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Introduction

Thank you, Frank Tudor, Chairman of the Australia–China Business Council.

It is a pleasure to be here again at the Australia–China Business Council Networking Day.

Last year China became Australia’s largest two-way trading partner.

This has not happened by accident. It is testimony to our economic complementarities and to the links built over the years by the Australian and Chinese business communities.  In that regard, I acknowledge the contribution of the Australia-China Business Council.

My colleague, Simon Crean, has already set out the measures the Government is taking to support stronger bilateral commercial links, such as our free trade agreement negotiations and the ‘second-track’ approach of engaging China’s fast-growing second-tier provinces.

I will focus my remarks today on the broader policy context of our bilateral relationship, including how Australia pursues our diverse interests with China.

Government’s approach to Australia-China relations

The Government is committed to building a mature, balanced and sustainable relationship with China.

Our economic interests for doing so are obvious.

Less well-understood, however, is that Australia and China have enduring, shared interests in cooperating on regional and global challenges.

We have extensive and growing interests when it comes to maintaining peace and stability in the Asia Pacific region, supporting global economic growth in the wake of the Global Financial Crisis, advancing nuclear non-proliferation and disarmament objectives, and combating climate change.

While our interests are often intertwined and our expectations of our expanding relationship are high, it is also natural that differences emerge from time to time.

2009 was a year when commentary on the Australia-China relationship tended to focus on tensions caused by individual issues, and from those tensions to extrapolate negative judgments about the state of the broader relationship.

Some commentators were projecting a dramatic and prolonged downturn in relations, but at the same time China became our largest two-way trading partner and Australia signed one of its largest trade deals ever to export LNG from the Gorgon project to China.

I mention this to highlight three points.

Firstly, Australia and China share strong and growing economic complementarities. There is mutual benefit, as well as mutual dependence.

Second, that there will be tensions and difficulties from time to time, owing to our different political systems, histories and societies.   These will arise whether Australia or China or both like it or not. The challenge, as always, is in managing the relationship where our interests, values or concerns pull in contrary directions.

Third, both sides appreciate that, such are our shared economic and other interests, it is vital to chart a steady course in the long term with the broader relationship.

The fact that bilateral relations are now seen to be back on track indicates that both sides have been and are committed to dealing with difficult issues in a straightforward and constructive way, with a view to the long-term.
In October 2009, Australia hosted two senior members of the Chinese Government.

These visits were timely and important.

They signalled willingness by both sides to take a long-term view following a difficult period in the bilateral relationship.

Chinese People’s Liberation Army General Chen Bingde visited Australia for the Defence Strategic Dialogue.

This was only the second time these talks had been held at the level of Secretary of the Department of Defence and Chief of the Defence Force.

It reflected a mutual commitment to strengthen our dialogue on the strategic challenges that face our region.

Later in October, the Deputy Prime Minister hosted a very successful visit by Chinese Executive Vice Premier Li Keqiang.

Vice Premier Li’s visit resulted in three Government to Government Memoranda of Understanding.

These covered education and training; the prevention of illegal logging; and the protection of cultural property.

Two commercial agreements were also signed — one between Telstra and Chinese mobile phone company ZTE, and the other between Unwired and Chinese telecommunications provider Huawei.

During Vice Premier Li’s visit, we issued a significant joint statement.

That joint statement makes it clear to even a casual observer that Australia and China are engaging each other politically on a wide range of bilateral, regional and global issues.

The joint statement also reaffirmed Australia’s and China’s commitment to open trade and investment policies, and reflected the determination of both sides to conclude our FTA negotiations ‘as rapidly as possible’.

But most importantly, it underscored the importance of pursuing level-headed stewardship of a healthy, sustainable bilateral relationship.

Both sides recognised that, in any good partnership, differences inevitably arise from time to time.

Both sides recognised that we need to be aware of each other’s core interests, but that we must also be able to agree to disagree on the basis of mutual respect.

Forthcoming bilateral activities

We are of course moving to build the momentum in bilateral relations this year.

Free trade agreement negotiations resumed in late February 2010, and the next is scheduled for mid-year in Beijing. Given the size and importance of the economic relationship, we are dealing with a large and complex negotiating agenda and we hope to make further progress in this next round.

Australia is well advanced in its preparations for the Shanghai 2010 World Expo.

The Government approved a total project value of over $80 million to ensure Australia would have an impressive, whole of nation presence at what will be the largest and most dynamic Expo ever.

We were delighted that the only foreign pavilion Chinese President Hu Jintao visited in his well publicised inspection tour of the Expo site in mid January 2010 was Australia’s national pavilion.

We are confident that our extensive Australian pavilion business program, featuring more than 200 events, will foster new connections between Australian and Chinese businesspeople.

I acknowledge the sponsorship contributions made by our corporate sponsors and state and territory partners — led by ANZ, BlueScope Steel, Rio Tinto, Victoria and Queensland at the platinum level; and Qantas, Lend Lease, the University of Sydney, and New South Wales at the gold level.

We will also be launching the Year of Australian Culture in China to run alongside Expo activities and extend into other areas of China.

This will be followed by a Year of Chinese Culture in Australia.

Together the two programs will strengthen our already considerable cultural and people to people ties.

I have also asked DFAT to develop options for an informal 1.5 track dialogue with China on the entirety of the bilateral relationship.

A 1.5 track dialogue will bring together key people from both sides — including business people, senior academics and government figures — to forge deeper connections for the future.

It has the potential to develop over time into a forum similar to those we have with important partners like the United States and New Zealand.

Some implications of China’s rise

A productive relationship with China, based on mutual interest and mutual respect, is unambiguously in Australia’s national interest.

It is hard to think of a single international issue of importance to Australia where China is not a key player on the world stage

Australia welcomes the many opportunities to work constructively with China on such issues of regional and international significance and importance to Australia, including climate change, the G20, and regional architecture.

The Prime Minister and I share the view that this century, the Asia-Pacific will become the world’s centre of gravity.

Although it is not the full story, China’s rise will be a defining element of Asia’s growing influence.

At the same time it is important to put this rise in a wider context. Everyone sees the rise of China but the rise of India is still underappreciated, as is the rise of the ASEAN economies combined.

The great individual potential of Indonesia and the enduring economic strengths of Japan and South Korea must also be acknowledged.

The United States, which has underwritten stability in the Asia-Pacific for the last half-century, will continue to be the single most powerful and important strategic actor in the region for the foreseeable future, both in its own right and through its network of alliances and security relationships.

The relative resilience of the region amid the global economic crisis has also brought home to others that our region is and will be crucial to global economic stability and growth.

This was one of the factors behind the emergence last year of the G20 as the premier forum for global economic cooperation.

The G20 reflects the realities of the new global economic order.

It was the G20 that successfully met the challenge posed by the global financial crisis, acting in a coordinated and immediate way to stabilise the financial sector and build confidence globally.

China has been a key contributor toward achieving these results.

China might be the world’s second-largest economy, but in terms of GDP per capita it ranks 98th in the world, at 17.5 per cent of Australian GDP per capita in purchasing power parity (PPP) terms.

Maintaining economic growth, therefore, continues to be the number one priority of the Chinese leadership.

This of course has implications for how China acts on the international stage to address global challenges.

It also means China has a vested interest in the stability of world markets and how they function, which has greatly facilitated the 10 per cent average annual expansion in the Chinese economy that has occurred since 1980.

We welcome the significant economic and social progress that has been made in China on many fronts and look forward to its continuation.

We recognise the challenges that lie ahead for China’s development, including environmental and population pressures, and other areas of interest to the Australian community, such as strengthening the rule of law and protection of human rights.

The focus by China’s leadership on its domestic development agenda is understandable.

Economic growth will also increase China’s strategic influence.

This inevitably brings with it greater expectations of China taking up a commensurate share of responsibility as a good international citizen.

We look forward with confidence to China’s further development and full and constructive participation in the global community, which Australia continues to encourage.

We are optimistic that China will emerge into a “harmonious world” as a “responsible stakeholder”.

Conclusion

Australia and China have much to gain from our growing relationship.

Australia will continue to give priority to developing two-way trade and investment in ways which benefit both countries, both peoples and both economies.

We will continue to deal with inevitable areas of difference with China in a responsible and straightforward manner with a view to the long term.

Australia’s policies towards China will continue to be constructive, patient and forward-looking, informed by both our long-term strategic interests and a growing sense of optimism about this, the Asia-Pacific Century.

There are a range of opportunities this year to move our bilateral relationship with China forward.

The ACBC continues to have an important contribution to make to this in strengthening and deepening this important and dynamic relationship.