Since the trade war with China began, the public response in Australia has been not just divided but incredibly confused. In fact, there has been no clear plan around China put forward for Australia by even our political class who seem just as at a crossroads as most of the public. Pew Research recently found that while Australians trust Germany and a slew of other European countries before they trust China, in fact more than 50% of Australians trust China before they trust the US. The US under Donald Trump seems to be losing international confidence and it can hardly be chalked up purely to the reality that Trump is an erratic figure or his problematic comments but likely also because Australian’s stand to loose much more from an all-out trade war with China than the US does. Of course, the layman concerns in Australia around China “buying up the country” remain. However, the debates seem split between those who make almost entirely moralistic arguments on the question (that any desire for protectionism is innately racist) or that China is somehow necessarily on some ghoulish plight to dominate the country both economically and culturally using arguments that most often equate to simply yelling ‘Yellow Peril’ into the void. So, is Australia really “bought?” And if so, by whom? Well, the first factor to acknowledge is that overall the USA is Australia’s primary investor and outstrips China on this question significantly where total Chinese total investment equated to about $87.2 billion and US investment to $433 billion (10x higher).
Undeniably, foreign investment in Australian primary commodity industries has played a major political role in our national “growth” strategies under both the Liberal Party and the Labor Party. The ALP under Kevin Rudd loosened the rules for foreign buying of Australian property and since then we’ve seen a massive jump in overseas property purchases albeit foreign investment overall still only sits at about 2%. While, according to the Foreign Investment Review Board data China does as of 2013 take the lead in that overseas investment, but it’s tailed strongly by the United States and that number in the post-corona and post-trade war era is likely to significantly drop as the CPC continues to hit back at the Australian government’s tailing of the US in the South China Sea. According to research by business consultancy Cross Border Management and BIS Oxford Economics, however, the primary reason for the jump in property prices over the past decade is low interest rates and strong population growth driving up demand. As Australian Post-Keynesian economist Steve Keen puts it most clearly the Australian Reserve Bank is “the most brain-dead central bank on the planet” slashing interest rates while ignoring a growing property bubble and Australia’s 400% of debt to GDP ratio. But what about natural resources and business investment?
The three biggest foreign investors in Australia’s farms are respectively a Canadian, American and Dutch company owning $7.3 million hectares collectively and $7.4 billion worth of land, water and infrastructure assets. Of the overall largest owners of agro-monopolies, Australian-owned Macquarie Agriculture also takes the top of the list. We also cannot consider foreign investment of Australian land without considering US military investment in Australia. Then of course there is the mining giants collectively plowing through Australia’s natural minerals 86% of which are foreign-owned including BHP, Rio Tinto, Glencore, and Adani Mining. Regardless, of their devastating impact on climate change globally, it paints a picture to recognize that they have taken $541,275,884 of wealth from Australian natural assets overseas over the last decade.
So, while foreign investment as a whole does represent an overwhelmingly negative impact on Australian land management and possible wealth production, China does not represent an existential threat to Australia’s ability to be “bought” at least far less so than one of than our Anglo peers in the US and the UK. In fact, when Trump and other US lawmakers make comments like “China does not play by our rules” one of the most ignored possible responses “no but why don’t we play by theirs?” Of course, that doesn’t mean submitting to any possible international whim but that what Trump actually means by those comments is that China are in fact still incredibly protectionist despite how much they are lauded by mainstream economists for “welcoming capitalism.” While the Australian government have been opening up the domestic markets, China have been taking steps to ensure that their domestic sectors are heavily protected by government regulation.
Similarly, China benefited from Western countries like Australia offshoring their manufacturing, even though it only represents 2.5% of their GDP overall, because foreign companies added value by helping to improve and modernize their domestic technological production via information exchange. In other words, the Chinese economy has benefited from a process of economic globalization where increasingly the West has not. For example, joint-venture businesses are set up such that if a Chinese company hires the legal representative, they then have the final say in major decisions, products are subject to state-fixed pricing and all foreign firms pay 30% income tax after remaining in China for longer than 5 years. Meanwhile, Australia and America lost out because jobs moved overseas and unemployment immediately shot up which didn’t only have an impact on the domestic economy but on long-term social stability as well.
So, Trump is objectively not wrong to point out that free trade agreements with China have the impact that they do on job loss but he hasn’t ever brought anything to the table that would have the real-world impact of bringing manufacturing back. He, right now, has implemented measly tariffs that have only served to in turn destroy their steal-consuming businesses. In other words, he is picking a fight with China and hoping the market will do the rest. Unfortunately, if countries like Australia and America want to bring back a manufacturing base that will have to be the result of direct government investment in industry and in the case of of Australia investment in something other than raw minerals or alternatively the result of expropriating companies that threaten to move parts of their supply chain overseas. And now, at a time when Australia is rapidly losing foreign investment as a result of coronavirus and experiencing severe economic contraction is a better time than any to have a policy like that on the table.
Ultimately, the game of determining the conversation about Australia’s economic relationship with China being one of fixed racism vs globalization is an unfortunate and incredibly dangerous one to be playing. There has always been a sensible approach between elements of protectionism to stimulate job growth combined with regulations on every prospective investor, especially the US but including China, and ensuring that we maintain China as one of our largest export bases (even if we move away from extractivist industries). Australia deserves real independence and that can only come if we recognize who our real puppeteers are. And we aren’t any closer to understanding that by pretending that China is a looming malicious force, it also won’t be made clearer if we think China doesn’t have strategically self-interested goals, but especially we won’t understand how to achieve real independence if we ignore the harms of foreign investment from our Anglosphere investors simply due to perceived cultural similarities. But of course, our political classes won’t shift the narrative in that direction because the last time that happened we saw the first ever soft-coup this country has experienced.
