The bilateral expectations gap, a sobering trade lesson, and what to watch in 2024
Weeks of 11 December 2023 to 4 February 2024
After a long southern summer hiatus, BCB is back for 2024. This year is shaping up to be especially tumultuous and consequential. A second Trump term is in the offing, cross-Strait ties are in flux, wars rage in Europe and the Middle East, and momentous elections are on the calendar in many democracies. Not all these developments will impact the Australia-China relationship equally. But this year more than most, bilateral ties look set to be buffeted by international eddies and riptides. Added to potential exogenous shocks, the stabilisation of the Australia-China relationship will continue to be roiled by a long and likely lengthening list of bilateral disputes. And it seems that there’ll be an early Australian federal election this year in which ties with China could be the subject of partisan politicking.
For readers looking for breaking analysis of these and all the other big developments impacting bilateral ties in 2024, I’ve added an additional paid subscription option. BCB in Brief provides quick assessments of the latest stories shaping the Australia-China relationship. Within hours of Australia-China news breaking, paid subscribers will receive analysis of what happened, why it matters, and what’s likely to happen next. You can upgrade to a paid individual subscription by clicking the ‘Upgrade to paid’ button on the BCB website. To learn about institutional subscription options, please reach out here. BCB in Brief aside, the newsletter will continue offering its free fortnightly analysis of the full suite of issues at play in the Australia-China relationship. This fortnightly version of BCB will remain outside the paywall and available to all subscribers. And on that note, here’s the first edition for this year.
Mind the expectations gap
China’s ambassador to Australia, Xiao Qian, addressing journalists in Canberra on 17 January:
“The two sides should make joint efforts to follow the market principles, strengthen cooperation in traditional fields such as energy and mining as well as emerging fields such as green development, digital economy, scientific and technological innovation and health industry, refrain from politicising economic and trade issues and overstretching the concept of security, so as to achieve win-win development and promote regional prosperity.”
Quick take:
The Australian summer saw simmering tensions between Canberra and Beijing on a wide range of fronts. In early December, the Australian government publicly and directly called out China’s aggressive on-water actions against the Philippines in the South China Sea. Ambassador Xiao then warned in mid-January that political ties with Taiwan could push the Australian people “over the edge of an abyss”. And after the Taiwanese election on 13 January, he also rebuked Australia for congratulating President-elect Lai Ching-te, despite this diplomatic missive being almost identical to Canberra’s positive responses to the 2016 and 2020 elections. In early February, Canberra objected strongly when Australian writer Yang Hengjun received a suspended death sentence. Meanwhile, Canberra and Beijing exchanged claims and counterclaims about who was responsible for injuries sustained by Australian navy divers.
Against this backdrop of regular bilateral argy-bargy, Ambassador Xiao’s media address sounded a distinctly more positive note. But more than that conspicuous contrast, Ambassador Xiao’s remarks highlight the gap between China’s and Australia’s respective ambitions for the relationship. Whereas Beijing is already seeking to pursue more avenues for cooperation, Canberra remains (at least publicly) focussed on ongoing repair of the existing relationship. Speaking at the Lowy Institute on 19 December, Prime Minister Anthony Albanese emphasised “[s]tabilising our relationship with China,” including “rebuilding dialogue” and getting “impediments to trade … removed”. With Australia’s wine, beef, and lobster still being targeted by Beijing’s economic coercion and Australian citizens enduring harsh treatment in China, Canberra is understandably more focussed on persuading the Chinese government to relent than charting a new cooperative path.
And as I’ve said previously to some of my Chinese interlocutors, domestic political considerations in Australia likely make this expectations gap even wider. Not only does the Australian public still have a relatively high threat perception of China despite a recent moderation, but the Opposition is likely to criticise the Albanese government if Canberra agrees to expand cooperation in some of the domains suggested by Ambassador Xiao, including military ties, science and technology, and assistance to the Pacific. These domestic political considerations provide extra impetus for the Albanese government to concentrate on ongoing repair of the existing relationship rather than embracing a broadened cooperative agenda. This is neither to argue that Canberra should necessarily rebuff Beijing’s requests for more cooperation, nor to suggest that there are no viable avenues for extra bilateral collaboration. Yet the signals from Canberra and the Australian public indicate that Beijing’s hope for expanding cooperation is (at least for now) likely to go unmet.
Of course, in a big and complex relationship, it should be, and often is, possible to increase cooperation while also managing deep and enduring disagreements. In fact, that’s arguably how it’s often been between Canberra and Beijing. All manner of tensions intruded even during the high point of bilateral ties in 2014-15 when President Xi Jinping addressed the Australian Parliament and the China-Australia Free Trade Agreement (ChAFTA) was agreed and came into force. The sore points at that time included, among others, Canberra’s objections to Beijing’s land reclamation and construction activities in disputed parts of the South China Sea and Australia’s concerns about a wide range of human rights issues in China. Be that as it may, additional cooperation doesn’t seem likely while bilateral ties are being dragged down by Beijing’s ongoing economic coercion. And Yang’s recent suspended death sentence is likely to have hardened Australia’s assessment that more repair of the existing relationship should be the focus for the foreseeable future.
The sobering subtext of China’s removal of trade restrictions
Minister for Trade and Tourism Don Farrell speaking to Sky News’ Andrew Clennell on 17 December:
“I would be very confident … that in the new year, early in the new year, we will get a favourable result from the Chinese authorities to lift the ban on Australian wine.”
Quick take:
Suspensions on three Australian meat exporters were lifted in early December, albeit with eight such suspensions remaining in place. This was followed by optimistic comments in January from Prime Minister Albanese (here and here) about the prospects that China would remove its duties on Australian wine. In the same Sky News interview quoted above, Minister Farrell even suggested that it wasn’t an “unreasonable prediction [to say that all China’s remaining trade sanctions will be removed in 2024]”. Concurrent with this Australian optimism were upbeat assessments about bilateral ties and the trade relationship from Chinese diplomats (here, here, here, here, here, here, and here). Taking all these datapoints together, it seems likely that we’ll see the progressive removal of the remaining trade restrictions in the coming months.
Despite these positive signs, it’s worthwhile casting a more jaundiced eye over Beijing’s decision to (at least for now) persist with trade restrictions on wine and lobster. Call me cynical, but it seems unlikely that it’s innocent coincidence that the two trade restrictions that have proven the most stubborn impact exports that Australian businesses have had the hardest time redirecting to alternative markets. Wine and lobster are also the two sanctioned exports that are (almost certainly) least important for Chinese industry and food security, notwithstanding how much wealthy Chinese consumers might love a drop of Australian red or a morsel of Australian shellfish. All the other targeted exports, which have received at least some trade relief from China—from coal to copper and beef to barley—were easier for Australian businesses to redirect to alternative markets and more important for the Chinese economy.
Although it’s welcome news for Australia that the remaining trade restrictions look set to go, there’s a potentially sobering lesson in the order in which China has removed these barriers. Beijing seems to fully appreciate the power of asymmetric trade dependencies, which can allow one actor to maximise the pain suffered by the other while minimising their own. So, if Beijing levels new forms of economic coercion, there’s good reason to expect that they will target exports that hurt Australia while leaving China relatively unscathed. Beyond the well-known cases of wine and lobster, I wouldn’t want to suggest other examples of such asymmetric trade dependencies. But I’d imagine/hope that the Australian government and private sector are mapping them and developing appropriate resilience measures.
An (incomplete) Australia-China watching brief for 2024
From the readout of President Xi’s remarks to the Central Conference on Work Relating to Foreign Affairs on 27-28 December:
“Changes of the world, of our times, and of historical significance are unfolding like never before, and the world has entered a new period of turbulence and transformation.”
Quick take:
I’ve previously written about the pointy China policy decisions facing Australia (here and here). Many of these will continue to pose ticklish questions for the Albanese government this year. But beyond the policy minutia of what Canberra may or may not do, bigger forces in Beijing and beyond will also impact the Australia-China relationship. What follows is my rough bilateral and international watching brief for 2024. I certainly don’t presume to have covered everything and it’s entirely possible that black swans will prove much more impactful than anything here. Still, the below captures many, if not all, of the incoming developments that will shape the Australia-China relationship this year.
High-level meetings and diplomatic ties
A leader-level visit to Australia looks likely in 2024. A visit by President Xi a decade since his last trip to Australia in November 2014 is possible. But Premier Li Qiang seems like the more probable traveller. If it occurs, it’ll be the first visit to Australia by a Chinese leader in circa 7 years. The timing of any such visit will be kept close hold. But I wouldn’t at all be surprised if it was scheduled for October/November to roughly coincide with the 10th anniversary of the establishment of the Australia-China comprehensive strategic partnership, which Chinese diplomats have started telegraphing as a significant anniversary (here, here, here, here, here, and here). That timing would also be a decade since President Xi addressed the Australian Parliament and the ChAFTA negotiations concluded. So, perhaps pencil in (very tentatively) 17 November 2024 for Premier Li’s visit? It’s unclear how that timing might fit with a likely early Australian federal election, but it would at least allow the visiting Chinese leader to combine the trip with their attendance at one of the summit season gatherings that usually fall in the October-November period.
It seems likely that we’ll see the Chinese foreign and/or commerce ministers visit Australia before such a leader-level visit. Australian Minister for Trade and Tourism Farrell is keen to get his counterpart down to South Australia for a chat over some Australian wine and the foreign ministers’ Foreign and Strategic Dialogue hasn’t yet occurred in Australia after being revived in Beijing in December 2022 following a circa four-year freeze. If I’m not mistaken, the last time China’s foreign and commerce ministers visited Australia was in March 2017 (here and here).
Having last occurred in 2017, the Strategic Economic Dialogue (SED) looks set to resume in 2024 (location TBC). The revival of the SED was explicitly mentioned in the joint outcomes of the China-Australia Annual Leaders’ Meeting in November 2023 and, assuming it reprises its old format, is likely to bring together the Australian Treasurer and Minister for Trade and Tourism alongside the Chairman of China’s National Development and Reform Commission.
It’s also possible that we’ll see the resurrection of the Australia-China Human Rights Dialogue, which last occurred in February 2014. But given the Australian government’s growing willingness to publicly call out China’s human rights abuses and the breadth and depth of the disagreements on this issue, it’s possible that Canberra has limited appetite to again formalise closed-door human rights exchanges.
Trade and investment ties
China’s remaining trade restrictions against Australian wine, lobster, and beef look set to tumble in 2024. The wine duties will presumably be removed in March or soon after, pending the outcome of the Chinese government’s review. The timelines for beef and lobster seem less clear, but Canberra is likely to be gunning for the first half of the year. That would allow the Albanese government to potentially go to an early election in the second half of 2024 with all of China’s trade restrictions removed. This timeline would also lay the groundwork for a successful Chinese leader-level visit and celebration of a decade of the Australia-China comprehensive strategic partnership in (potentially) October/November.
Chinese firms still seem intent on expanding their stakes in the Australian critical minerals industry and Canberra still seems determined to keep them out. Whether the Albanese government formally prohibits more investments or informally warns Chinese companies off, Australia’s treatment of Chinese investments in the critical minerals industry will be an enduring concern in Beijing and an ongoing policy juggling act for Canberra.
It’ll also be worth watching whether Australia rebuffs more Chinese investments in the wake of the creation in December 2023 of a new Strategic Minerals List, which includes nickel. Despite formally rejecting two Chinese/China-linked investments in the Australian critical minerals industry in 2023, a substantial investment in nickel was approved in July 2023.
Both China’s bid for entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the US push to impose outbound investment restrictions on select Chinese technology companies are likely to play into the bilateral relationship. Given the slow-moving and consensus-based CPTPP accession process and the vicissitudes of politics and policy in Washington, Canberra might avoid having to make any tough calls on either of these issues in 2024. Still, how they’re each tracking will be worth watching for potential impacts on bilateral dynamics.
China, the United States, and international security
Major policy and political meetings and milestones in China, including the Two Sessions in March, the Third Plenum of the Chinese Communist Party’s Central Committee (timing TBC), and the 75th anniversary of the founding of the People’s Republic of China on 1 October, aren’t likely to yield anything specific about Beijing’s Australia policy. But these events, along with various high-level and publicly advertised work conferences and study sessions, will provide indicators of China’s approach to a wide range of issues that will have significant flow-on effects for the Australia-China relationship, such as Beijing’s strategy for entry into the CPTPP, its policies towards Taipei, and its management of technology competition with Washington.
Canberra and Beijing have taken conspicuously different positions on both Russia’s invasion of Ukraine and the Israel-Palestine and broader Middle East conflict. These divergences could easily splash back on bilateral ties, especially if China increases its material assistance to Russia’s war effort.
Dangerous maritime and air encounters between Australian and Chinese vessels and aircraft remain a perpetual possibility. And the inauguration of Taiwan’s President-elect Lai on 20 May and his administration’s subsequent approach to cross-Strait ties will impact how Beijing treats Taipei in 2024 and beyond.
The United States is pushing forward with massive initiatives to maintain its military and technological edge over China. With Australia critical to expanded regional US military presence to counterbalance the People’s Liberation Army and Washington scoping Canberra out as a potential force multiplier for elements of its technology competition with China, US policy is likely to exert a growing indirect influence on bilateral ties.
Then there’s the possibility of the re-election of President Donald Trump, which is shaping up to be the most probable outcome on 5 November. A second Trump term could see the United States level tariffs of 60% or more on all Chinese goods, which would likely create (among many other impacts) heavy weather for both the Chinese economy and a wide range of China-dependent Australian exporters. Though even if Trump wins, that’ll be a massive shock to the system that’ll admittedly only really play out in January 2025 and beyond…
Many of the above potential divers are only question marks at this stage. And factors not canvassed could have a colossal impact on bilateral ties. Will details emerge of a new foreign interference scandal in Australia involving the Chinese state and its proxies? Could territorial and maritime disputes in the East and South China seas and/or on the India-China border ferociously erupt? Or might the Coalition win an early Australian federal election in the second half of the year and start pursuing significantly more forward-leaning policies on human rights in China, Taiwan, and Chinese investments? It’s all possible. Regardless, there’s more than enough in the bilateral in-tray this year even just considering the watching brief above. So, buckle up. Like so much of international politics, the Australia-China relationship could easily feature a heavy dose of turbulence and transformation in 2024.
As always, thank you for reading, and please excuse any errors (typographical or otherwise). Any and all objections, criticisms, and corrections are very much appreciated.
Strong return - welcome back!