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Published by Black Inc.,
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Copyright David Uren 2012
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ISBN for eBook edition: 9781921870620
National Library of Australia Cataloguing-in-Publication entry (for print edition):
Uren, David.
The kingdom and the quarry : China, Australia, fear and greed / David Uren.
ISBN for print edition: 9781863955669 (pbk.)
Australia - Politics and government - 21st century. China - Politics and government - 21st century. Australia - Foreign economic relations - China China - Foreign economic relations - Australia.
337.94051
Designed by Peter Long
Contents
The visions of Chinas future that are shaping our economic and geo-political strategy have strong echoes in history
Hu Jintao jets into Perth in late 2007, the seventh Chinese leader to have made the trip. Few provinces in China have received such attention. Hu believes a great era of cooperation awaits
Kevin Rudd has ambitions to shape the rise of China for the rest of Asia, building on a rich history of Labor leadership, starting with Gough Whitlams 1972 diplomatic recognition
Spectacular individual wealth is generated by Chinese demand for Australian resources, which sparks a wave of entrepreneurial capitalism in both countries
Chinalcos shock raid on Rio Tinto pushes the policy boundaries and provokes a sharp response from the new Labor government
Between BHPs dystopian view that the Chinese are out to exploit Australia and Rio Tintos goal of building partnerships with the rising world power lies the dilemma for Australias foreign investment regulation
Rudd abandons the equivocation of the Howard government, resolving to strengthen Australias military alliance with the United States as a hedge against malign forces taking control of China
Public denunciation of human rights abuses in China brings a deterioration in the relationship. The alternative of private dialogue on human rights issues is acceptable because it is not threatening
Contract negotiations between Australian iron ore miners and Chinese steel mills break down acrimoniously. The entire Rio Tinto marketing team in China is arrested and charged with espionage and corruption. BHP successfully imposes market-based pricing of iron ore
The prospect of a new Asia-Pacific Community and new agreements on climate change test Chinas goodwill as a global citizen. China takes the initiative to resolve problems in its relationship with Australia
The Chinese community in Australia achieves unprecedented political influence in the 2007 battle for Bennelong, but the influx of Chinese students, settlers and investors brings a backlash, with echoes of the 1800s
Chinas desire for a secure supply of resources has implications for Australia. A strengthened ANZUS alliance carries risks as well as reassurances. Australia needs to do more to assure China that it is a reliable supplier
FUTURE TELLERS
Australias first ambassador to the Peoples Republic of China, Stephen FitzGerald, wanted his new prime minister, Malcolm Fraser, to understand the potential for China to transform not only itself but also Australia. Writing in mid-1976, he said: If it could be assumed that the Chinese economy and Chinas trade with Australia were to expand in the last quarter of the 20th century in the way the Japanese economy and trade with Australia did in the third, by the year 2000 China would have a dominant role in the expansion of the Australian economy. China was still an impoverished country with a GDP by conventional measures only 50 per cent larger than Australias and less than a tenth the size of the United States. But the briefing paper envisaged the economy growing at a pace of 10 per cent a year over 25 years, enough to lift output ten-fold.
The Australian ambassadors despatch arrived to a sceptical audience at the Department of Foreign Affairs. A measure of wishful thinking here, was the pencilled note in the margin alongside the claim that China would develop greater institutional flexibility. The acting secretary, Peter Henderson, advised the embassy to give more careful consideration to ensuring its own credibility with the department and with the embassys readership generally. While they might think that China was the centre of the world, others did not necessarily share this view.
In mid-1976, China was still in the grip of the Cultural Revolution that had run for a decade. Zhou Enlai had died in January and the elderly Mao Zedong was nearly on his deathbed, leaving power concentrated in the group known as the Gang of Four. These were the ultra-leftists, including Maos wife, Jiang Qing, who had spearheaded attempts to expunge all trace of Confucian tradition and real or imagined bourgeois traits from Chinese society. Yet FitzGerald looked to a future beyond them, predicting the emergence of a new leadership that takes China away from dogmatic self-reliance and Marxist-Leninist purity towards greater economic (and thereby political) flexibility.
He predicted that China would emerge from its stagnating, centrally planned economy and rediscover for itself the dynamism apparent in other Asian societies which have their roots in Chinese culture. If these assumptions held, there would be little question that the Chinese economy would be a major influence in the world economy and particularly in the region of Asia and the Pacific.
Thirty years would elapse before Treasury officials started charting the data that had informed FitzGerald, mapping the rise in Chinas output per person against that of Japan, South Korea and Taiwan in the last half of the twentieth century. The charts told a powerful story. Although Chinas rapid growth had by then been underway since the late 1970s, its average standard of living relative to the advanced nations was still only where Japan was in the 1950s. Chinas catch-up growth could last for decades more, with India not far behind.
This had profound implications for Australia. The biggest leaps in commodity prices had previously been caused by Korean and ArabIsraeli wars and were very short-lived. Australia now faced the prospect of a boom in demand for its raw materials that would last a generation. In the 200708 budget, Treasury thought it would take ten years for resource prices to decline by 20 per cent. By 201112, this had stretched out to 20 years.
The global economy is undergoing a transformation unprecedented in the last 100 years. Geo-strategic and geo-economic weight is moving, inexorably, from the Western advanced economies towards the emerging market economies. And the pace of this transformation is faster than many anticipated, the Treasury Secretary, Martin Parkinson, explained in 2011. If booming commodity prices were a flash in the pan, there would be a case for government to come to the aid of industries hurt by what would be no more than a temporary jump in the exchange rate. But if they were going to last for decades, then everyone would have to get used to it. Businesses that couldnt compete would simply have to be let go, as part of the endless creative destruction that sees 300,000 new businesses arise in Australia every year and a similar number disappear.
