1.1 China's Historic Transformation
You need only to look at a few basic facts to appreciate that China's economic progress is very impressive. China's economy has been growing at around 10 percent a year for the past 15 years. China's emerging prowess as a trading nation is equally impressive. Twenty years ago, China ranked below 30 among the world's exporters. Now it is up in the top ten and climbing fast. From July, with Hong Kong, China will be the sixth largest trading nation in the world. Soon after the year 2000, it is expected that China's trade with Japan will overtake United States-Japan trade - which has been a pillar of Asia Pacific trade and the international economy.
One of the most significant conclusions reached by the EAAU's new study is that the policy reforms underway in China are likely to sustain rapid growth well into the next century. The EAAU report confirms forecasts that China's output, measured in internationally comparable terms, will exceed that of the United States by around 2020.
There is a clear recognition in China that economic reform has delivered strong growth and tangible benefits. The Chinese leadership recognises the imperative to maintain growth in order to avoid widespread unemployment and possible social disruption. As the EAAU study notes, since Deng Xiaoping's death, China's leaders have reaffirmed their strong commitment to the continuation of market-oriented reforms.
I believe that this is a very welcome sign of continuity for China's Australian business partners and for the relationship generally.
1.2. Australia and China : A Strategic Partnership
It is clear that both the Australian and Chinese economies are going through periods of rapid change resulting from the forces of globalisation.
China's sustained economic growth - and the increasing openness of the Chinese economy - offer unprecedented opportunities for Australia.
Australia's trade with China has grown twice as fast in the past decade as our trade with any other major trading partner. Australia is now China's ninth largest trading partner. By the year 2000, if recent trends continue, China could be our third largest trading partner after Japan and the United States.
I am convinced that the recent expansion in our two-way investment links is an unmistakable sign of a maturing economic relationship. China is now Australia's 13th largest source of foreign investment, and Australia is in the same position as a source of foreign direct investment for China. Australian firms have established a significant and growing presence, in Beijing, Shanghai and Guangzhou, and in other parts of China.
The result of these powerful economic trends is that the relationship matters for both Australia and China, and will matter more in the future. The outlook for better economic links is therefore very promising.
The EAAU study shows that Australia and China have many economic complementarities which will underpin a sustained expansion in the volume and scope of bilateral trade and investment. The study concludes that Australian government and business are well placed to make a real contribution to overcoming the constraints that are holding back China's economic development - for example, the losses and weak performance of state-owned enterprises, serious infrastructure and skilled labour shortages, distribution system bottlenecks, incomplete legal and administrative systems, relatively under-developed financial markets, and China's need for a community-based social security system.
China knows that in a wide range of areas Australian investment can bring technology and services to China as advanced and effective as that of any nation in the world. New sectors for trade and investment - taking advantage of Australia's particular strengths in banking, insurance, accounting and legal services, for example - are already adding a new dimension to Australia's traditional role as a reliable supplier of commodities to China.
In fact, if you choose almost any commercial activity known in Australia, you'll find an Australian pursuing it in China. Australian lawyers, architects, accountants, education consultants and teachers are all active in China.
Prime Minister Howard - during his recent successful visit to China accompanied by the most senior business group ever to accompany an Australian Prime Minister abroad - placed particular emphasis on laying down the outline for a new economic partnership. This is a partnership that will build on the economic complementarities and the enormous potential generated by China's continuing reform and high economic growth.
1.3 Trade Liberalisation
As a large fast-growing economy, China is dependent on and will continue to generate huge and increasing needs for resources, capital and technology. Those needs can only be satisfied by a world trading system operating in a liberal, rules-based environment.
That is why the Government attaches so much importance to trade liberalisation. Steady progress towards meeting APEC's trade and investment liberalisation goals is our best hope of ensuring that growth in the Asia Pacific - and importantly in China - reaches its full potential.
I welcome that China is already making some meaningful reductions in its overall tariff rates in the APEC context. These reductions will improve market access for China's trading partners and increase her domestic competitiveness, with commensurate benefits for China's economic growth and living standards.
Australia - along with China's other trading partners - has a clear interest in maintaining open and consistent trade policy and rules within China. China will benefit from being a member of the World Trade Organisation, and Australia wants to see China join - on commercially acceptable terms.
Part Two: Political and Security Cooperation
2.1 A Shared Interest in Regional and Global Stability
I am convinced that the rapid development of trading and investment links between China and Australia - and other countries in the Asia Pacific region - has helped create a stronger sense of community and shared interests among regional countries that extends well beyond the economic sphere.
For China, as for Australia, a stable and peaceful regional and international environment provides the necessary climate for continued growth in trade and economic activity generally.
I want to underline the fact that, at the political level as well as the economic level, Australia and China cooperate in a growing number of areas, particularly in the Asia Pacific region.
Australia and China not only cooperate to advance APEC's wide-ranging agenda, but we also work together in the ASEAN Regional Forum (ARF), the multilateral process for security dialogue and cooperation which brings together all the countries of the Asia Pacific. Last month, for example, Beijing successfully co-hosted the first official multilateral security meeting ever held in China - the ARF inter-sessional group on confidence-building measures.
During my visit to China in August last year, I proposed - and China agreed - to expand our annual bilateral disarmament discussions to include discussion of regional security issues. And, during the Prime Minister's recent visit, agreement was reached on initiating a regular dialogue between our defence agencies.
Set against the background of China's integration into the world trading system and its pivotal place in regional and global affairs, the argument about whether the world should seek to contain or engage China is irrelevant.
The EAAU study provides overwhelming evidence that China is embracing the market in an enthusiastic fashion. And, beyond the unparalleled dynamism of the market place, China is making a number of constructive contributions in regional and international forums. Ten years ago, for instance, nobody would have foreseen China voting for a Comprehensive Test Ban Treaty, as it did in September last year.
Clearly, then, China is already deeply engaged with the rest of the world, and its engagement is accelerating.
I want to emphasise that Australia welcomes that historic process, and is committed to working with China as it assumes a greater role in the region and the world.
2.2 An Effective Framework for Managing Differences
Of course, given that Australia and China have different histories and political systems, it is not surprising that we should have different perspectives on some issues from time to time.
That fact makes it all the more important to have an effective framework in place where those differences can be managed and dealt with in a way that doesn't hinder the achievement of the many goals we have in common.
In an important sense, the strength of the entire bilateral relationship provides a valuable framework for managing differences that may arise, but there is also scope for considering more specific mechanisms to handle the sort of important issues I am talking about.
That is why I have warmly welcomed China's agreement in principle to Australia's proposal, put by the Prime Minister to Premier Li Peng in March, that we establish a formal and regular bilateral dialogue on human rights. I discussed this matter with the Chinese Minister for Justice on 10 April and he supported an early start to such a dialogue.
An effective, focused human rights dialogue will mark a substantial and very welcome new development in our relationship. We hope that it will provide a framework for dealing with differences and for pursuing concrete improvements in the observance of internationally recognised human rights standards in China. The shape and content of the dialogue will be determined in consultations between Australian and Chinese officials.
The human rights dialogue with China will provide us with a mechanism through which we can facilitate dialogue on a range of issues, including those related to the Hong Kong handover. As I have underlined to Chinese, Hong Kong and British leaders, Australia's substantial interests in Hong Kong will best be served by the maintenance of Hong Kong's stability and prosperity. Central to that is the continuation of those elements of Hong Kong's way of life that have underpinned its success; the rule of law, the free flow of information, labour and capital; and the rights and freedoms the people of Hong Kong currently enjoy.
I believe that government-to-government dialogue will enable us to advance our concerns on the broad general issues but also on specific issues that concern Australians, and in areas such as institution-building where Australia has much to offer.
I want to emphasise that the Government's practical aim is to make a difference on human rights issues. To that end, we are committed to working constructively with China to achieve practical improvements in the human rights situation.
Part Three : Expanded Personal Links and People-to-People Contacts
Finally, I am convinced that the future expansion of the economic and political cooperation I have been speaking about will depend on more extensive people-to-people contacts and personal links, not only at the government level but at all levels of our respective societies.
The Government has done a great deal to establish productive personal links with China at the ministerial and officials level.
Mr Fischer, Mr Ruddock and I, among others, all visited China within the first six months of the Government coming to office.
The meeting between the Prime Minister and President Jiang Zemin late last year in Manila was another good example of the Government's commitment to improve contacts at the highest level. And, as a result of the Prime Minister's most recent visit, Mr Howard and Chinese Premier Li Peng have agreed there will be a regular contact at head of Government level and that the Joint Ministerial Economic Commission will meet at least once every two years and - at senior officials level - at least every year.
The visit of the Chinese Justice Minister earlier this month - and the visit by senior Politburo member, Mr Ding Guangen, which is currently underway - are the first of many productive future contacts at ministerial and officials level.
Of course, the recent expansion of people-to-people contacts extends well beyond our official exchanges. Over 50,000 Chinese visitors came to Australia last year. An estimated 140,000 Australians visited China in 1996, up from a figure of 129,000 in 1995. There are nearly 3,000 students from China taking full-time courses in Australia. Opportunities for travel, trade and educational exchanges have been assisted greatly by the new and expanded air service arrangements which were signed in March 1996.
More than that, Australia has a very large community of people of Chinese descent of which it is very proud. The Chinese community has made a tremendous contribution to Australia's economic, political and cultural life, and such links have created a deep reservoir of goodwill in the relationship.
In conclusion, I believe that the EAAU's new report, and all that I have said today, underlines clearly that China is going to matter more and more to Australia, our region, and to the world.
I want to emphasise that Australia welcomes the increasing prosperity and dynamism of China and other parts of East Asia. It has great significance for regional stability and deeper economic cooperation.
I am convinced that sustained economic growth not only tends to bring regional countries together, but it brings genuine benefits to the lives of people - both within our near region and in Australia itself.
I can assure you that the Government will maintain its strong and practical focus on effective ways of enhancing our relations with China.
Clearly, though, if Australia is to gain the maximum benefit from its participation in the enormous and dynamic Chinese market, then the business community will need the best available information and analysis on what is happening in China.
In that context, the EAAU's new study makes a valuable contribution to Australia's understanding of economic reforms and developments in China, and the likely path of policy changes in the future.
The Unit's report builds on a number of important studies on China produced by the Unit over the past few years, including Overseas Chinese Business Networks in Asia (already in its third printing), Iron and Steel in China and Australia, Southern China in Transition, Grain in China, and a working paper on China's transport infrastructure.
I would like to congratulate the report's main author, Dr Frances Perkins, on the study's comprehensive analysis of China's economic prospects.
I am certain that it will prove of very great value to large and small Australian businesses alike in formulating their China strategies.
I commend the study to you.
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