A Year of Confidence and Energy

Rowan Callick looks at what is in store for the Australia-China relationship in the year ahead.

 

Clint Eastwood, Shinzo Abe, Oprah Winfrey, John Travolta, Ang Lee, Aretha Franklin, Jimi Hendrix, Jackie Chan, Sean Connery and Hong Kong’s chief executive C Y Leung are all people born in horse years. Hard to discern what they have in common, although most “experts” claim that Years of the Horse – such as we have just entered, on January 31 – are marked by self- confidence and energy.

This is certainly lining up as a year in which those qualities are to the fore in the political leaderships in both China and Australia. But it also makes for a degree of unpredictability, which means that businesspeople in both countries need to be especially attentive and responsive to what’s happening in Beijing and Canberra.

President Xi Jinping has become the most powerful leader of China since Deng Xiaoping – with core party/government committees answering to him on both the economy and on security, ensuring he is at the apex of all decision-making, certainly not a ceremonial leader. The previous committee-man domination of Chinese decision making may have militated against much-needed reforms, but was more predictable.

On the Western New Year’s eve, Xi and his Politburo Standing Committee colleagues attended a performance of a Peking Opera, produced by the party’s favourite in-house artistic director Zhang Yimou. At the end of a year during which Xi’s arch-rival Bo Xilai was satisfactorily sentenced to life imprisonment, and former security chief Zhou Yongkang, also associated with a different political camp from Xi, started to come under formal investigation, the title of the ancient opera that the leaders watched, was indicative. It dealt with the demise of rivals to an ancient ruler, and was called: “All the people pledge allegiance to the Emperor.”

Xi’s economic and social reform program, as outlined following the recent Third Plenum of the party’s central committee, is promising but challenging. He needs to deal primarily with the state’s massive debt overhang, while at the same time revolutionising the sclerotic finance sector. More decisions will now be made centrally. No one should underestimate Xi from now on. He is a force who must be reckoned with, one with whom China will climb to further achievements – or fail in the attempt.

In Australia, Tony Abbott has made a steady start as prime minister, indicating that he intends to stay in charge for some time to come – with the model in front of him, of his mentor John Howard, who was in power for 11 years. He commands massive support within his own ranks. He has already made a couple of bold moves, including accepting that the car industry will not – perhaps should not – survive in Australia unless vast more taxes are poured into it.

His Treasurer Joe Hockey has also halted an American takeover of GrainCorp by Archer Daniel Midland, causing understandable anxiety that foreign investment will become much harder. However, since then several large Chinese investments have been approved. Abbott has been criticised for angering China.

But this early perception derives from Foreign Minister Julie Bishop calling in new ambassador Ma Zhaoxu, to explain Australia’s anxiety about the impact on the increasingly fragile security climate of East Asia, of the manner in which it declared an Air Defence Identification Zone. And while Beijing is obviously not happy about this, most of China’s other neighbours also responded negatively, and at a large security conference I attended at this time in Beijing, Australia’s own minor role was glossed over – including by senior Chinese diplomats and military leaders.

Bishop says her focus will be on economic diplomacy, and Abbott’s challenge to complete free trade agreements with Australia’s three top export partners – all in north Asia – will require intense application in this area. A deal with South Korea was completed just before Christmas, Japan looks likely to come next, and then follows the biggest challenge: a comprehensive FTA with China.

Bishop told the third Australia-China Forum that “our country has been built on foreign investment… and we appreciate and welcome investment from China.” She said: “I have absolutely no doubt that the very best days of the Australia-China relationship lie ahead of us.”

To achieve this, will require a preparedness to see the big picture, mutual respect, and especially in this Horse Year, energy and commitment, of which concluding an FTA will be the crucial test. In some respects, the relationship thus now needs to be re-made, as it enters its fifth decade, with new political realities on each side. Neither country can afford to be left behind, as the world moves on. A new Chinese invention illustrates this well. Passengers waiting at a platform, step into a compartment that awaits above the track. The train moves through the station without stopping, picking up the compartment as it does so. This lodges on the roof of the train. The passengers then walk down into the carriages below. They leave through a similar process. The train never stops. This extraordinary idea will probably never be realised, but it is strongly suggestive of a world of change, that continues even if mighty China itself takes a pause to restructure its economy. America is becoming a net exporter of energy, Japan is rediscovering inflation and growth, south-east Asia is booming. It’s all happening. Australia and China thus need to make a priority of what they can best do for their mutual benefit, and get on with it.

They both have can-do leaders, who need early this year to get together and work on what they can do together. 

*Rowan Callick is the Asia-Pacific editor of The Australian, and the author of the new book Party Time: Who Runs China And How.

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