29 Apr China ups the trade ante over push for virus probe
Andrew Tillett – Australian Financial Review – Wednesday 29 April 2020
Serbian President Aleksandar Vucic is a busy man. But that did not stop him from appearing at Belgrade’s airport on March 21 to greet a group of Chinese doctors bringing medical supplies to help treat the coronavirus outbreak.
Vucic – whose country is one of the Balkans’ biggest recipients of Chinese loans – even kissed the Chinese flag in gratitude.
It was priceless public relations for the embattled Chinese Communist Party, and part of a global diplomatic strategy that portrays China as the white knight riding to the rescue of countries around the world from the deadly pandemic.
The other prong of that strategy was on show in Australia this week after Beijing’s envoy in Canberra tried to deflect scrutiny away from China’s role as the source of the outbreak.
Chinese ambassador Cheng Jingye, in an exclusive interview with The Australian Financial Review, repeated the party line that there is no proof the virus originated in a Wuhan wet market.
More significantly, the softly spoken diplomat branded the Morrison government’s push for an international inquiry into the origins of the pandemic as “dangerous” and warned of a Chinese consumer backlash against Australian goods and services if ministers continue to pursue it.
“I think in the long term … if the mood is going from bad to worse, people would think ‘Why should we go to such a country that is not so friendly to China? The tourists may have second thoughts,” Cheng said.
“The parents of the students would also think whether this place which they found is not so friendly, even hostile, whether this is the best place to send their kids here.
“It is up to the people to decide. Maybe the ordinary people will say ‘Why should we drink Australian wine? Eat Australian beef?'”
While relations between the two governments have been poor for several years, Canberra regarded Cheng’s linking of protecting public health with economic retaliation as particularly incendiary.
There was little internal debate about how hard Australia should respond, knowing that any reaction would inflame Chinese sensitivities.
Foreign Minister Marise Payne was blunt, declaring: “We reject any suggestion that economic coercion is an appropriate response to a call for such an assessment, when what we need is global co-operation.”
For his troubles, Cheng earned a diplomatic dressing down in a lengthy phone call with Department of Foreign Affairs and Trade head Frances Adamson.
The ambassador’s comments have also given further ammunition to the China hawks within government ranks.
“The ambassador’s ham-fisted threats show exactly why Australia’s relationship with China must change,” says Victorian Senator James Paterson, who is deputy chair of the Senate’s COVID-19 response committee.
“The pursuit of an independent international investigation into a public health crisis is entirely reasonable and something Australia would pursue wherever the virus originated.
“That the Chinese Communist Party regards this as warranting economic punishment highlights what a dangerous business partner they are to rely on.”
Cheng’s comments were consistent with the increasingly assertive approach Chinese diplomats around the world are taking. For a country that lacks freedom of speech, diplomats are increasingly popping up in Western media and using platforms like Twitter (which is banned in China).
Veteran China watcher John Fitzgerald of Swinburne University says China has two objectives through its campaign.
“They hope to persuade people in China that the party is not responsible for what happened in Wuhan, and that China is a responsible global actor,” he says.
Beijing’s foreign ministry hardliners have earned themselves the nickname “wolf warriors”, after a popular film series about a Chinese commando unit. But it begs the question, are they guilty of crying wolf when it comes to using its economic leverage?
During the interview, Cheng was asked whether China’s displeasure over Australia’s push for an inquiry would translate to lower purchases of the big three resources commodities of iron ore, coal and gas, which collectively were worth $94 billion in 2018-19.
Cheng refused to be drawn on that, pivoting instead to warn “dismayed” Chinese people may cut back their appetite for discretionary consumer Australian goods and services like education, tourism, beef and wine.
“What the Chinese do is they are more careful than they look,” Lowy Institute senior fellow Richard McGregor says. “They want to send a message, they want to inflict damage, but they are not going to damage the sectors that hurt them as well.
“If they did [target resources] it would be too great a cost to their economy. We are a reliable, well-placed supplier and they don’t want to interfere with that.”
McGregor says though the threat to other sectors is not a hollow one, he is careful not to overstate the impact.
Chinese people, with the exception of dissidents, can obtain a passport and travel overseas. Parents would still want their children to get a good education.
“The Chinese government can make a lot of noise but it is very unlikely they would take a draconian step altogether,” he says.
“They can damage those sectors but it is unlikely to come to zero.”
McGregor cites the example of South Korea, which suffered in 2017 when Chinese tourist numbers plummeted and Korean retailer Lotte’s Chinese stores were boycotted.
Though the boycott was ostensibly consumer-led, the Chinese government was furious at Seoul for deploying an American missile defence system on its soil, intended to protect against potential North Korean attacks.
The number of Chinese tourists plummeted 61 per cent, but according to McGregor trade between the two countries clearly went up. China still wanted South Korean electronic goods.
The director of the University of Technology Sydney’s Australia-China Relations Institute, James Laurenceson, makes a similar point. When the Chinese government issued a travel warning in 2018 that Chinese people were unsafe in Australia, that didn’t deter students or tourists.
“We don’t want to be panicking or overreacting to these comments because they don’t signal the trade relationship tap is about to be turned off,” he says.
“China trades with us not because they love us. They trade with us for the same reason we trade with them – because it’s in their economic interest.”
Laurenceson says Australia needs to “worry more about its own backyard” when it comes to recapturing the lucrative Chinese student and visitor market, pointing to the racist attack last week of two female Chinese students in Melbourne.
“If you want to know what is going to cause Chinese students not to come to Australia, it’s knowing someone’s friend or relative has been bashed on the streets of Sydney or Melbourne,” he says.
Laurenceson says he found it hard to fault Payne’s statement, although it was a “bit of a stretch to call it economic coercion”.
“She was very clear about what the Australian government is trying to achieve,” he says.
Donald Trump, through his trade war with Beijing, had begun the task but coronavirus has exposed the extent of the world’s dependency on China’s factories to fuel global supply chains.
Appearing before the COVID-19 committee on Tuesday, Treasury Secretary Steven Kennedy told senators there would be a diversification of global supply chains following the shock the pandemic has induced.
“This is quite some time ago … but even in the way Australia responded to the Asian financial crisis, which is the late 1990s, we saw Australia diversify its export sources to North America and to other countries,” he says.
“Businesses, when they get shocked, they quickly move and they quickly take opportunities to diversify their arrangements, so I expect we will see some of that.”
Nevertheless, Kennedy reminds senators not to forget how valuable it is to Australia to complement Chinese growth.
“For example, the iron ore price has stayed high through this period, as has the price for metallurgical coal and our exports have continued,” he says. “We had a very strong flash estimate, a real-time estimate from the ABS on our trade position for April.
“I suspect we’ll see both of those things, but as I said there’s great economic return to Australia in continuing to support Chinese development and growth through our trade relations.”
Trade Minister Simon Birmingham says Australia has made its “displeasure” known to Cheng and won’t back down on the inquiry push.
“Our policy positions are clear. They’re based on public health principles,” he says.
“Let’s be honest here. COVID-19 has seen hundreds of thousands of people die around the world. Millions of people lose their jobs. Billions of people face massive disruption to their lives.
“The least the world can expect is a transparent inquiry into the causes of COVID-19 so that we can understand how best to prevent a repeat episode any time in the future.”
Don’t expect Scott Morrison to be kissing any Chinese flags any time soon.