China update 2010
Keynote address
Australian National University, College of Asia and the Pacific, Canberra
14 July 2010
Ambassador Zhang Junsai, Ambassador of the People's Republic of China to Australia.
Vice Chancellor of the Australian National University, Ian Chubb.
Professor Ross Garnaut.
Distinguished guests. Ladies and gentlemen.
Thank you Ian for that kind introduction.
I take this opportunity to pay tribute to your leadership of the Australian National University and wish you the best for your retirement.
You will leave a legacy of distinguished service to this University, not least the strong institutional links the ANU has forged with Chinese universities and research academies during your tenure.
I also extend a warm welcome to our overseas guests who are participating in this 2010 China Update.
It is largely thanks to your contributions that this annual conference is such an important one on the Australia-China calendar.
The theme of this year's conference – 'China: The Next 20 Years of Reform and Development' – is both timely and relevant, dealing as it does with China's continued rise and the implications that has for the future of our bilateral relationship and our economic links.
China and Reform
A defining change in the world order is taking place as power, wealth and strategic influence shift to the Asia-Pacific.
The continuing rise of China is part of this change.
Australia recognises the historic changes that have taken place in China since the reform and opening period was initiated by former leader Deng Xiaoping in the late 1970s.
These reforms have transformed the face of China and the way that ordinary Chinese live and work.
China has been the fastest growing major economy in the world over the past quarter century, with annual growth averaging 10 per cent.
It has gone from an impoverished and largely agrarian economy to an increasingly industrial and urban-centred economy and an engine of world growth.
Up to 500 million people have been lifted out of poverty.
China has become the world's second largest economy in purchasing power parity terms.
China now has 400 million internet users – more than the United States - and an estimated 635 million mobile phone users.
It is the world's largest exporter of manufactured goods.
It is the world's largest car market.
It holds the world's largest forex reserves – around USD 2.5 trillion.
Its holdings in US Treasury notes and bonds – at USD 900 billion – are also the largest in the world.
These are impressive figures, but the important point to note is that China's growth began from a very low base, and still has a long way to go.
This is reflected in China's Gross Domestic Product per capita, which the IMF ranks at 98th in the world.
This is also reflected in China's rate of urbanisation, which has important implications for Australia.
China's level of urbanisation rose from 20 per cent in 1980 to 40 per cent in 2005. By 2030, it is expected to reach 70 per cent.
Today more than 600 million Chinese are living in cities. There are an estimated 160 cities in China with more than 1 million people.
On some estimates, China is likely to need to accommodate at least 300 million more people in urban areas by 2030.
This will require large inputs of iron ore and other raw materials, as well as more environmentally sustainable design and construction services, all of which Australian companies are well placed to supply.
While its economy has been transformed through three decades of policy reforms, China's basic political structure – a centralised state under the leadership of the Chinese Communist Party – remains largely unaltered.
Australia welcomes the fact that ordinary people in China, particularly those in cities, enjoy vastly greater opportunities and choices than those faced by their parents 30 or 40 years ago.
At the same time, we have expressed our concerns about media and religious freedoms and the operation of the legal system.
There are other strategically important facts to consider.
In 2007, China surpassed the US to become the world's largest emitter of greenhouse gases.
China is a nuclear weapons state and maintains the world's largest standing military, with advanced capabilities, including ballistic missiles.
China's domestic defence industry is an emerging player in the international arms marketplace.
These strategic realities bring with them responsibilities, including the need for greater openness and transparency in relation to capabilities and strategic doctrine.
China is now a significant and growing aid donor and investor in places as diverse as Africa, Central Asia, and, of particular interest to Australia, the South Pacific.
China is a permanent member of the UN Security Council and participates actively in international organisations and regional bodies that matter most to Australia – including the WTO, the G20, APEC and the ASEAN related institutions.
All these developments mean that China is now a major stakeholder in and substantial contributor to the current global order.
The current global order, an international rules based system, has helped raise the living standards of Chinese people in coastal and inland provinces. The opening of China's economy has resulted in the single largest movement of people out of poverty in human history.
This has important implications and consequences into the future for China's engagement with the world.
As a trading nation, China has a vested interest in the security of vital international sea lines of transport and communication and in the stability of world markets and in open international trade.
As a trading nation, China is interested in working with us to secure the conclusion of a WTO Doha Round.
China is a global trade and economic power. That is also why Australia welcomes China's active participation in the G20, responding to the global economic crisis.
As a country committed to maintaining regional security, Australia believes China has a special role to play in ending the stand-off over North Korea's nuclear weapons program.
It has a special role to play in encouraging North Korea to engage constructively with its neighbours.
Australia condemned the recent sinking of the South Korean vessel, the Cheonan, by the DPRK. This attack threatened peace and stability on the Korean peninsula.
Australia welcomed the United Nations Security Council support for the Presidential Statement issued last week condemning the attack. The Security Council, including China, has sent a clear message that such acts cannot be tolerated.
Australia's interests are of course directly affected by China's relations with the other major powers, notably the United States, Japan and India.
We welcome the positive trajectory of these bilateral relationships.
It is also appropriate that China - as the world's largest greenhouse gas emitter and as a country vulnerable to the impacts of global warming - takes on a greater leadership role on climate change.
Australia understands the priority that China places on its own domestic economic growth.
Australia also acknowledges the challenges that lie ahead for China's development, including managing environmental and population pressures, as well as other areas of interest to the Australian community, such as strengthening the rule of law and protection of human rights.
As China's economy grows, of course, so too will China's strategic influence.
The Australia-China relationship
This has important implications and consequences for the Australia-China bilateral relationship.
Our bilateral relationship is defined in part by our shared foreign policy interests – in supporting stability and prosperity in our own region and in addressing global challenges.
In the 21st century, security and economic challenges demand coordinated regional and global action.
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.
It is in Australia's and China's national interests to strengthen our practical cooperation in a wide range of areas.
Our dialogue has expanded in recent years in the priority areas of regional security, trade, climate change, environment and development assistance.
As one example, in February 2008 in Canberra, I hosted the inaugural Ministerial-level Strategic Dialogue with my counterpart, Chinese Foreign Minister Yang Jiechi. Last year I went to Beijing to conduct the second Strategic Dialogue with Foreign Minister Yang.
It is, by any measure, a comprehensive relationship, and it is growing in prominence and complexity.
It has been underpinned for more than three decades by Australia's early diplomatic recognition of the People's Republic of China by the Whitlam Government in 1972, at a time when it was not necessarily fashionable to do so.
This recognition came with the adoption of Australia's One China policy, an enduring, bipartisan policy adhered to by all successive Australian Governments.
At a political level, our relationship is underpinned by frequent high-level visits in both directions.
Over the past year, Australia has welcomed visits by senior Chinese leaders, including Executive Vice Premier Li Keqiang last year and Vice-President Xi Jinping last month.
General Guo Boxiong, China's most senior uniformed military officer, visited Australia this year for discussions with Australian ministers, and civilian and military officials on a wide range of regional and international security issues.
Our approach also seeks to build on complementary efforts by state and territory governments, the business sector, educational and research institutes, NGOS, community groups and the general public.
While Australia and China are firmly committed to a productive and mutually beneficial relationship, we both recognise that we have different histories, different societies and different systems, as well as some differences of view.
It is inevitable, as in any good partnership, that there will be tensions and difficulties from time to time.
The challenge is in managing the relationship for the long term when our interests, values or concerns pull in contrary directions.
We do so through frank exchange and dialogue and with mutual respect.
Australia is clear-eyed, not starry-eyed, in our assessment of China and our approach to our bilateral relationship.
Australia appreciates fully the concerns of the People's Republic of China, in particular with regard to its territorial integrity.
But we too have interests and core values that do not change over time. These too form part of our ongoing bilateral dialogue.
Trade Ties
I turn now to the economic dimension of our relationship.
Our economic relationship is underpinned by profound and growing complementarities.
Mutual benefit as well as mutual dependence flow from these complementarities.
The 1980s, under the Hawke Government, signalled a significant expansion in our relationship, with exponential growth in trade and economic ties.
The foundation of this expansion was the growing trade in minerals and petroleum resources, led by exports to China from my home state of Western Australia.
By 2009, China was Australia's largest trading partner, with two-way trade valued at around A$85 billion, as well as our largest export market and largest market for education services.
This growing trade, conducted in accordance with market principles, is unquestionably important to Australia.
It helps Australia maintain low unemployment and contributes to Australia's prosperity.
This trade is also important to China, which increasingly looks to Australia as a reliable source for the diverse array of raw materials, energy and food China needs to sustain high rates of economic growth.
This was one the themes of the inaugural bilateral CEO Roundtable, held in Australia last month in conjunction with the Economic and Trade Forum.
Both countries are committed to a comprehensive, high-quality, balanced and mutually beneficial Free Trade Agreement, which we are working hard to conclude.
The most recent negotiations – the 15th round held in Beijing late last month – were conducted in a pragmatic and constructive spirit.
We are dealing with a large and complex negotiating agenda and hope to make further progress in the next round of negotiations in Australia later this year.
As part of a second track approach, we are also focusing on promoting opportunities for Australian business in China's rapidly developing regional areas.
To give an illustration, when I visited China last year, I deliberately started in the west -- in Chengdu, in Sichuan Province, then Chongqing -- to send a message that Australia understands that China is more than just Beijing, Shanghai, Guangzhou and the eastern seaboard generally.
This visit brought home to me the shift in the centre of gravity of China's economic development westward, and the economic dynamism of these areas.
We are encouraging Australian industry to look west, where much of the economic activity is domestically based, rather than driven by external demand.
It is about matching Australian industry strengths and domestic policy objectives with opportunities for collaboration, trade and investment in these regions.
A key plank of this strategy has been the signing of individual framework agreements and MOUs to collaborate further with China's rapidly developing inland provinces.
We have, for example, an agreement to develop agribusiness opportunities with Yunnan province, showcasing Australian expertise in horticulture, dairy, beef and wool.
And in Hubei and Anhui we are targeting collaboration in the automotive industry.
We will also be pursuing a framework agreement with Shandong province, where there are great opportunities for Australia in areas such as clean energy innovation and agribusiness.
Two-way Investment
Two-way investment links are an increasingly prominent element of our economic relationship.
Australia maintains, as it has for many years, a consistent, open and welcoming stance towards foreign investment, wherever it comes from, including from China.
This policy is well known and of long-standing.
Australia has made itself into a well-developed and prosperous nation by being both a successful trading nation and an attractive place for foreign direct investment.
Australia's welcoming policy towards investment from China is borne out by the facts.
Last year, China was Australia's second largest source of foreign direct investment approvals, jumping from sixth place in the previous year.
Since the Government came into office on December 2007, Australia has approved over 180 Chinese proposals to invest in Australia, valued at around US$54 billion (A$60 billion).
Only five of these approvals involved undertakings, conditions or amendments.
None has been rejected.
Conclusion
Looking back at what has been accomplished since the establishment of diplomatic relations in 1972, it is remarkable how far Australia-China relations have come.
Three decades ago few would have predicted that in 2010 China would be Australia's largest trading partner.
Looking ahead, Australia's policies towards China will continue to be constructive and forward looking.
To make the most of the opportunities that will emerge from the next twenty years of reform and development in China, however, we need to raise the level of China skills in Australia.
The establishment of the Australian Centre on China in the World here at the ANU has an important contribution to make in this regard.
I welcome yesterday's announcement that Rio Tinto and the ANU will extend their partnership agreement to support the centre for three years.
I note that the Centre's Library is now well-stocked following the gift of Vice President Xi of more than 1800 books on Chinese history and contemporary society.
That is also why Foreign Minister Yang and I have agreed that we now take forward a one and a half track dialogue.
The Australia China Forum, as it will be called, will bring together Ministers, senior officials, business people and academics to consider the entirety of our comprehensive bilateral relationship.
Officials have already commenced work on the arrangements to hold the inaugural Forum in Australia.
This is, in my view, long overdue, and bodes well for the future of the Australia-China relationship.
I look forward to ANU continuing to make an important contribution to the future development of this significant relationship.
Thank you.