China and the World

Treading carefully

Turnbull talks trade, but tensions loom in the South China Sea

Australian Prime Minister Malcolm Turnbull  and Chinese President, Xi Jinping shake hands before the meeting at the Diaoyutai State Guesthouse in Beijing

Turnbull talks up trade with Xi

During an address at the Australia Week in China gala (sadly, the event has nothing to do with WiC) Malcolm Turnbull indulged his audience with a little retail therapy. The Australian prime minister noted that ‘old’ Shanghai once boasted four department stores, all built by tenacious Chinese-Australian returnees. They were modelled, he said, on the Anthony Hordern New Palace Emporium in Sydney, which he added was once the world’s largest department store.

Talking up trade links was clearly on Turnbull’s agenda last week as he made his first visit to Beijing since taking office in September. It is election time in Australia and a new free trade agreement between the two countries took effect in December after Turnbull’s party pushed it through a hostile Senate. Now he wants to spruik (an Aussie term) the benefits of the deal and widen the trade relationship beyond natural resources.

The Australia Week in China event took place in eight cities and hosted 2,000 delegates. Turnbull described it as “a statement of the incredible scale and reach and enduring potential of our economic partnership”. Xinhua stuck to more of a boilerplate description, noting the growing bilateral cooperation while throwing in the obligatory mentions of Xi Jinping’s One Belt, One Road Initiative and the Asian Infrastructure Investment Bank (AIIB). Australia joined the new multilateral lender last year, despite disapproval from Washington.

For Australia the visit was more than a case of platitudes-as-usual. Trade with China is crucial to its prosperity and much of its recent economic success stemmed from a China-inspired mining boom. Now that boom has subsided, there is anxiety about what comes next, although the relationship with China is still seen as fundamentally important. As Fairfax’s China correspondent Philip Wen wrote last year, “In broad strokes, anything bad for the Chinese economy is not usually good news for Australia either.”

Two-way trade is currently worth A$150 billion ($116 billion) but the Australians are hoping for a boost from the new trade pact. There has already been an upsurge in wine sales, for instance, and New Zealand – which established its own free trade agreement with China eight years ago – has set precedents in other exports, especially milk.

During the visit it was also announced that a consortium led by the Shanghai-based Pengxin Group will buy the giant Kidman ranch for A$370.7 million (the property is home to 185,000 cattle and accounts for about 1.3% of Australia’s total land area). The deal now needs the approval of Turnbull’s government and will serve as the latest litmus test for local sensitivities towards Chinese investment.

For Beijing the sensitivity over land is more about the bits it is busily reclaiming in the South China Sea. This week a Chinese jet landed on Yongshu Reef (or Fiery Cross Reef) to offer what the Chinese government described as humanitarian aid for three ailing construction workers. CNN reports that the flight drew protests from the US military, stoking tensions during a period in which the Americans have been conducting joint military exercises with the Philippines.

Turnbull has called for respect for international law in the disputed waters (in Australia’s latest defence white paper the phrase “rules-based order” is mentioned 56 times). But he tried to keep the discussion to business topics during his China trip. That said, the Aussie media wasn’t quite as restrained, while the China Daily warned that Australia needed to be “careful and considerate about Canberra’s stance on the South China Sea”.

Han Feng from the National Institute of International Strategy at the Chinese Academy of Social Sciences told the same newspaper that the maritime row was not Australia’s concern and predicted that Canberra’s response would be “a test of the Australian leader’s political wisdom.”


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