Just over a month ago, Bob Katter – the eccentric independent from Far North Queensland – asked Josh Frydenberg, the newly-appointed Minister for Northern Australia, to explain a little-known deal to lease the Port of Darwin.
With his trademark delivery of man caught halfway between tears and hysterical laughter, Katter used Parliament’s question time to ask whether the Australian government’s decision to allow the sale of public asset, the Port of Darwin, to a Chinese company called Landbridge for $506 million would transform it into a “foreign corporate, unrestrained, monopolistic money machine” that dominated half of Australia’s vast northern coastline?
In the theatre of federal parliament, all attention was focused on Frydenberg’s reaction and none on the substance of the question.
Frydenberg started to give a stock-standard answer, but started spluttering with laughter at Katter’s increasingly frantic shouting and gesticulating. Eventually the Member for Kennedy walked out in disgust, muttering about the foolishness of appointing a Melbourne-based lawyer as the minister responsible for Northern Australia.
It was a five-minute diversion that was quickly forgotten in the hubbub of mainstream politics.
This week that small matter of a 99-year port lease signed last month to a Chinese company with links to the People’s Liberation Army has exploded into an international controversy. United States President Barack Obama publicly chided and embarrassed Malcolm Turnbull on the world stage for not keeping him in the loop, and defence analysts warned of national security risks in selling off a strategic asset used by the Australian navy, the US Marines and the navies of our friends and allies.
It cast an immediate cloud over the future of other major infrastructure sales such as that of the NSW electricity grid, TransGrid, and brought new scrutiny to bite-by-bite acquisitions of Australia’s gas and electricity network by Chinese interests.
But what appears on the surface as a conflict between national security and foreign investment, has actually revealed itself as a more profound realisation of Australia’s small role in China’s grand, multi-generational plan known as “One Belt, One Road”.
More than 200 years ago military genius Napoleon Bonaparte warned China was a sleeping giant. “Let her sleep, for when she wakes she will move the world,” he said.
The sleeping giant metaphor has become a cliche for the rise of China. But this month, as new parents go searching for baby formula on empty Australian supermarket shelves cleaned out by opportunistic small-time exporters of China’s latest status product, Australia is starting to feel the tremors.
“One Belt, One Road sounds daggy to us but it’s deadly bloody serious,” says Hugh White, professor of strategic studies at the Australian National University’s Strategic and Defence Studies Centre.
The very name of the consortium buying the Port Darwin lease, Landbridge, is an obvious clue to China’s larger ambitions.
Australia is only a small part of China’s global spiderweb of trade routes and White says we can be part of that or we can choose to exclude ourselves but it would mean also locking Australia out of the majority of the future economy.
The sensitivity to foreign investment is hardly a new thing, starting more than 200 years ago with Britain’s colonisation of Australia, followed by waves of investment by Japan, then Russia in the 1990s, and the sale of farmland to rich Arab states like Qatar and finally China.
The difference this time comes through the sheer size of Chinese money flowing into Australia and what the geopolitical shift to Asia means for our old allies, the US and Britain.
Those surprised by China’s growing direct investment in Australia have been living under a rock. Reserve Bank of Australia governor Glenn Stevens said in July that markets need to prepare for a world where China invests $400 billion a year offshore, much of it in Asia as it increasingly liberalises. The figure is equivalent to more than 25 per cent of the Australian economy
China’s rapid rise was first made clear to the world’s economic elite in the early 2000s at events such as the Davos World Economic Forum.
Back in 2002, Chinese officials and business leaders hit the forum in force, foreshadowing the nation’s rise over the subsequent decade to a level where it now challenges the US economy’s dominance. In closed-door sessions, the abiding memory of participants was that China’s leaders were thinking and planning over the long-term, across multiple generations, as opposed to the west, which was stuck in tight, multi-year political cycles and the emerging fight against terrorism.
China is by far Australia’s biggest trade partner, with two-way trade hitting a record $152 billion in 2014, more than the combined trade with Japan and the US, the second and third biggest. Two-thirds of the trade with China is exports from Australia.
For the first time this year, China became Australia’s biggest source of approved foreign investment after a $12.4 billion splurge on real estate last financial year. Chinese investors planned to spend $27.7 billion here, according to the Foreign Investment Review Board annual report, overtaking US investors who were approved to spend $17.5 billion.
But in Australia – somewhat embarrassingly – most of the political and media attention in the real-estate obsessed major cities have been focused on the proliferation of Asian faces. Similarly the foreign investment debate has largely been captured by the Nationals’ campaign to limit China’s acquisitions of farming land, leading to a dramatic tightening of foreign investment rules so that any cumulative acquisitions of agribusiness and farmland worth more than $15 million requires the approval of the FIRB.
Stung by fallout from the Port of Darwin lease – as well as the looming sale of the NSW electricity grid – Treasurer Scott Morrison moved this week to review laws that allow states to sell strategic assets to foreign companies without federal scrutiny.
FIRB often doesn’t need to be called in when states and territories sell assets, a potential shortcoming that will be subject to a Senate inquiry launched by independent senator Nick Xenophon.
The question of where exactly FIRB oversight should kick in was highlighted by Morrison’s decision on Thursday to block the sale of Australia’s largest privately-owned land holding and cattle company, S Kidman & Co, to a Chinese bidder because of its proximity to Woomera.
No simple answers
Two Chinese companies offered to buy the business for between $325 million and $350 million, a price that drew the automatic attention of FIRB’s investigators.
White says there are no simple answers to the way Australia deals with China’s encroaching reach on our landholdings, infrastructure assets and even our politics.
“Should we be concerned? Yes. Should we say no to Chinese investment? No,” White says.
This is not about spies, or intelligence gathering by our biggest trading partner. It’s about a fundamental reshaping of the global economy and Australia’s relationship with the world’s biggest economy.
White believes the national security implications of having a Chinese government-linked company owning a strategically important asset like Darwin’s port are “manageable” because the potential to spy on a few US marines nearby is only of small importance to China, which is far more interested in building a land bridge between Australia and China.