Australia pays high price for megaphone diplomacy

by | Dec 10, 2020 | Economy & Markets

The hysteria over the Victorian government’s MoU with China’s Belt and Road Initiative shows a disturbing lack of understanding of the project by media commentators, academics and some MPs, writes Colin Heseltine.

Victoria’s memorandum of understanding with China’s BRI is likely to be the first test of the recently enacted Foreign Relations Bill. The federal government’s response could have huge consequences for this nation’s economic future, especially given that the Australia-China relationship is at its lowest point since diplomatic relations began in 1972.

Unfortunately, the opposition to the MoU from media commentators, academics and some MPs has reached fever pitch. That they believe it undermines Australia’s national security and foreign policy shows how fundamentally they misunderstand the whole BRI project.

If the government repudiates the MoU it will not only further worsen relations with China, but it will mean turning our back on potentially massive economic opportunities.

And Australian businesses and the economy, and by extension, the Australian people, will pay a high price.

The MoU is symbolic

But first to the MoU. It is a general non-binding document that doesn’t commit Victoria to any specific project. It merely provides a framework for Victorian firms to participate in BRI projects. Projects that involved Chinese investment in Australia would require Foreign Investment Review Board consideration and federal government approval. The Australian government has in the past welcomed Australian companies’ involvement in BRI.

Even if the MoU were repudiated, this would not stop the Victorian government and companies from participating in BRI projects. In other words, the MoU has symbolic, but little practical, importance.

The BRI is an extension of China’s development strategy that originated in the 1990s to promote economic activity in China’s western regions. First announced by Xi Jinping in 2013, the BRI began as a kind of badging exercise linking infrastructure projects in western China and beyond. Significantly no central government agency was set up to manage BRI, and the participating agencies were mostly economic ones, with limited involvement from the foreign ministry and/or national security agencies.

A key part of the BRI was to move excess industrial capacity into China’s western regions and across its borders through central Asia and Asia Minor, and on to Europe (the “belt”). The maritime component, through the South China Sea and the Indian Ocean, was the “road” and it included Australia. (More information is available here on the Belt and Road Initiative).

China won’t have free rein

Australia’s main criticism has been that China is implementing a geostrategic plan to dominate the globe. While China will be extremely influential in the BRI, the country will not have things all its own way. There are numerous sovereign independent countries along the route, all with their own interests and agendas. Regardless, whether it is through the BRI, or a similar concept, the Eurasian land mass will, in time, become a massive economic powerhouse.

And for a geographic outlier such as Australia, rather than being a threat to our national security, BRI offers huge economic opportunities – a chance to integrate our economy into Eurasian development. Rather than turning our back on BRI at this early but important stage, we should be looking for positive ways to work with China.

The intense opposition in Australia to BRI, and to the memorandum of understanding in particular, is emblematic of the over-charged and emotional reaction in Australia to many recent policy decisions taken by China that one might normally expect a rising great power to take.

The anti-China hawks, including some MPs, view China as a strategic competitor and therefore support containment of it. For them, the economic pain is a necessary price to pay to preserve what they see as our values and sovereignty.

For many Australians, though, the question is how to maintain a constructive relationship with our largest trading partner while at the same time ensuring our national security. Unfortunately, there is no clear answer.

In seeking a way out of the current mess, it is necessary to understand how we got into it. The Australian Government’s narrative is that China changed into a more aggressive and assertive power after 2012 and that the downturn in relations is all China’s fault. China, of course, argues that Australia is to blame. China’s rise has led it to more assertive actions, both domestically and externally.

An insecure China is hyper-sensitive, but all too often, Australia has resorted to megaphone diplomacy. Meanwhile, Australia has no clear strategy setting out where the national interest lies in confronting China on so many issues, other than vague statements about defending our values and principles, none of which appears greatly threatened.

Using back channels won’t work 

It is hard to see a way forward for Australia, such is the extent of the damage. Well-meaning people have suggested we use business back channels with China or send a respected envoy there to seek a resolution.

But these proposals misunderstand how China works. China’s decision to punish Australia has been made at the highest level, so lower-level negotiation is simply not a starter. A Biden Administration might offer a small hope of a reset in US-China relations that could benefit Australia but no one should be holding their breath on this.

Short of a significant change in approach by either China or Australia, which is highly unlikely, we must expect that relations will remain in a poor state for a long period, with continuing economic losses for Australian businesses.

A good start to reversing the downward spiral in bilateral relations would be to avoid overturning the Victorian MoU but to issue a statement at some point making it clear that BRI projects in Australia would not be approved unless they strictly complied with foreign investment laws and guidelines.

And dial down the megaphone diplomacy.


Colin Heseltine

Colin Heseltine

Colin Heseltine was Australian Ambassador to the Republic of Korea (2001-05), head of Australia's representative office in Taiwan (1992-97) and deputy head of mission in the Australian embassy in Beijing (1982-85 and 1988-92). He was also a board member of Sino Gas and Energy (2011-18).


  1. Avatar

    I do doubt that the Liberal Party misunderstands the BRI MOU.

    Their every action is calculated and political. The BRI ticks all the boxes. A Labour state government which stared down Morrison. Morrison looked small and ineffectual. An issue relating to China which can be blown up to an existential threat to our national security. News Corp love it.

    And it distracts nicely from the many scandals of the Liberal Party.
    Aged care
    Grants misappropriation.
    Climate change inanity
    The accident prone Angus Taylor.
    IR reform which sets out to reduce wages.
    Cashless card.

  2. Avatar

    The interesting part of this megaphone diplomacy is the notion that we are standing up for some moral principles? His actions of ‘stop the boats’, on robodebt, grant money, and intransigence on climate change, makes this government sound hollow and frankly hypocritical. Articles like this, by Colin should be printed and posted everywhere. Thank you for a great article and insightful read.

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    Speaking of megaphones, I don’t recall Australia putting 14 conditions on totalitarian China. I don’t recall us engaging in wholesale immigration into China, infiltrating their central committees, or undermining their universities.

    Morrison is right, and there’s no question he has voter support. He is self-serving and not at all to be trusted, but the longer and harder he perseveres, the longer he’ll keep totally compromised Labor in the wilderness.

    • Avatar

      Well, as an observer, I just see that the contradictions of our position vis a vis China have been forced into the open. I don’t consider China a strategic threat and US preeminence and the Unipolar will end one way or another and we need Chinese assistance with dealing with climate change.
      For us to inflame the contempt of the Chinese for the arrogance of the West in the face of their success will have unforeseen negative consequences as well. If imitation is the sincerest form of flattery, what’s the problem.

  4. Avatar

    “over charged emotional reaction… viewed as a strategic competitor” These statements distort the origins of the anti China vitriol. There exists a profound hatred of socialism in the Anglo American establishment of Australia, and that establishment shall take every step to prevent Australia becoming socialist. The hatred of China is a hatred of socialist China. This is why every statement about China is a statement about the Communist Party of China, and how it is that the establishment does not consider the US or UK as strategic competitors despite the fact that said corporations own a vaste quantum of Australia and dictate our foreign and indeed our domestic policy. The national so called microeconomic reform agenda over the last 40 years was and is a disguised political agenda to destroy all elements of socialism in Australia, disguised by the cunning deception of objective rational economics, which is inculcated throughout Australia by the economists of the establishment. The citizens of Australia are now paying the price of that political campaign, diabolical aged care is a few dollars of that price, lining the bank accounts of the aged care corporate oligarchs who campaigned their elected plutarchs for the oligarchs’ economic agenda

    • Avatar

      While I would agree with you completely that we are part of the hate circle against socialism these days, mainly propped up by the appalling main stream news media we have in this country and an increasingly right wing and totally ideological Liberal Party that takes from the poor and gives to the rich, anti-Chinese sentiment was going on here long before socialism was even thought about in China or Mao even turned up on the scene. We were already part of the coalition of soldiers sent to quell the Boxer Rebellion between 1899 and 1901. The crime of the Chinese in that example of Western and Japanese repression? They wanted foreigners and proselytising Christian zealots to get out of China after they’s stolen China’s wealth and land due to forced opium trade for over 100 years.,_1900._From_the_left_Britain,_United_States,_Australia,_India,_Germany,_France,_Austria-Hungary,_Italy,_Japan._(49652330563).jpg

      Note that if you look at the picture above, you’ll find a group of mostly Western imperialist nations combining to repress China while including Japan among them. The same ones that largely complain about the Chinese today. At the time Theodore Roosevelt was pushing Japan to become the imperialist nation in Asia, which later had dire consequences in WWII for China and the rest of the world. Obviously during the Boxer Rebellion Japan was selected to be part of the group because it was seen as a model of learned imperialist savoir faire in the Western image in the region.

      During the Australian gold rush in the 1850s Chinese also paid a price with pure racism directed at them mainly because they worked harder and could live off less. Many were murdered on the gold fields.

      Notions such as the ‘yellow peril’ arose in Germany before the end of the 19th Century and in Australia we were also spreading such tales. Views of ‘Mongolian’ men (19th Century racialism categorisation) invading Australia with the intent of stealing Australian’s wives and women in general were widespread.

      China’s an easy target, they don’t speak English, we don’t speak Chinese or know very much at all about the culture at all. Perfect for xenophobia and racist prejudice and persuading minds for political reasons. This, and fear of socialism is being pushed by the US and Australia primarily to add to the mix of hate and re-containment of China as it always was.

  5. Avatar

    I completely agree. We should be embracing these opportunities. The banning of Huawei was a crazy idea anyway, but the Intelligence Agencies are running the country. The failure of Scott to consult Xi over Covid-19 and letting the State Dept leak to Aussies journos to smear China has been a catastrophic loss of face.
    China was hoping to a model a good relationship with the west via Australia and Canada and US pressure has overwhelmed sense.
    I would say the political reaction to this won’t serve the government in.the long run.
    The road to the future runs through China, like it or not.

  6. Avatar

    It is great to read Colin’s piece above. It is really a pity that DFAT is rarely visible in these important policy discussions and formulation.

    On BRI, a question Canberra really needs to answer to all of us in Australia is that why after we invested US$3.7 billion in AIIB to be its 6th largest donor out of some 100 nations and the bank was set up in 2016 to fund BRI projects, we are now opposing BRI. Australia’s economy is directly benefited from the process of trade globalization and BRI is all about physical connectivity by investing in infrastructure projects to improve the connectivity between countries and continents. How could these be bad to us in Australia. Furthermore, investment in infrastructure need mineral and energy resources which directly helps our exports. Why are we against potentially increasing demand for our exports?

    Colin would know in 1980s we were the envy of the western world in developing our bilateral relationship not just trade and investment but also other people to people exchanges at federal and state levels. In fact from 1997 we were the first Western country beginning annual human rights dialogue with China and no other western nations following that has had equal senior level dialogue since. However now unfortunately we somehow become leading the West in attacking China despite it is not only by far our largest export market, nearly 5 times more than the combined exports to 28 EU nations and more than the combined total of our exports to the entire OECD nations and account for over 90% of trade surplus lately according to ABS. WHY do we do that?

  7. Avatar

    It seems that virtually everything previous governments have built for the long-term benefit of Australians this Coalition administration has managed to break.
    Medicare, universal superannuation, the recession-proof economy, the world’s highest median wealth, the Aussie dollar at par with the US dollar, liveable pensions and benefits, interest rates in the optimum band, very low government debt, increasing productivity, industrial harmony, low unemployment, the broadband network, the respect of the world and now the relationship with China.
    All wrecked. Bar none.
    Excellent article, by the way, Colin. Thank you.

  8. Avatar

    “While China will be extremely influential in the BRI, the country will not have things all its own way. There are numerous sovereign independent countries along the route, all with their own interests and agendas.”

    Interesting piece but this section really caught my eye.

    To be frank, China has been bullying its neighbors for decades and this has only ramped up in the last few year. Taiwan is being ostracized via soft power, Nepal and Mongolia are being engulfed by Chinese infrastructure, the local population of these central Asian countries face severe backlash culturally from the CCP, lets not even mention the Uighur situation. The South China Sea is being dominated by China, the Philippines won the arbitration between the states by the UN yet China has completely ignored it. There is not much ‘free rein’ for these countries at all.

    China is expanding, and it can most definitely be classified as a rapid expansion at that. Whilst this may not be of immediate concern to little old Australia so far away, you would be ignorant to assume that the BRI is not another step in that expansion. And then to believe that they won’t have ‘free rein’ over most of these oppressed central Asian countries after looking at their recent track record, well that’s just naive.

  9. Avatar

    “a board member of Sino Gas and Energy (2011-18).”

    …need more be said

  10. Avatar

    Interesting article but there are a few statements which I would question.

    “While China will be extremely influential in the BRI, the country will not have things all its own way. There are numerous sovereign independent countries along the route, all with their own interests and agendas”. This statement sounds plausible in theory, but it turns out that in practice the interests of sovereign independent countries are not the priority, rather it is the interest of China. How is this so one may ask? It’s because many local politicians are influenced by China to act in China’s interest. Don’t take my word for it. Look up what’s happened in Sri Lanka and Zambia, (two countries I have personal interest in). Also consider what happened in the USA because of their unbridled appetitive to outsource manufacturing to China. Only China, the Outsourcing Consultants and the US Corporations benefited. The US worker was decimated.

    Then there is the statement ” An insecure China is hyper-sensitive, but all too often, Australia has resorted to megaphone diplomacy”. Why is it ok for China to be insecure and hypersensitive? Is it not the 4000 year old civilisation with the biggest population and the 2nd biggest economy etc. etc

  11. Avatar

    I would like to read the MOU >can someone telll me where to find it

  12. Avatar

    At the risk of self-promotion, may I suggest that my 2017 book, Dragon and Kangaroo, (Hachette) gives us a useful foundation from which to build an understanding of the current imbroglio, and the superficiality of so much political commentary. Colin’s article could hardly be more sensible and diplomatic, but we do need to see the relationship in a broader context.

    • Avatar

      Robert, couldn’t agree more on the need to see the relationship in a broader context. The ignorance of China in this country is worrying.

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