Australia and China: Engagement and Cooperation

Address by The Hon Alexander Downer, MP, Minister for Foreign Affairs, to the 1997 Australia in Asia Series, Sydney, 10 September 1997.


I am delighted to be part of this forum, and I want to thank the Institute for the opportunity to speak to you today.

The 1997 Australia in Asia Series - a new monthly forum - is one of the Institute's most significant initiatives. It is an excellent way of encouraging a broader and more intelligent discussion of topical issues relating to Australia and its place in the Asia Pacific

Last month, the Government released Australia's first ever White Paper on Foreign and Trade Policy. It is a declaration of commitment to the Asia Pacific. It charts Australia's regional future for the next fifteen years. I want to take this opportunity to thank my co-panelist - Meredith Hellicar - for her contribution as a member of the White Paper Advisory Panel.

The policy framework and analysis provided by the White Paper is very relevant to this forum's topic. To begin with, the White Paper makes two general points about China:

. First, it is important to take a long term view, and to be aware of history, when dealing with China.
. Second, as China's economic stature grows, so too will its impact on the security and politics of the region and the world.

This year is a landmark year in Australia's bilateral relationship with China - it is 25 years since diplomatic relations were established. The White Paper states that China will remain one of Australia's key relationships. It is a relationship based on shared interests and mutual respect. Our growing economic partnership is founded on the complementarity of our two economies, but our cooperation extends across a wide range of activities and fora.

Australia will remain committed to the one-China policy pursued by Australian Governments since 1972. We will pursue within the framework of the one-China policy the important and growing economic and trade relationship we enjoy with Taiwan.

Drawing on the White Paper, I want to outline today the Australian Government's perspective on China's growing influence and the expanding bilateral relationship. But, first, I want to set the scene by summarising briefly what the White Paper has to say about Australia's overall approach to the Asia Pacific.

PART ONE: Australia's Enduring Commitment to the Asia Pacific

A fundamental message of the White Paper is that Australia is committed to the Asia Pacific for the long haul, and that Australia's highest foreign policy priority is to make a lasting contribution to the region. It reflects the weight of Australian interests which are engaged with the Asia Pacific: with the region's three major powers and largest economies - the US, Japan and China - and with our largest neighbour, Indonesia.

As a member of the Asia Pacific, and with one of the most East Asian-oriented economies in the world, it makes perfect sense for Australia to build on the foundations which complementary economies and geographic proximity provide.

The White Paper underlines Australia's accelerating involvement in the economic life of the Asia Pacific, and the enormous potential to expand our ties across the region. It recognises that the sustaining force behind the Asia Pacific's dynamism is economic liberalisation.

The White Paper identifies globalisation and the rise of East Asia as the two most profound trends in the international environment to which Australia's foreign and trade policies must adapt and respond over the next fifteen years.

Globalisation offers huge opportunities for internationally competitive economies, but also brings in its wake challenges for political and economic management. The White Paper's judgement is that economic growth in industrialising Asia will continue at relatively high levels over the next fifteen years. The White Paper also identifies several constraints which could prevent sustained rates of growth at the unprecedented levels we have seen over the past two decades. The World Bank forecasts growth for East Asia (excluding Japan) over the next decade at 6.8 per cent, compared with 2.4 per cent for Western Europe and North America.

All of this means that the countries of East Asia will become even more important to Australia as trade and investment partners, and in security terms. It also has implications for Australia's relative standing in the region, and significant consequences for the broader relativities of power and influence in the Asia Pacific and beyond.

PART TWO : China's Growing Contribution to the Regional and Global Economy

2.1 China's Economic Influence - A Positive Development

When considering China's growing influence over the past few decades, it is natural to think first about China's spectacular economic development. China's impressive economic performance has been - and shows every sign of continuing to be - a positive development for the region and the world.

This was made clear in a comprehensive report produced by my Department's East Asia Analytical Unit earlier this year, entitled "China Embraces the Market". China's leaders attach very high priority to economic development and raising living standards in China.

The report anticipates that China's output, measured in internationally comparable terms, will exceed that of the United States by around 2020. Soon after the year 2000, it is expected that China's trade with Japan will overtake United States-Japan trade - which has been a pillar of Asia Pacific trade and the international economy.

The White Paper makes clear that trade and investment liberalisation is very important for all countries in the region, including China. China needs to assure itself of open markets and a stable international trading system if its economy is to keep growing. China is dependent upon and will continue to generate huge demands for resources, capital and technology.

Trade and investment liberalisation - and greater integration into regional and global economic affairs - is very much in China's interests and the interests of Australia and other countries.

That is why Australia's approach to China's growing economic influence is a constructive and positive one. Australia is encouraging China's further integration into the regional and global economy, through bodies such as APEC and the WTO. Australia supports China's accession to the WTO on appropriate terms because it will help bring China into a rules-based regional and global trading environment. I am pleased to say that China is already making some meaningful reductions in its overall tariff rates in the APEC context.

2.2 Complementary Economies - The Foundation of the Relationship

The growing complementarity of our two economies lies at the heart of the economic relationship. These important complementarities will underpin a sustained expansion in the volume and scope of trade and investment.

Vice Premier Zhu Rongji, in his address to the Australia China Business Council in Sydney in May, spoke about this complementarity when he referred to the "huge potential for cooperation" between Australia and China. And Prime Minister Howard - during his China visit in late March - spoke with equal enthusiasm of a new economic "strategic partnership" between Australia and China.

Australia's reliability as a supplier of commodities to China dates back many years. We have been supplying wheat to the Chinese market since the 1960s, and we are well positioned to underwrite China's future growth, just as we did for Japan and Korea at an earlier stage in their development.

But there is much more at stake for both countries than increased commodity exports or imports. New opportunities for mutual profit are opening up across the board. China's sustained economic growth - and the increasing openness of the Chinese economy - offer excellent opportunities for Australian businesses and enterprises. China will not only continue to have a strong demand for agricultural commodities, but also for industrial materials and elaborately transformed manufactures.

At the bilateral level, the Australia-China economic relationship is going from strength to strength. Australia's trade with China has been growing twice as rapidly as our overall trade. Australian firms have established a significant and growing presence in Beijing, Shanghai and Guangzhou, and in other parts of China. Australia is already one of China's most important destinations for overseas investment, but there is great potential for Chinese investment in Australia to grow even further. In turn, China knows that in a wide range of areas, Australian investment can bring technology and services to China as advanced and effective as that of any nation in the world.

The Australian Government's `focus sectors' for market development activity in China reflect this new diversity and depth of opportunity - agribusiness, processed food and beverages, building materials and construction services and environment protection services - to name just a few of the sectors. My colleague Tim Fischer has just completed a visit to China where he had discussions with Premier Li Peng and other senior Chinese leaders and opened the Australia-China Business Forum - a forum designed to showcase many of the Australian companies involved in these `cutting edge' sectors.

I am pleased to say that the closer economic relationship is already beginning to bear fruit. For example, on services - the issuing of a Beijing branch licence to ANZ; permission for AMP to open a representative office in Beijing; and the issuing of a Shanghai licence for the law firm - Blake, Dawson and Waldron. From the Chinese perspective, there has been confirmed Chinese interest in investing in the Australian iron and steel sector, particularly in `directly reduced iron '.

2.3 Hong Kong - New Opportunities for Australian Business

I also believe that the return of Hong Kong to Chinese sovereignty on 1 July has enhanced China's global economic position. Hong Kong's strategic position as an international financial centre is difficult to overestimate. On his visit last month to Australia, Hong Kong Financial Secretary Donald Tsang conveyed a welcome message of `business as usual' in Hong Kong - a message we are also receiving from Australian business.

China's resumption of sovereignty over Hong Kong offers exciting opportunities for Australian business in China as economic links between Hong Kong and the rest of China deepen. Already, some 22 percent of Australia's exports to Hong Kong are re-exported to other parts of China, and over 80 percent of Hong Kong's economy is based on services, where Australia is already well represented.

That is why the Australian Government is determined to diversify and expand all aspects of the burgeoning economic relationship with China, in tandem with the private sector.

PART THREE : Political and Security Cooperation

3.1 China's Important Contribution to Regional and Global Security

For China, as for Australia, a stable and peaceful regional and international environment provides the necessary climate for continued growth in trade and economic activity generally.

The White Paper's analysis of regional trade and investment patterns - and their wide-ranging implications for jobs in Australia - is matched by its hard-headed appraisal of the new regional security environment. This appraisal shows that Australia has an historic opportunity to help lock in the peace which is underwriting the region's extraordinary economic growth.

The White Paper's judgement is that the United States will continue to see its best interests being served by maintaining its strategic engagement in East Asia, where it has vital security and economic interests.

The White Paper also notes that China's economic growth, with attendant confidence and enhanced influence, will be the most important strategic development of the next fifteen years. How China manages its economic growth and pursues its international objectives, and how other nations, particularly the United States and Japan, respond to China will be crucial issues over that period.

The growth in economic and political influence of others in East Asia, notably the Republic of Korea and Indonesia, is also likely to affect the dynamics of regional security.

In that context, I notice that - from time to time - Chinese journals criticise the United States presence in the Asia Pacific. This view appears to stem from a misconstruction of the objectives of that presence. Furthermore, it is a fact that other countries in North and South East Asia - for example, Japan, the ROK, Singapore and Thailand - share Australia's perspective on the importance of the United States presence in the region.

Historically, whenever a country of China's potential emerges into great power status, a period of adjustment follows - both on the part of the emerging power and on that of other countries, particularly those in the same region. In the latter half of the 19th century - before nationalism and irredentism helped drive the European imperial system into conflict in World War I - European states adjusted with some success to the emergence of a united Germany. The hallmark of that success was the ability of Germany and its European neighbours to display moderation and flexibility, and to understand each other's interests and sensitivities.

That is why successful engagement is a genuinely two-way process. It must be anchored in the constructive pursuit of common interests and a strong commitment to enhanced cooperation. For example, just as Australia - through its one-China policy - continues to appreciate and understand China's sensitivities on Taiwan, it is important China understands that many Australian jobs and family incomes depend on our important economic and trade relationship with Taiwan.

I am convinced that as a growing China adjusts more and more to the region in which it lives, and the Asia Pacific engages China more extensively in the region's affairs, bilateral and regional relationships based on shared interests and mutual respect will remain the only sure foundation of sustained prosperity and stability.

3.2 Engaging China in Regional and Global Security Affairs

Consistent with these principles and our constructive approach to China's increasing economic influence, Australia is working actively to engage China more fully in regional and global security matters. China is already part of the growing web of relationships between countries at the bilateral and regional level, including better regional security dialogues and exchanges.

Australia has made recent progress in expanding its bilateral security dialogues in the region. I announced in Kuala Lumpur in July that Australia is establishing security dialogues with four of our major regional partners. This includes a regional security dialogue which will be added to the regular Disarmament Talks with China. And, during the Prime Minister's visit to China earlier this year, agreement was reached on initiating a regular dialogue between our defence agencies. The first round of these talks was held in June.

At the regional level, Australia and China agree on the importance of the ASEAN Regional Forum. The ARF is moving ahead well. Australia and China were pleased with the constructive dialogue and cooperation at the recent ARF ministerial meeting in Kuala Lumpur. Both countries, along with our ARF partners, agreed that the ARF should demonstrate its strong support for the ASEAN initiative to help restore political stability in Cambodia.

Earlier this year, Beijing successfully co-hosted the first official multilateral security meeting ever held in China - the ARF inter-sessional group on confidence-building measures. Australia and Brunei now take over from China and the Philippines as co-chairs of this important core ARF activity. We look forward to working closely with China in this group over the coming year.

In short, China's enhanced involvement in regional fora such as the ARF and APEC helps build trust and confidence which are essential building blocks for the promotion of regional stability and security. China has an interest in the countries of the region being confident about future stability.

At the global level too - China's interests - and Australia's interests - are served by bringing China more fully into the international security system. In that respect, I believe that China's support last year for Australia's initiative in saving the Comprehensive Test Ban Treaty was a positive sign.

3.3 An Effective Framework for Managing Differences

As the White Paper makes clear, Australia supports a mature and broadly-based relationship with China. We want to expand cooperation where we have interests in common.

As two countries with different traditions, cultures and political systems, there will be some issues on which Australia and China do not share the same view. These issues are best addressed through dialogue and good communication. Let me make it clear - I do not believe that it is productive to lecture or hector other countries about human rights.

This Government took the decision not to co-sponsor the annual resolution on China at this year's session of the UN Commission on Human Rights because we judged that it was not a constructive way of promoting human rights in China. For seven years, this resolution has been put forward, but never once adopted - not once.

Empty sloganeering - and the easy headline that often follows it - is no substitute for doing the hard work of advancing Australia's interests and concerns in an effective and forthright fashion. Our aim is to work together with other countries to achieve practical outcomes which actually improve the lives of individuals.

That is why Australia's human rights dialogue with China - first raised by the Prime Minister and then agreed between Justice Minister Xiao Yang and me in April - is a substantial and very welcome development in the bilateral relationship. It is a mechanism through which we can raise a full range of issues of concern to Australia in a constructive manner.

The inaugural human rights talks were held in Beijing a couple of weeks ago, and went very well, reflecting the clear commitment of both sides to move the relationship forward in practical and effective ways.

Australia and China agreed to initiate a program of technical cooperation aimed at addressing China's needs in the promotion and protection of human rights. $300,000 has been set aside in this year's aid budget for this purpose. The dialogue will continue on a regular basis - we look forward to the next round in 1998.

I am also pleased to say that we have instituted regular bilateral consular talks with China, and are looking at the possibility of formalising a bilateral consular agreement.

PART FOUR: Expanded People-to-People Links

Of course, Australia values China's contribution not just as a partner in the economic, security and political realm, but because China has much to offer Australia and the region through extensive people-to-people ties, including educational and cultural exchanges. This is a key aspect of engaging China more comprehensively in the diverse and exciting life of the region.

Since 1994, we have seen double-digit growth in the number of Chinese students arriving in Australia. There are nearly 3,000 students from China taking full-time courses in Australia. This trend has been complemented by the growing links between educational institutions in Australia and China. Opportunities for travel, trade and educational exchanges have been assisted greatly by the new and expanded air service arrangements which were signed in March 1996

I know that the Asia Australia Institute - through activities such as the Gwinganna Forum - is doing a great deal to deepen mutual understanding between Australia and China, and the rest of the Asia Pacific. The Institute appreciates better than most that these people-to-people links bring the region together in a unique and lasting way, flowing as they do across national borders and down through the generations. They also help demonstrate the world-class quality of Australia's scholarship and our expertise in the provision of education services to the Asia Pacific across a broad range of disciplines.

Australia has a very large community of people of Chinese descent of which it is very proud. The Chinese community has made a tremendous contribution to Australia's economic, political and cultural life, and such links have created a deep reservoir of goodwill in the relationship. It is one of the most valuable assets which Australia brings to its regional and global engagement.

It also goes to the heart of the White Paper's absolute rejection of racial discrimination. This repudiation of racial discrimination is not just a moral issue. It is fundamental to Australia's acceptance by, and engagement with, the region where its vital security and economic interests lie.


It is clear from everything I have said today that China is already deeply engaged with the world, and that engagement is accelerating.

I am convinced that the rapid development of trading and investment links between China and Australia - and other countries in the Asia Pacific region - has already helped create a stronger sense of community and goodwill among regional countries that extends well beyond the economic sphere.

Set against this background, the argument about whether the world should seek to contain or engage China is irrelevant.

The White Paper underlines the fact that, as China becomes more fully involved in the economic and political affairs of the Asia Pacific, it can become an even greater force for prosperity and stability in our region. As Prime Minister John Howard said last year, such a development would be "a proper expression of the huge potential of the region's most populous nation."

Looking to the future, I assure you that the bilateral relationship with China will remain a key one for Australia. More than that, our landmark White Paper on Foreign and Trade Policy makes it clear that the relationship will continue to be based on the key principles of shared interests and mutual respect.