The Australian Government may have rejected BRI, but smart Australian businesses know that this is where the future lies.

The Australian Federal Government recently vetoed two Belt and Road Memorandums of Understanding signed between the state of Victoria and China’s National Development and Reform Commission.

Foreign Affairs Minister Payne said the arrangements were considered to be “inconsistent with Australia’s foreign policy or adverse to Australia’s foreign relations.”

Newly appointed Defence Minister Dutton thundered that “China and others need to understand that Australia is not going to be bullied and we’re standing up for our beliefs.”

The reactions all seem a bit over the top when the BRI agreement did not commit the Victoria government to specific projects and were not legally binding. The agreements were about potential future co-operation.

Many Australian businesses quietly wondered just how much more debilitating aggravation would be unleashed by a Government that seems intent on frustrating cooperation with China.

The decision was not a surprise. In December 2020 the government introduced the Foreign Arrangements Scheme. It was clear the legislation was primarily aimed at the Belt and Road MOUs signed by the state of Victoria. The federal Government has a deep dislike for the Premier of Victoria, Daniel Andrews so the attack is part of a domestic political quarrel.

Although there are impacts on the Australia-China relationship, the driving factor behind this legislation is more about domestic politics and attacking domestic political rivals.

In addition to these domestic skirmishes, there was an awareness of the impact this decision would have on Australia-China relations. The timing of the decision coincidentally followed an address by China’s Deputy head of Mission, Wang Xining to the National Press Club. He again extended an olive branch, discussing ways the relationship could improve.

The last time Wang Xining did this, the response from Prime Minister Morrison was swift, immediately pledging to tear up State agreements with China.

Following this week’s press conference with Wang Xining, the Foreign Affairs Minster announced exactly that.  

Australia was well aware of the disruption this announcement would cause and the way this decision would further cool Australia-China relations. There are some in the Federal Government who welcome this attack. There is an active cohort of China hawks who want to contain and confront China.

In this sense, this announcement serves an Australian foreign policy agenda which very much takes its lead from the United States. This doesn’t mean following every step the US takes, particularly under the ex-President Trump, but it does mean Australia looks to the US for guidance and support. This was the key message Australia took from the meetings in Anchorage.

Australia interpreted US Secretary of State Blinken’s comments in Anchorage to mean that the United States has Australia’s back.  Basking in this sunshine, it was perhaps inevitable that an emboldened Australia would take the next step and veto the BRI agreement.

There is a third aspect of this foreign policy as it relates to international relations rather than just relations with China. Australia has aspirations to play a leadership role in the newly created RCEP. Although an outside observer to the upcoming ASEAN meeting, Australia believes it plays an influential role in these organisations.

However, Australia’s rejection of the BRI puts it out of step with many of the RCEP and ASEAN members. These are countries who are actively embracing the BRI and see this as a way to increase their engagement with China. They are wary of Australia’s less than nuanced approach to China.

Part of the reason for the veto was to send an international message but judging by the level of commitment made by many ASEAN nations to BRI, it would seem that this message is already obsolete.

Australian business has watched on as this clumsy domestic politics spills over into already fraught China relations and the relationship with other nations in the region. Worried by the increasing anti-Chinese rhetoric, many business organisations have chosen to remain largely silent.

Chair of the Australia China Business Council, David Olsson said “Australian business prefer to look beyond the politics of BRI and focus on the genuine commercial opportunities that will emerge from infrastructure investments.”

The veto of the Victorian agreement is largely about domestic politics, but it also signals a change from benign acceptance of the BRI, to active pushback against the BRI. Many in business believe this is a foolish change that will further damage the foundations of Australia’s prosperity.

The Belt and Road Initiative is too large and has too much momentum to be hindered by this Australian decision.

The Australian Government may have rejected BRI, but smart Australian businesses know that this is where the future lies.

The article reflects the writer’s opinions, and not necessarily the views of China Focus.

Belt and Road Initiative

Daryl Guppy

Daryl Guppy is an international financial technical analysis expert. He is a national board member of the Australia China Business Council.