Corporate concern over China tensions harming trade

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orrs Chambers Westgarth CEO John Denton says there are tensions with China. Picture: Stuart McEvoy

Australian business leaders have urged the federal government to support China’s Belt and Road Initiative amid increasing concerns that political tensions between Canberra and Beijing could harm trade relations.

“In recent discussions I have had in Beijing, it is fair to say that there is a level of challenge in the relationship,” John Denton, the chief executive of law firm Corrs Chambers Westgarth told The Australian.

“As seen from the Chinese perspective, there is a notable tenor coming from Australia which is emphasising the relationship with China more through a security lens than an economic lens,” he said.

“There will always be friction in the Australia-China relationship as we are friends, not allies, and we operate with very different economic systems.

“But, at the moment, there are a few more frictions than you would want for better relations.” Mr Denton, who is also chair of the Business Council’s Global Engagement Task Force and a board member of Asialink, said Australia had been slow to embrace the potential of China’s Belt and Road Initiative, which involves a string of infrastructure projects across Asia and into Europe, designed to strengthen trade links in the region.

Mr Denton said there was a danger of economic ties between Australia and China “drifting” if Australia did not become more involved in the business potential of China’s BRI initiatives.

“We have to understand that BRI is not a foreign policy of the Chinese government, it is an economic development play,” he said.

“A lot of future outbound investment decisions from China will be made by state-owned enterprises and state-directed banks, which will be viewed through the prism of the BRI.

“Our challenge is to make sure that we work through some of the issues in working with state- owned enterprises.”

He said Australia needed to “sort out” its position on the BRI and “grasp the opportunities it has in terms of the economic relationship”.

Orica chairman and BHP director, Malcolm Broomhead said Australia needed to “wholeheartedly embrace the Belt and Road initiative”.

Mr Broomhead, who is chairman of the Australia-China Belt and Road Initiative, said Australia “hadn’t quite worked out its relationship with China vis a vis the US”.

“I would encourage the government to sign a memorandum of understanding with the Chinese government on BRI.

“The BRI is a signature policy of Chinese President Xi Jinping. It is under way and it is huge.

“It will dwarf the Middle East in terms of its development opportunities.”

Mr Broomhead said Europe, Britain and even the US had begun to embrace the opportunities of the BRI.

The Chinese government had hoped that the Turnbull government would sign a memorandum of understanding on the BRI during the visit of Chinese Premier Li Keqiang in March this year.

“I would urge Australia to have a clear and consistent policy which will enable Australian companies to get more involved in this area,” he said.

Mr Broomhead said he was worried that Australia might “miss the boat” when it came to the opportunities from the BRI in the same way that Australian companies had missed business opportunities in the Middle East.

He said signing up to the BRI would also “provide a strong signal” to Beijing that it wanted to take the free trade agreement with China to the next level.

Australian business leaders with an interest in China have been watching the increasingly hard line rhetoric against China from the Turnbull government, including Foreign Minister Julie Bishop, with some concern.

They have been worried that security issues including concerns over the South China Sea and the importance of close ties with the US are starting to crowd out the emphasis on the importance of trade ties with China.

One business leader pointed out to The Australian that it appeared that the Turnbull government did not have a high-profile champion of the relationship with China in the same way as previous Australian governments.

While economic and trade relations are still strong, there is a concern being expressed privately by other business leaders that Australia’s recent urging of more US involvement in the region and its vocal stance on The Hague Court’s decision last year against China’s claim to islands in the South China Sea have angered Beijing and could spill over into the business relationship.

The tougher rhetoric on China also comes amid changing economic and regulatory conditions within China and slower economic growth is also prompting business leaders to be aware of putting too much emphasis on the business potential of China.

Companies such as Black­mores, Bellamy’s, A2 Milk, Murray Goulburn and Crown Group have all had unexpected problems with their ambitious plans to court Chinese consumers.

Chinese officials watching the Australian relationship have privately expressed concern about comments made by Foreign Minister Julie Bishop and more recently by Prime Minister Turnbull which appear to indicate a tougher line on China and more encouragement for US involvement in the region.

They are also concerned at recent foreign investment decisions involving Chinese companies and what they see as an anti-Chinese debate on foreign political donations.

While trade relations are still strong — worth more than $150 billion — there is a concern that pressure from the US to become more actively involved in maritime patrols in the South China Sea could provoke both diplomatic and trade retaliation from Beijing.

“Sometimes you hear suggestions that an Australian company and its operations have been hurt because China is sending a message about an Australian posture that they don’t like,” former foreign affairs minister Bob Carr, who heads the Australia China Relations Institute, told The Australian. “But this seems pure speculation.”

He said: “The Chinese have always given the impression that they separate the diplomatic and commercial agenda, certainly with respect of Australia.

“Good trading relations with Australia are vital to them and Chinese diplomacy seems directed at creating solid partnerships with as many countries as possible.”

But Mr Carr warned that the situation could change if Australia were to become more actively involved in sensitive areas in the South China Sea.

“We might be pushing things if we get drawn into any flamboyant anti-Chinese gestures, like joining American patrols within the 12 nautical mile radius of Chinese-claimed territory in the South China Sea,” he said.

Former federal minister Warwick Smith, who has strong business ties with China, told the Australian that there were “ebbs and flows” in Australia’s relations with China.

“We manage our differences with maturity as they arise,” he said.

“Commentators and leaders should recognise that ebbs and flows occur and we need to deal with them sensibly and take a long-term views as our relationship has grown over a 30-year period.”

Fortescue Metals Group chief executive Nev Power told The Australian recently that FMG was looking to expand its customer base in other areas of Asia.

He said FMG, which currently earned more than 90 per cent of its revenue from selling iron ore to China, was looking at potential new markets in Asia, including India and Indonesia.

He said China would remain a major market for FMG but its demand for steel was large but was not growing at the same rate as in the past.

By GLENDA KORPORAAL
The Australian

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