• Bloomberg


China’s economic offensive against Australia is partly designed to warn countries against vocally opposing Beijing’s interests, particularly with Joe Biden looking to unite U.S. allies. Yet it’s already showing signs of backfiring.

China last week imposed anti-dumping duties of up to 212% on Australian wine, the latest in a slew of measures curbing imports from coal to copper to barley. Tensions escalated further on Monday after a Chinese Foreign Ministry official tweeted a fake photo of an Australian soldier holding a knife to the throat of an Afghan child.

Australian Prime Minister Scott Morrison quickly called on China to apologize for the "repugnant” tweet. Chinese Foreign Ministry spokesperson Hua Chunying, in turn, questioned whether he lacks "a sense of right and wrong” and said overall ties deteriorated because Australia "took wrong measures on issues bearing on China’s core interests.”

To Beijing, the attacks on Australia are meant to deter others like Canada, the European Union and Japan from joining a U.S.-led campaign to counter China’s rise. Communist Party officials see Morrison’s government as one of their most vocal critics, and an easy target: China accounts for about 35% of Australia’s total trade, three times more than the next highest country, Japan. Australia accounts for less than 4% of China’s commerce.

"It is only natural that China wants to sound some precautionary alarm” to warn countries off building an anti-China alliance, said Zhu Feng, professor of international relations at Nanjing University. "After all, confrontation is the least wanted by the world now.”

China is betting that most Western countries will avoid provoking Beijing and risking the kind of trade retaliation Australia is suffering, particularly with their economies weighed down by the pandemic. At the same time, it has sought to strengthen ties with Japan, South Korea and nations in Southeast Asia, in part by offering more trade, investment in 5G networks and access to COVID-19 vaccines.

Yet China’s moves are adding to worries about its use of economic coercion, and could end up pushing middle powers closer to the U.S. camp. President-elect Biden has vowed to rebuild relationships with allies damaged by Donald Trump’s "America First” policies, which in turn would make it more palatable for some allies to align more closely with his administration.

"Biden is planning is to resume U.S. international policy after a four-year hiccup,” said Jeff Moon, the U.S.’s assistant trade representative for China for part of the Obama administration, adding that the scope of China’s actions against Australia was "breathtaking.”

"The leverage is to work together,” he added. "That is what they most fear, and they see that coming.”

While it’s still unclear how exactly that would work, several key groupings including the "Quad" — the U.S., Japan, Australia and India — as well as Five Eyes — the U.S., Australia, U.K., Canada and New Zealand — have been revived in recent years. New initiatives have also been floated, including one that would give countries an alternative to Huawei Technologies Co. for 5G networks and another that would find alternative supply chains to China.

The Wall Street Journal reported in November that the Trump administration was formulating a joint retaliation plan that would allow the West to push back against the kind of economic coercion China is inflicting on Australia. The European Union also plans to call on the U.S. to seize a "once-in-a-generation” opportunity to forge a new global alliance that would counter China, the Financial Times reported Monday, citing a set of draft policy proposals.

For its part, the Trump administration is continuing to pressure China with moves to prevent some of its biggest companies from accessing American technology. Senior officials have also stepped up visits to Asia ahead of the planned inauguration for Biden on Jan. 20: Following a visit to Japan in November, national security adviser Robert O’Brien said leaders in Tokyo saw the Quad as a "game changer.”

"China against any individual country, including quite powerful countries like South Korea or Thailand or even Japan, China would be dominant,” said Malcolm Rifkind, a former British foreign secretary. "But in the real world when you have such a situation, your potential victims join up to ensure a collective and coordinated response.”

‘Evil’ Australia

Part of China’s aggressive response is for a domestic audience. State news agency Xinhua carried a commentary that called Morrison’s request for an apology "utterly absurd,” while the Communist Party’s Global Times called Australia "evil” in an editorial. Social media users on Weibo and Wechat commended Hua, the Foreign Ministry spokesperson, for exuding the "style of a great power” in her responses to repeated questions by foreign journalists.

Beijing has also sought to distinguish between countries that step out of line, in effect playing them off each other. Earlier this year the Global Times said China should deliver "public and painful” retaliation to the U.K. for banning Huawei but avoid a full-fledged confrontation because it saw Britain as the "weak link” in the Five Eyes.

In a phone call with his EU counterpart Josep Borrell last week, Chinese Foreign Minister Wang Yi also signaled the bloc should think twice before strengthening ties with the incoming Biden administration, as the two sides look to complete an investment treaty by the end of the year. "Strategic autonomy is a necessary character for staying independent,” Wang said, adding that it involves "opposing man-made ‘decoupling’, opposing confrontation among different blocs and a new ‘Cold War.’”

Australia, on the other hand, has faced China’s unabashed wrath ever since Morrison’s government called for Beijing to allow independent investigators into Wuhan to discover the origins of COVId-19. Chen Hong, director of the Australian Studies Centre at East China Normal University who said he had his visa to Australia revoked this year because he was labeled a national security risk, said Australia’s actions differentiated it from New Zealand, which maintained relatively good ties with Beijing.

"Australia has been purposefully echoing the Washington’s anti-China policy and coordinated with Trump’s strategic intentions,” Chen said.

Allies galvanized

Still, in an early sign that Beijing’s Afghan tweet may have galvanized some of Australia’s partners into responding, New Zealand Prime Minister Jacinda Ardern said on Tuesday that her own diplomats had directly registered concern with Chinese authorities over the "unfactual post.” Lawmakers in the U.K. also condemned China’s actions, with former Conservative party leader Iain Duncan Smith urging Britain to do more to stand with Australia, the Sydney Morning Herald reported.

In Canberra, Australian officials have said Morrison’s government is speaking out for its own interests regardless of the U.S. on issues like China’s increasing grip over Hong Kong and assertiveness in the South China Sea. Morrison himself has also sought to portray Australia as stuck in the middle of the U.S. and China — a view also shared by Singapore Prime Minister Lee Hsien Loong, who said in an interview in November that many nations in Asia aren’t keen to join an anti-China bloc.

Even after he called on China to apologize for the Afghan tweet on Monday, Morrison again sought to restart talks with Beijing without conditions.

"Countries around the world are watching this, they are seeing how Australia is seeking to resolve these issues and they are seeing these responses,” Morrison told reporters on Monday. "This impacts not just on the relationship here, but with so many other sovereign nations not only in our own region, but like-minded countries around the world.”

The spat has only hardened attitudes toward China within Australia, to the point where even business groups have stopped pushing for warmer ties, according to Natasha Kassam, a former Australian diplomat who worked in China and is now a research fellow at the Sydney-based Lowy Institute. At the same time, she said, it’s "impossible to imagine” China apologizing to Australia.

"While there may be an emboldening of countries in the region responding to China,” she said, "it’s equally likely that a number of countries will see the way in which Australia’s export industry has been punished and think twice about making their own criticisms.”

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