Australia needs to dispel 'China myths', says academic | Connect Asia

Australia needs to dispel 'China myths', says academic

Australia needs to dispel 'China myths', says academic

Updated 28 May 2012, 15:12 AEST

Australia's recent prosperity has been built on the back of China's growth.

The hunger for natural resources has led to a mining boom in Australia, with profound impacts for both domestics and international politics.

It has also put the country in a tricky position caught between our traditional security alliance with the United States and our growing economic dependence on China.

Managing this tension is shaping up as one of the pre-eminent challenges for Australia in the 21st century.

Presenter: Bill Bainbridge

Speaker: Geoffrey Garrett, Dean of the University of Sydney Business School

GARRETT: I think probably there are three large misconceptions about Australia's world out there at the moment. First Australians believe that China is about to leap past the US to become the world's dominant power. I actually think that the US and China will essentially be standing together at the top of the global pile for the next 40 or 50 years. The second misconception is that the US-China is a new Cold War. I don't think that's right because really the defining characteristic of US-China relations today is their economic co-dependence. And then third, some people in Australia today are worried that the country must choose, it must choose between an American past and a Chinese future. I don't think that's right either, in fact Australia I believe is well positioned to benefit economically as part of an economic triangle with the two superpowers.

BAINBRIDGE: So you're saying that we're not in a Cold War, but Australia's Foreign Minister Bob Carr was just in China where it would seem that he spent a lot of his time trying to explain why Australia's allowing US troops to rotate through Australian bases. And he said that the Chinese officials told him the time for Cold War alliances have long since passed. I mean the Chinese would appear to think that Australia should be choosing between China and the US?

GARRETT: Yes I think what we've got to do here is distinguish between what government officials in all countries say and what they do. So certainly Barak Obama gave a very muscular foreign policy speech when he announced the troops in Darwin last year. Certainly the Chinese reacted in a pretty truculent manner, but I think that often what we've got to understand both for China and for the US is that when leaders speak they're often speaking mostly to domestic audiences, and what they're saying to their counterparts behind closed doors is, listen, you know I'm going to say some tough things, but just watch my behaviour, and my behaviour is to manage the relationship. So back to Bob Carr's visit to China, the Chen Guangcheng saga was ongoing at the time and my view on that is that here was a real opportunity. If the US and China really were fundamentally at odds, this was an opportunity for the US to draw a line in the sand and say, human rights are the most important element of foreign policy. Equally it was an opportunity for China to say no, and the second that Mr Chen left the US embassy to put him back under house arrest. Neither of those things happened. What actually happened is that both the US and China bent over backwards to come an agreement on Mr Chen that they could both live with, an agreement that in the end has seen him go to the US to study law. So yes the words are inflammatory, but I'd look a little harder at the deeds, and the deeds tell me that the US and China both want to live with and manage their differences.

BAINBRIDGE: There are going to be points though going forward in these two relationships where Australia is going to be put in a position of choosing between one of the other, don't you think?

GARRETT: I'm not sure, I don't know what examples you were of thinking of. The one that has always been there is Taiwan. What would happen if the Chinese government got into a military altercation with Taiwan, would the US be drawn in and then what would Australia do? But there again I would say that the Taiwan issue, look peace can't be guaranteed, but with respect to Taiwan the probability of a military clash between the island and the mainland just continues to go down. And the fundamental reason it does down is that the economic integration between Taiwan and the mainland is so strong and so important to both sides. So yes there are going to be lots and lots of flashpoints; Taiwan is one, Tibet and human rights issues would be a second, trade and currency would be a third, but if you go back and look at the long history, at least 20 years of US-China relations what you see is flashpoint after flashpoint but they never spiral out of control. And the reason is that both sides understand the game, and the game is of course we stand up for our principles in words, but in deeds we understand that our relationship is so important we've got to live with each other.

BAINBRIDGE: So you think that China only has around another decade of this very large levels of economic growth in it and then it will start to slow down a bit, why is that?

GARRETT: Yes everyone's concerned about Chinese growth in the very short term, this year and next year, will it be lower than seven-point-five per cent? I think the thing that we're not thinking about is that in the medium term future, let's say a decade from now, two things will have happened in China. First, China will have become in economic terms an old country, that is its working age population won't be increasing. Second, China will have gone from being a low-wage producing economy to a middle class consuming economy. The consequence of both of those things is that the Chinese growth rate in the 2020s is bound I think to be four or five per cent rather than the ten per cent that we've become used to. Now that's not a sign that China has failed, in fact it's a sign that China has done so extraordinarily well. But a four or five per cent Chinese growth rate probably won't be much faster than the US, which historically has grown at three, to three-and-a-half per cent, and there's no reason to believe that the US can't continue to grow at that rate into the indefinite future.

BAINBRIDGE: And so just finally Professor Garrett, how does Australia from its position, how does it benefit from having both these relationships? What is the way to manage it?

GARRETT: Well if you concentrate on the economics as I think we should do more of, rather than focussing so much on national security, if you concentrate on the economics what we see today, what most Australians see is a massive trade relationship with China. What they don't see so much, but is an equal reality, is that a lot of that trade with China is being made possible by US investment in Australia. Think about the Chevron 80-billion dollars in Western Australia, or Origin Energy's partnership with Conoco Phillips in Queensland, 20 billion dollars. Those big liquefied natural gas projects aren't about the Australian market, they're about exports, and the biggest export market is China. So US firms are making massive and needed investments in Australia so that Australia can maximise its raw material potential where most of the market is China. To my mind that's a win-win-win economic triangle, it's not this invidious geo-political triangle that so many people are talking about today.

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