How threatened is Australia by the rise of China?

This is an audio transcript of the Rachman Review podcast episode: ‘How threatened is Australia by the rise of China?’

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Gideon Rachman
Hello and welcome to the Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s edition comes from Australia, where I recently spent a couple of weeks as a guest of the Lowy Institute, the country’s leading foreign policy think-tank. Towards the end of my time in the sun in Sydney, I sat down with its director, Michael Fullilove, to discuss Australia’s place in the world, including the security pact it signed with the US and UK to acquire nuclear submarines.

Michael Fullilove
To me, Aukus and the nuclear subs capability is not so much about war-making. It’s about providing a balance of forces in the region. It’s providing some structure to the region. Because if you’re sitting in our part of the world, if the United States gets less engaged, if it steps back, then suddenly the region can be dominated by one huge resident power.

Gideon Rachman
Australia has always been a close ally of the United States. So how threatened is it by the rise of China?

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Australia feels prosperous. The country’s had more than 30 years of uninterrupted economic growth, much of that powered by Chinese demand for Australian goods and minerals. But as political relations between the two countries have worsened, so China has imposed trade sanctions on many Australian goods.

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For the best part of a year, China’s trade sanctions have hit industry after industry.

Australian manufacturer 1
This was massive. This was the end of our export to China.

Australian manufacturer 2
The markets actually dropped to zero.

Australian manufacturer 3
We’re all in survival mode. We’re doing the best we can. That’s all we can do.

Gideon Rachman
Tensions eased a little at the recent G20 summit, when for the first time in six years, an Australian prime minister met a Chinese president face to face as Anthony Albanese sat down with Xi Jinping.

News clip
Now the sit-down may mean a significant thawing of relations between China and Australia. Both sides have identified key issues to work on, expressing their commitment to continue maintaining their 50-year strong bilateral ties.

Gideon Rachman
But while the Xi-Albanese meeting was welcome, it’ll take a lot to rebuild ties. Opinion polls in Australia show there’s been a collapse in trust in China over the last five years amidst a growing strategic rivalry. So at the end of my stay in Australia, which included a visit to the Australian navy base in Sydney, I sat down with my host, Michael Fullilove, to discuss my impression and Australia’s role in the world.

Michael Fullilove
Thank you for coming down. It’s been a lot of fun clambering on and off warships with you and introducing you to various friends of the institutes in Australia. So thank you.

Gideon Rachman
Yeah, it’s been good. So taking a couple of steps back before we get to the immediate challenges of now, it seems to me since maybe 2015, 2016, the Australian-Chinese relationship has become a lot tenser and that’s reflected in a plummet in Australian popular faith in China. What’s been happening? Why is it going on?

Michael Fullilove
Well, don’t forget that China’s relations with many of its neighbours and partners have been pretty poor over that period. But the decline in the Australia-China relationship was particularly stark. We’ve been at daggers drawn effectively and that’s a big deal for us because China is by far our largest trading partner and our really most important economic partner. What’s the cause of it? It was partly changes in Beijing and in China, generally hardening of their approach to the world. But it was also that the former government took a hawkish approach to China and made a series of decisions that China didn’t like. For example, to exclude Huawei from our 5G network, to introduce legislation to prevent foreign interference and various other things. Now, I agreed with many of the decisions that the former government made, but it’s also true that diplomacy requires you to be shrewd as well as strong. And sometimes, in my view, the government went a little bit overboard in its rhetoric. But as you say, the net effect of this decline in relationships was the tanking of Australian public opinion towards China. So four years ago in the Lowy Institute poll, 52 per cent of Australians trusted China to act responsibly in the world. This year, 12 per cent. So from five in 10 to one in 10. And also this year, the other really important figure is that nine out of 10 Australians told us that the alliance with the United States is very or fairly important to our security. So if you’re sitting in Beijing, these are bad numbers. One out of 10 Australians trust China to act responsibly in the world. Nine out of 10 Australians say the alliance is important to our security.

Gideon Rachman
So you’ve now got a new government in Canberra and the first meeting between an Australian prime minister and a Chinese president I think in six years took place at the G20. So is this a change of direction for Australia or is it more of the same but a slightly different tone, do you think?

Michael Fullilove
I think it’s been brought about again because of changes in both capitals. So I think on the Chinese side, you’ve seen a general softening of Xi Jinping’s rhetoric and you saw in his meeting with Biden, with Scholtz and with other leaders, you’ve seen him a bit more open to the world. Of course, he’s travelling, he’s meeting leaders. And then on the Australian side, I think you’ve seen a sustained diplomatic effort where the new government said, “Look, we’re not going to change our overall view of China, but it’s important that we have a stable relationship and a productive relationship and that means being able to speak to them”. Because don’t forget, in addition to a pretty outrageous campaign of economic sanctions against Australia in recent years, we’ve been in the diplomatic deep freeze. We’ve been getting the silent treatment. Leaders haven’t met, ministers haven’t spoken. So I think the new government said, “We wanna reopen the channels of communication”. So what you have is, I wouldn’t say it’s a reset at all because the factory settings have changed in China. We’re not going back to the old relationship with China, but the new government wants a stable relationship, a relationship in which they can talk to their counterparts — hopefully a productive relationship.

Gideon Rachman
Yeah. And I guess the signal that certainly would have been read in Beijing and Washington that there’s a lot of continuity with Morrison even if there’s a change in tone, is that the Labor government has not in any way resiled from Aukus, this new security pact: Australia, UK, US.

Michael Fullilove
Yeah.

Gideon Rachman
Explain to me the significance of that, because one of the things I’ve been struck in the past two weeks in Australia is what a big deal it is for Australia in terms of financial commitments, but also their whole security posture.

Michael Fullilove
It’s huge. It will be, I think, depending on which boat we buy, to be the biggest contract in the history of Australia, probably. For a country without an indigenous nuclear industry, without nuclear weapons to acquire and then run, a fleet of nuclear-propelled submarines is a huge deal.

Gideon Rachman
And to be clear, these aren’t nuclear armed submarines because that . . . 

Michael Fullilove
Correct.

Gideon Rachman
 . . . gets confused sometimes.

Michael Fullilove
Correct.

Gideon Rachman
They’re actually nuclear-propelled.

Michael Fullilove
Conventionally armed, nuclear-propelled. I mean, submariners have said to me for many years that the capability makes sense for Australia because of the size of our coastline, how far we are from the rest of the world and in terms of lethality and speed, the ability to stand on station, the deterrent effect of nuclear-propelled submarines is very significant. Aukus is not just about the subs, it’s also about technology-sharing, more generally in terms of AI and quantum and hypersonic weapons and so on. So it’s, I think, the best way to think about it, it’s not a new alliance, it’s a technology-sharing relationship between very old allies. But the capability of the nuclear-propelled submarines is certainly at its heart. You know, when Aukus was announced, Gideon, it brought to mind the destroyer bases deal in 1940, when Britain, which was running out of warships, did a deal with the United States, who at that point was not yet in the second world war, where the Americans provided, I think, about 50 overaged destroyers to the Brits in exchange for access to British naval bases. Churchill gave a speech at the time in which he said, “Because of the challenges that America and Britain are facing, we’re gonna have to be somewhat mixed up together for mutual and general advantage”. And that metaphor of getting mixed up together is at the heart of Aukus. It’s at the heart of the deepening connections between democracies and like-minded countries around the world, where they’re operating more with each other, swapping personnel, sharing technology in the face of a big challenge.

Gideon Rachman
Yeah. And and that has implications for Ukraine as well, which we’ll get on to in a moment. But I’m very interested that you choose that wartime comparison because again, one of the things that struck me, being in Canberra a few weeks after being in Washington, is how both the American and Australian security establishments are thinking about the possibility of a war with China. I mean, they’re very keen to avoid it and they see things like Aukus as in a sense about avoiding it because it’s about building up deterrents. But for the first time in my lifetime that I can remember, it’s really front and centre, this idea that, you know, there might be a war and if there was, it would be over Taiwan and therefore Australia would be drawn into it probably.

Michael Fullilove
Well, look, I think that, as I said, in the last government, you had ministers engaging in war talk. You’re not gonna have that with the new government.

Gideon Rachman
And when you say engage in war talk, it was people like, you know, I guess for an international audience, they might not know the names of people like Peter Dutton, who were explicitly raising the prospect of a war.

Michael Fullilove
Yeah, that’s right. The mantra, I think, of the new government is we co-operate with China when we can, we disagree when we must, but always be clear and consistent. That’s, I think, the mindset. Now you’ll always have defence planners and indeed defence forces and they have to plan for war. That’s their job. To me, Aukus and the nuclear subs capability is not so much about war-making. It’s about providing a balance of forces in the region. It’s providing some structure to the region because if you’re sitting in our part of the world, if the United States gets less engaged, if it steps back, then suddenly the region can be dominated by one huge resident power.

Gideon Rachman
And to be clear, there’s been a big Chinese military build-up over the last 20 years, to which this is a reaction in some way.

Michael Fullilove
That’s right. And indeed, even in the south-west Pacific, in our near abroad, really, you’ve got China probing for vulnerabilities and trying to establish deeper relations in the Pacific Islands off Australia’s coast. So what Aukus is about is about keeping the United States engaged, to some extent pulling the Brits further in. But the broad approach of the government from that sort of strategic point of view is complicate the picture, keep the United States engaged, get the Europeans involved, try to encourage India and Japan to step forward more, get Indonesia more interested in expressing itself in strategic terms. Because the opposite, where we all sort of hunker down and pull back to our own shorelines, leaves a region in which China can dominate.

Gideon Rachman
Yeah, and that’s the thinking here. But one of the things that’s been striking about Aukus is the way it’s been noticed around the world. I mean, the Chinese have condemned it explicitly several times. I think it even featured in Putin’s speeches. He talks about Aukus announcing this new cold war. Is there a danger that we get sort of trapped in a kind of escalatory logic in which Australia thinks it’s responding to a Chinese military build-up? China says, “Oh my God, you know, the US is tightening its alliances,” and you get a ratchet of tension.

Michael Fullilove
Mmm. That’s always a danger. Of course, the PLA navy has a huge number of submarines and surface vessels. And so an additional eight or so submarines put to sea by the Royal Australian Navy, it’s hard to see that as an escalation.

Gideon Rachman
Sure.

Michael Fullilove
But look, you’re right. Even as you plan for the worst, you want to try to develop the best outcome. And that’s why I say it’s important that Australia is reaching out to China, that we’re talking to counterparts, we’re trying to re-establish relationships, we’re trying to co-operate where we can, even as we realise that the new softer approach from Xi Jinping, that’s probably a tactical change. It’s probably not a strategic change. When you step back and look at the last 10 years, it has been a very consistent story since Xi Jinping became president of a hardening of Chinese foreign policy, a much more assertive stance, a tightening of controls over the Chinese people. I don’t think that is changing any time soon.

Gideon Rachman
Yeah. Last Aukus question. Again, it’s been interesting talking to some of the military types. One of them, I won’t say who, said they wondered whether Australia knew what it was getting into with Aukus, because the nuclear aspect specifically is technologically very complicated, very expensive, will take a long time. Is there any element of buyer’s remorse where you think, my goodness, we’re not even going to get these subs for 15 years and the bill will, in the way of military procurement, go up and up and up?

Michael Fullilove
It’s interesting you say that, especially because the new government is a Labor government and most Labor MPs didn’t go into parliament to put a fleet of nuclear-propelled submarines into the ocean. They went into parliament because they believe in social justice, because they believe in making Australia a fairer social democracy. And yet to date, you’ve seen absolutely no wavering, no evidence of buyer’s remorse. We’re in a period now where the government is working intensively behind the scenes. By March next year, they will come back with a plan. They’ll come back and say which boat we’re gonna buy — is it an American boat or a British boat? So I guess we’ll see then. But I have been struck by the fact that in the six months since the election, there’s been no big discussion about whether we made the right decision. I think internally the feeling is that this is a capability that will be very important. Now, is it a huge deal for Australia? It’s massive. It’s a nation-building project.

Gideon Rachman
Yeah. I’m conscious that the questions I’ve been asking you so very much like a triangular world: Beijing, Washington, Canberra. But a lot of Australian foreign policy has always been and continues to be about the region and increasingly an emphasis on relations with China and Japan. And this other thing, the Quad, and I know you’ve hosted Jaishankar, the Indian foreign minister quite recently. Tell me a bit about that Australian-Indian tie-up. I mean, how much faith or importance is Canberra putting in it?

Michael Fullilove
I think it’s very much in Australia’s interest that the kind of strategic direction that Dr Jaishankar, the external affairs minister, favours, that Modi favours, which is of tightening connections with the United States, with Australia, with Japan, with other like-minded countries, and seeking to balance China. That’s very much in our interests. And when we hosted Dr Jaishankar at the Institute recently, he said that the Australia-India relationship was the one where he was most satisfied with the progress while he’d been minister, that in terms of leaders’ meetings, in terms of exchanges, that there’d been more progress on that than any other bilateral relationship that India had had. So I would say to you that I always think about Australia running a 3D foreign policy historically, where the first dimension, height, is the relationship to a global ally: first the Brits, then the Americans. The second dimension, width, is deep engagement with international institutions. But the third dimension is deep relations with Asia and the Pacific. And it’s very important to your question that even though we’re focused on China, we don’t become obsessed by China. We don’t want to shrink Asia to the dimensions of China. We want to bring forward the other elements of Asia: India, south-east Asia, Japan, South Korea and so on.

Gideon Rachman
Yeah, and I mean, Australia, as you say, has to think primarily about its region, but it’s also always been involved in the big global events. I mean it was very striking going to the war memorial in Canberra that, you know, (inaudible) from the first world war, second world war, Korea, Vietnam, Iraq.

Michael Fullilove
Yeah.

Gideon Rachman
It seems to be in Australia’s DNA to be involved in these things. I’d be interested to know why you think that is. You know, Australia’s sending weapons to Ukraine. Do you see this as very important to you as well?

Michael Fullilove
You’re right. If you go to the cloisters of the war memorial, you see that we left our dead, not just on the western front and Gallipoli, but the Sinai, Palestine, the Boxer Rebellion, you know, all over the world. It’s interesting how Australia’s strategic culture, because I think it developed at the knee of the leading naval power of the day,  the Brits, we’ve always, as you say, had a global lens even when we haven’t had global capabilities. And so whereas in different circumstances, a small population occupying a large continent on the other end of the earth, surrounded by this moat formed by the Pacific Ocean and the Indian Ocean and the Southern Ocean, it might have been seen as purely rational to have a sort of a Swiss approach. In fact, Australia has always done the opposite. It’s sought to find its security in the world by allying itself with the global sort of like-minded power of the day. So that’s a bit of the history. On Ukraine, I think that Ukraine makes the idea of the rules-based order flesh and blood. It’s not an academic debate. It is about the right of countries to choose their own way, to choose their own path. It’s about state sovereignty, about territorial integrity. It’s about the right of every country not to have to live in the shadow of another. And so, yes, I think in Australia there’s been absolute moral clarity about what Russia’s invasion of Ukraine means. And we’ve done everything — we’ve sent I think 100 or so Bushmasters to Ukraine, sent a lot of aid and material and really done everything we can, even though it’s a long way away.

Gideon Rachman
I mean, it strikes me that as well as Australia being very conscious of its global role, that, you know, when I talk to people around the world. Australia looms larger than it used to. I think maybe because of the rise of China and Australia almost, if I can put it being an outpost of the global west in this region. You had Zelenskyy speak to you here at Lowy via Zoom link, as he does with everybody. Tell me how that came about and the significance of that, really?

Michael Fullilove
Well, he did speak by Zoom, although I invited him to return in person once Ukraine has won the war so I look forward to that happening. I mean, look, I just thought Zelenskyy is such an important leader. A demonstration that history is made not just by vast impersonal forces, but by individual men and women and the decisions that they take.

Gideon Rachman
Indeed, if Zelenskyy hadn’t gone back to Kyiv, if he’d done an Ashraf Ghani and fled . . . 

Michael Fullilove
Exactly.

Gideon Rachman
Things would have been very different.

Michael Fullilove
Yeah, well, you remember that famous quote, “I don’t need a ride. I need ammo”.

Gideon Rachman
Yeah.

Michael Fullilove
Yeah, you’re right. If he had taken the ride, we might be looking at a different situation. So I was very keen to have him and Kyiv was keen for him to speak to Australia. One thing that I was really struck by was Zelenskyy’s deftness and professionalism in the remarks he made to the Lowy Institute, the attention to detail that revealed. In the middle of his speech, he started quoting a speech that Angela Merkel had given to the Lowy Institute in 2014 when she was chancellor. And afterwards I said to my colleagues, “Did we send that information to Kyiv”? They said no. I said to the Ukrainian ambassador, “Did you send it to Kyiv?” And he said no. So somewhere in Kyiv, with missiles raining down on their ears, someone is spending a couple of hours on the Lowy Institute website to dig up some important content for the boss so that his speech lands right. And that showed to me really the professionalism, the dexterity of the Ukrainians that we’ve seen throughout the year. I mean, has a country ever transformed its reputation so swiftly and surely as Ukraine, from being corrupt and divided to being charismatic, brave, clever and professional? And I saw that in miniature in that conversation with President Zelenskyy.

Gideon Rachman
Yeah. And I think one of the interesting things is that just as Australia takes quite an active role in the European conflict, increasingly Europeans are taking more of an interest in this region. Then you get a sort of meshing of the American alliance, our allies in Asia with the American allies in Europe. And Australia, I think for the first time ever, attended the Nato summit earlier this year. Do you see this, rather than being sort of two different theatres, some kind of merging?

Gideon Rachman
What I think is happening is a quickening of connections between like-minded countries and between democracies. And you see it at the government-to-government level, you see at the military level, you see it at the think-tank level, at our level, where suddenly directors of think-tanks in similar countries that might not have had that much to do with each other in the past are wanting to speak to each other. I think it says that as the liberal international order looks increasingly less liberal, less international, less orderly, we look to each other more. And so I think the links that bind western countries or like-minded countries or democracies, however you want to phrase it, are tightening. But I think it’s also important for people like you and me to remember that, of course, there’s a lot more ambiguity in the rest of the world about the merits of the Ukraine war.

Gideon Rachman
Yeah, I know, I absolutely felt that because on the way down here, I stopped in Jakarta and I interviewed President Jokowi, or President Widodo for the FT and yeah, I mean, the first thing he said off the bat was, “We do not want to be a pawn in a new cold war.” And I wonder whether that complicates life for Australia, because you’re seen as very much on the western side of the argument over Ukraine. The other countries that you have to work with in Asean — an association of Southeast Asian states — Indonesia is the biggest of them and they are very much determined to remain non-aligned. Does that then complicate your relations with them?

Gideon Rachman
It does. So in Asia, the countries that have been absolutely clear on Ukraine, you can almost count on one hand. It’s Japan, South Korea, Singapore, Australia, New Zealand — that’s about it. Most of south-east Asia is on the fence. I was in Jakarta myself quite recently and they don’t react to the Ukraine war in the same way that we do. There’s elements of the non-aligned history, anti-westernism, some sort of hangover prestige for Russia. They’re a developing country that take a different view. Does it complicate our life? It does complicate our life. And one way to mitigate that risk is for Australia to invest much more in south-east Asia, in the Pacific, in these regions where they have a slightly different view from us. And that’s where I think the new government is scoring a lot of runs. They have put a big emphasis on south-east Asia. Albanese was straight up to Jakarta and to Makassar, also in Indonesia, as soon as he became prime minister. The new very impressive foreign minister, Senator Wong, has been all over south-east Asia, all over the Pacific. That doesn’t mean that we’re gonna change our view on Ukraine or even change our attitude to the US alliance because we’ve been an ally of the United States for three-quarters of a century. We have made our choice, as it were. But that doesn’t mean that we can’t be out there listening to perspectives in south-east Asia, explaining how we see things, and also explaining that that’s not our only identity. Countries can have different foreign policy identities, so even as we’re a western country, a US ally, but at the same time there’s a different side of Australia which can engage wholeheartedly in south-east Asia and in the Pacific.

Gideon Rachman
Yeah. So, to round off, it strikes me that suddenly coming from Europe and spending a lot of time in the US, this has been a rather dark period economically, geopolitically. You know, you’ve got the biggest land war in Europe since 1945. Growing anxiety about what you said, you know, the liberal international order becoming less liberal, less international, less orderly. On the other hand, being here in a way, it’s refreshingly optimistic. Australia has done amazingly well economically over the last 30 years or so. No recessions. You know, the city is the clean, modern, you know, there’s actually less . . . 

Michael Fullilove
Come more often, Gideon.

Gideon Rachman
Yeah, I should. There’s less of the visible . . . Even nice weather! Less of the visible poverty that you see even in New York or London. So what’s the mood here? I mean, has it darkened here as well because of what’s happening internationally or does this still feel like the lucky country?

Gideon Rachman
No, I think Australians are more seized of the global scene. Of course, the pandemic, the dip in relations with China — all these things had a response in Australia. We talked about some of those opinion polls. But I think there’s room for optimism too. After all, I mean, we haven’t spoken much about the United States, but the United States is now governed by a decent human being, which wasn’t the case for four years, and that sets the tone in many ways for the western alliance and for the international order. Imagine how Mr Trump would be managing the war in Ukraine if he was still in office. And also, again, Ukraine itself. The conduct of the war by the Ukrainians gives us reason for optimism because that shows that, you know, often there’s realists who sit back and stroke their chins and tell you that it’s inevitable that human history will go in one direction. But actually, Ukraine shows no, that’s not true and democracies can fight back. And there are strengths to the democratic systems that are not shared by the authoritarian countries. When they make decisions it’s very hard for them to course-correct. It’s much easier in democracies — not to say we don’t make mistakes; we did in Iraq and in many other occasions — but generally they’re better systems for getting the right information up to the leaders. And if the leaders make a mistake, it’s easier to course-correct in a democratic country. So I think those are things that should give us grounds for optimism.

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Gideon Rachman
That was Michael Fullilove of the Lowy Institute speaking to me in Sydney and ending this edition of the Rachman Review. Thanks for listening and please join me again next week.

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