Victorian Premier Daniel Andrews says his decision to sign on to China’s Belt and Road Initiative (BRI) will help Victoria attract foreign direct investment (FDI) and promote business links with China. Is this actually so?
Launching the BRI agreement in October 2018, Andrews highlighted the trade and investment opportunities the BRI promised to deliver to the state. In the face of recent public criticism of the state signing on, when the Commonwealth did not, he defended his decision by citing trade data.
Let’s look at the data
Over the last five years, exports to China have increased by 62%, tourists visiting Victoria increased by 70%, and the number of international students from China had grown by 50%.
The figures certainly sound good, and the premier has put a lot into the relationship. In addition to signing on to the BRI, he regularly signs up to attend China’s national day celebrations, new year functions, and other major events hosted by China’s Consul General in Victoria. He has made six trips to China over the past five years — two of them in 2019.
Of course, the premier visits other countries as well. According to his departmental website the premier has been to the US twice over these five years and once to Israel, Greece, India, Vietnam and Japan. All up though he has visited China about as often as all other countries combined.
So how well has the premier’s loyal attendance at consular events and visits to China assisted in promoting Victorian exports to China and attracting Chinese FDI into Victoria? As Andrews and the local Chinese consulate often point out, China is Victoria’s greatest two-way trading partner. They neglect to note that two-way merchandise trade favours China almost four to one and growing. According to DFAT trade data, in 2018/19 Victoria’s merchandise exports to China were valued at $6.5 billion and the imports from China were $23 billion.
The balance is deteriorating. Victoria’s merchandise exports to China showed no growth at all between 2017/18 and 2018/19, but China’s exports to Victoria grew 13.9%.
The premier made three formal visitsov er that period. It is difficult to avoid concluding that the more often Andrews visits China, the more China’s producers benefit and the less Victorian ones do.
As it happens, Victoria’s merchandise exports to the US grew 33% year-on-year and the state’s exports to Japan rose 12% over the same period, with no fanfare and little acknowledgement from the Andrews government. And in the other direction, imports from Japan fell at a time when China’s exports to Victoria grew almost 14%.
Services trade has been morerobust, but no more than Victoria’s nearest peer state, NSW. The number of Chinese tourists visiting Victoria has increased over the past five years but NSW has consistently done better in raw numbers. Proportionally speaking, Victoria’s Chinese tourist numbers have been tracking at around 70% of NSW figures since before Dan Andrews won office and have shown no significant variation since.
The growth in the number of students from China who have chosen to study in Australia is nothing short of phenomenal. The number has grown 20-fold over the past 20 years, and Victoria continues to attract more than its share. Again, there is no evidence that the premier’s strategic engagement with China has added anything of value to the state’s student recruitment efforts beyond that which the appeal and placement of Melbourne’s highly regarded universities and colleges can offer.
And for the all the hullabaloo about the BRI and investment, Japan remains Victoria’s largest source of FDI in Asia.
How does the BRI fit into all this?
The BRI does not appear to be helping with jobs, trade, or investment.
In fact, trade and investment have never been the primary purpose of China’s BRI. It is, instead, Chinese leader Xi Jinping’s signature geopolitical initiative to place China in a dominant strategic position in Eurasia and the Indo-Pacific.
How do we know? Before Xi became head of state in 2013, China had long been involved in country-to-country investment and infrastructure deals with neighbouring states and other countries, often on generous terms, to secure good will and diplomatic advantage. At that time China’s foreign aid and investment strategies were not unlike those of Japan and the US — self-interested, to be sure, but not particularly strategic.
In 2013, Xi incorporated these bilateral deals into a trans-continental strategy which he called the BRI. From then on, countries wishing to enter into major infrastructure deals with China needed to sign on and share Xi Jinping’s vision for his “new era” in their part of the world.
That’s what a geopolitical strategy looks like. Victoria’s agreement makes explicit reference in its opening paragraphs to this strategic “new era”.
Criticisms of the BRI for offering so-called “payday loans”, debt-for equity swaps, and access to new deep water ports for China’s naval and air forces around the Indo-Pacific region may be warranted, but they are misleading in suggesting the BRI has nothing to offer those who sign up. Xi wants his big play to work and he is likely to make a number of generous gestures along the way to win converts to his vision.
But these generous gestures are unlikely to come Victoria’s way.
In our region, far and away China’s biggest geopolitical play is to break the US alliance network by enticing Japan, South Korea, Australia, the Philippines and others to embrace the opportunities China offers and sever their ties with the US.
This play worked with spectacular success in the Philippines where President Duterte declared his country’s separation from the US during a visit to China in 2016. He unilaterally abrogated the Visiting Forces Agreement with the US in February this year.
Until very recently, Beijing was hoping to pry Australia away from of its alliance commitments as well. Some in Australia don’t appear to mind China’s approach. They are aggrieved over excessive US military force around the world and deeply troubled by the incumbent US president. But breaking alliance agreements with the US is not the position of Australia’s major political parties and is not yet, at any rate, supported by a majority of Australian voters.
Beijing was initially misled into thinking its prospects in Australia were good when it found political parties, business leaders, retired ministers and other thought leaders willing to speak on its behalf in return for rewards and opportunities. After its clandestine United Front operations were exposed, and Canberra moved on to take up outspoken positions on the South China Sea, on Huawei, on mass incarcerations in Xinjiang, and so on, China’s foreign policy circles and local consulates went into an Australia panic.
China’s Australia watchers began labelling Australian critics of Xi Jinping’s strategies as racists and bigots, and swore to wipe Australia from beneath their boots. In September 2019 Australia was branded the leading instigator of a global anti-China campaign and warned informally that it would suffer in consequence.
This is the larger geopolitical picture of Victoria’s engagement with Xi Jinping’s BRI. Not much good is likely to come of it and practically speaking there is not a lot to be done about it.
Where to next?
By signing on to the BRI, Andrews has arguably placed his state in peril.
Although the BRI deal has brought little or no benefit to Victoria, the fact remains that once a government signs on to an agreement with Beijing, the consequences of reversing the agreement can be far worse than not signing on in the first place. In this sense, the premier has hung an albatross around the neck of his own and any future government of Victoria.
Rather than withdraw from the agreement, Andrews could consider spreading the good will by investing more effort in trade and investment agreements with the other countries that he has visited — with India, Japan, and Vietnam in particular.
In weighing up the costs and benefits of the immense effort Victoria has expended in building trade and investment links with China, for no appreciable value added, we have to consider the opportunity costs of not investing comparable effort in relations with Japan and India and other countries in the region.
This would have positioned Victoria far better for the tough times ahead. Fortunately, there is still time to act.
This might be a bit convincing John if backed up with details you presumably chose to leave out.
What is the composition of the imports based trade deficit between China and Vic ?
What does this have to do with BRI ?
BRI reads to me like a fancy brand name for an infrastructure sales drive. Is there some part I’ve missed ?
What’s different between western countries flogging big ticket sales and finance deals and this Chinese one ?
In what way is BRI more of a debt trap than those deals directly from private investors or those sponsored and promoted by western governments ?
What is “immense” about Victoria’s efforts around BRI ?
How does the effort with China reduce options with other countries ?
I’m willing to be persuaded by quality argument that BRI is not a good thing. I’d hoped that someone of your caliber would present such a case here today but this effort is remarkably and disappointingly unconvincing.
According to the author, China is the only country to use soft power, I think I can safely ignore the rest.
I wouldn’t call threatening to wipe out our Barley industry ‘soft power’
It won’t be wiped out Oldie but the prices will be a bit lower and production will be reduced. This tariff is hard to justify and not a friendly act. It is the kind of thing big powers do to small powers to discipline them. As a small nation we would be well served by wiser diplomatic work making use of the concerns of our bigger neighbours that also do not want one hegemony replaced by another. That way we could get more of what we want without provoking the giant.
I would have thought that the recent 80% tariff by China on our Barley industry (which could wipe it out) for political reasons is enough to answer your questions.
Not at all. The barley issue is of long standing. I rather doubt the Australian barley business will go under. The world is full of beer drinkers and grain fed animals.
Similarly the recent beef issue which only applies to four abattoirs one of which has majority Chinese ownership. All trade has a political element. That the world is much more careful about the dangers of meat diseases can only be a good thing.
Please feel free to expand in your views. As I said I’m happy to be convinced a non commital BRI MOU is a bad thing. All I keep reading is what looks like hard or soft anti Chinese propaganda.
And there’s something else Fitzgerald left out. Or he knows something no one else does. MOU to “deal”… that’s quite a promotion.
He’s spent a good part of the article explaining China’s agenda, but I’m unable to glean anything about his.
The barley tariff is unhelpful Oldie, and we are seeing how quickly our dear allies and friends in the US are taking advantage of that, but that tariff has not much to do with Victoria. Most of the barley we were selling to China comes from WA and some from SA. I think the BRI deal may not bring much benefit to Victoria but the article doesn’t tell me anything about any harm it might cause as it lists the continuing benefits the state gets from other trade partners.
The barley issue is entirely appropriate as is the beef issue. Sure, there’s some politics in all trade, as there is in all aspects of our relationships. The point is, as Prof Fitzgerald pointed out, that under Xi Jinping it has become highly centralized, co-ordinated and weaponized under the BRI program. The current term for it is ‘sharp power’. I’m not as concerned about it as Prof Fitzgerald because I think the wheels are falling off it already and recent events such as the 80% barley tariff have convinced countries like Britain to eliminate Huawei in a couple of years time.
The point is to always have an alternative and if you tie yourself into one particularly strong buyer you’re going to get badly stung somewhere along the line.
Yes. Australian producers should try to have multiple target markets for their products so that one big customer can’t use its position as a lever. If that lesson is taken it will be a good outcome.
Solid points, Mark.
On your point about the BRI and ‘debt traps’, Fitzgerald is another who doesn’t seem to have heard of the IMF.
It would take China decades to tally up the number of countries that have been ruined by IMF ‘debt traps’.
And, recalling the great US economist, Dr Michael Hudson, in an interview I saw recently;
‘You do know the IMF has its HQ in a basement at the Pentagon?’
Fitzgerald is solidly aligned with the Australian Strategic Policy Institute on matters Chinese.
The ASPI is run by Peter Jennings, a favourite (public) servant of ‘Winston’ Howard.
The ASPI receives some funding from the local Defence Dept, but the majority comes from Lockheed Martin, Northrop Grumman, Raytheon, BAE Systems and Thales i.e. Yank, Brit and French weapons manufacturers.
They also receive funding from 2 foreign governments: Japan and Taiwan.
Fitzgerald also has an entry in his CV involving employment with the Ford Foundation, in Beijing.
From his Swinburne Bio;
“Before joining Swinburne in 2013 John served five years as Representative of The Ford Foundation in Beijing where he directed the Foundation’s China operations.”
They’ve had lots of ‘operations’, the Ford Foundation.
Ever heard of the “Berkley Mafia”?
en.wikipediadotorg/wiki/Berkeley_Mafia
“….The Ford Foundation then began a process where students from the FEUI were chosen to undertake overseas studies at the University of California, Berkeley. After the Ford Foundation conducted some preliminary preparations, the overseas studies program began in 1957. By the early 1960s, all of the students who had been sent abroad had returned from Berkeley and had begun taking up positions as lecturers at the Army Staff and Command College (SESKOAD).[3]
In 1966, General Suharto took over executive control in Indonesia from president Sukarno……”
To connect Sukarno to Gough, Pilger, 2014;
theguardiandotcom/commentisfree/2014/oct/23/gough-whitlam-1975-coup-ended-australian-independence
“Kerr was not only the Queen’s man, he had longstanding ties to Anglo-American intelligence. He was an enthusiastic member of the Australian Association for Cultural Freedom, described by Jonathan Kwitny of the Wall Street Journal in his book, The Crimes of Patriots, as “an elite, invitation-only group … exposed in Congress as being founded, funded and generally run by the CIA”. The CIA “paid for Kerr’s travel, built his prestige … Kerr continued to go to the CIA for money”.
When Whitlam was re-elected for a second term, in 1974, the White House sent Marshall Green to Canberra as ambassador. Green was an imperious, sinister figure who worked in the shadows of America’s “deep state”. Known as “the coupmaster”, he had played a central role in the 1965 coup against President Sukarno in Indonesia – which cost up to a million lives……”
The Ford Foundation did the spade work in Indonesia, starting in the 50’s.
I’ll leave you with that.
Who is John Fitzgerald?
And why are there no details about the author as on the other articles?
Professor Fitzgerald is listed among “our people” by the Australian Strategic Policy Institute, an organisation partially funded by the Department of Defence and partly by other defence-related organisations. If you click on his name you can see that all of his articles for Crikey on China have been somewhat negative. That doesn’t mean they’re wrong but it does colour your reading of this article. He is very knowledgeable on China but this knowledge does not shine through in the present article.
While I was writing the above your question was much more comprehensively answered by David Thompson. Thanks David.
Rais, if you have read David’s previous comments and accept them as serious contributions, then I’m afraid I won’t be able to convince you that they are a childish mishmash of Leninist-Trotskyist drivel which takes snippets from any source, slaps them together without any logical connection, and thinks that is an argument. If you and others want to know Prof Fitzgerald’s background (as distinct from this Trotskyist crap, I suggest you look up his academic history on the Swinburne Uni site below:
https://www.swinburne.edu.au/business-law/our-people/profile/index.php?id=johnfitzgerald
I was commenting on David’s present contribution Oldie. I don’t automatically reject left wing or right wing inclined comments, rather try to go by the content of the comment. Which part of David’s contribution was inaccurate?
Rais, the comments that Prof Fitzgerald has worked for ASPI and the Ford Foundation appears to be accurate. My response is: “So what?” He goes from there to some unbelievably contorted conspiracy theory implying that since Fitzgerald worked for the Ford Foundation he is somehow tied with Suharto or that since he has worked for ASPI he is somehow tied to the “Deep State”.
This is not an argument. It is a series of tweets and innuendos which are as coherent and informative as Trump’s tweets. If you like reading disconnected incoherent uninformative tweets, that’s fine. It’s your choice. However, as I said earlier, if you want to read a coherent argument or get a handle on Fitzgerald’s point of view, look up his Bio and list of articles on the Swinburne website. Here is a recent example of his advice about how to deal with the CCP and various Chinese communities in Australia and yes it’s published by that nefarious institute ASPI:
https://www.aspi.org.au/report/mind-your-tongue
Thanks for the links Oldie. I’ll read it with an open mind. I wish I had access to unbiased facts about this stuff* because it might affect my vote next time. *If such a thing exists.
Rais, I agree that it’s nearly impossible to find ‘unbiased facts’. The German thinker Nietzsche once said “There are no facts, only interpretations”. I find most daily newspapers are not very helpful even the most prestigious ones like the NYT or WAPO. You just have to look hard and find out the most reliable commentators in them, like Jamelle Bouie (NYT) or Paul Waldman and Greg Sargent (WAPO). Here, I much prefer our part-weeklies (Crikey) or weeklies like the Saturday paper or monthlies like the Monthly but again it depends on the contributors.
On the other hand, I am wary of those who first dismiss mainstream media and then proceed to tell you the ‘real truth’ which they alone have found in some obscure websites, most of them being clever propaganda outlets for anti-democratic governments. They may contain some truths but as Shakespeare once wrote, they:
“Tell us truths, win us with honest trifles,
So as to betray us in deepest consequence”
My pleasure, Rais.
I really am very tired of the Australian media handing the ASPI the bullhorn to bellow about China.
And, the great majority of the media who do so never, ever mention they are funded by those who make their wedge by invoking fears about the intentions of those who ‘don’t share our Western liberal values’.
Those ‘liberal values’ don’t seem to be faring all that well, just ATM, over in the land of the ‘leader of the free world’.
And, just to nip any thoughts in the bud, like ‘Ah, but, Trump…!, I invite people to look up the name of the Minnesota State Prosecutor who continually gave a walk to the rozzer who did for Floyd with his knee, likewise many of his Minneapolis cohort, in lots of ‘investigations’ into violence they perpetrated against citizens of colour, and diminished means.
If folks don’t recognise the name of that prosecutor, does the name “Joe Biden” ring a bell? Cos that ex-prosecutor is favoured to be Biden’s running mate, come November’s Presidential election.
Is Victoria’s China deal any more of a “dud” than the trade agreement negotiated by DFAT and Andrew Robb, who left politics to join a Chinese owned company shortly after signing the deal?
As a former lawyer, I do not like to form a view on a document I have not seen. Could you please publish the document or post a web page which contains it?
More on the Crikey theme of let’s bash Dan Andrews. Doing a job for the lying liberals.