it grapples with the expectations of its new middle class, and its ageing population, China has been increasingly interested in Australia's social security, health and welfare systems.

Australia is working with Chinese auto companies to develop new, green technologies – including a strategic cooperation agreement in Guangzhou to develop the infrastructure for electric vehicles.

Australia's services exports to China, valued at A$5.7 billion in 2011, are dominated by educational and recreational travel and have averaged annual growth of 11.3 per cent over the past five years.

Our higher education sector is doing animpressivejob in attracting Chinese students.

China is Australia's largest source of overseas students, with almost 160,000 enrolments in Australian educational institutions in 2011.

And China itself is taking the improvement of its own education sector seriously – it now has 22 universities ranked in the world's top 500, up from 12 just eight years ago.

By 2030, China is expected to have up to 200 million graduates, more than the entire workforce of the United States.

In the past 5 years, virtually all leading Australian cultural institutions have established Chinese art programs or collaborations with Chinese counterparts.

The Australian Ballet's 50th Anniversary will include a performance by China's National Ballet.

The National Portrait Gallery will host the largest exhibition of contemporary Chinese portraits to be ever held in Australia from September 2012 to February 2013.

Of course, we want to see more.

We particularly want to see more investment between our two countries.

And we should resist the temptation of falling back on narrow, nationalistic sloganeering when it comes to Chinese investment in Australia.

The fact is, foreign direct investment from China equated to just 2.6 per cent of the total FDI stock in 2011.

The top four source countries were the United States, the United Kingdom, Japan and the Netherlands.

The European Union, as a region, remains Australia's largest source of foreign investment, accounting for close to 34 per cent of total FDI.

As my predecessor Alexander Downer wrote in the Adelaide Advertiser this week (Sept. 10), "Asian money is just as good as US or British money".

China has made progress in opening up its economy, but there is still more to do – on currency, capital controls, and investment.

And it is true that there are still many barriers to investment.

But the idea that foreign ownership of Australian mines or farms will somehow limit our control over production or undermine our food security is simply not correct.

Australian Federal, State and Local governments make decisions about land zoning; they set the environmental standards; they legislate the investment rules.

As former NSW Premier Neville Wran once said, when pressed on questions about foreign investment in real estate, "they can't take it with them".

Conclusion

As I began with Henry Kissinger, I might conclude by quoting from someone whose actions and thoughts on this subject over four decades entitle him to be heard with respect.

In his latest book on China – and that is its simple title, "On China", Kissinger writes:

The question ultimately comes down to what the United States and China can realistically ask of each other. An explicit American project to organise Asia on the basis of containing China on creating a bloc of democratic states for an ideological crusade is unlikely to succeed – in part because China is an indispensable trading partner for most of its neighbours. By the same token, a Chinese attempt to exclude American from Asia economic and security affairs will similarity meet serious resistance from almost all other Asian states, which fear the consequences of a region dominated by a single power (p. 256).

That seems to me a wisely balanced statement of the realities we face in our region in this century.

It recognises the fundamentals that have shaped Australian policy over the past 40 years.

Within those realities and fundamentals there is ample scope for Australian action and influence, for what Henry Kissinger calls "co-evolution", whereby"both countries pursue their domestic imperatives, co-operating where possible and adjusting their relations to minimise conflict".

The South China Sea is one arena where the United States, China and the ASEAN countries will need to find a peaceful co-evolution.

Our national interest isto ensurethe great success story of this century, the Asian economic transformation, is not distracted by strategic competition in the South China Sea.

At the very least, because we got the fundamentals right from 1972 on, I believe Australia can approach the exciting and challenging developments in our region – includingthe evolution of US-China relations – with clarity, consistency and confidence.

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