China, explained.
Covid was the turning point (tatonomusic/Unsplash)
The China alibi
A geopolitical contest between the United States and China should not stop Australians assessing their own economic interests.
China, explained.
Covid was the turning point (tatonomusic/Unsplash)
A geopolitical contest between the United States and China should not stop Australians assessing their own economic interests.
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The China alibiThe China alibi
The 2024 Lowy Institute Poll makes fascinating reading, not least for the paradigm shift that it shows in attitudes to China. As recently as 2020, the majority of Australians (55%) saw China as more an economic partner than a security threat. Today, the response is roughly the opposite – with 53% of Australians seeing China more as a security threat. In measure after measure, Australian attitudes have hardened on China.
Some of this change reflects geopolitics. But the shifting power dynamics between the United States and China also provide a distraction. Australia’s domestic policies have failed to provide stability following the disruption of the Covid-19 pandemic, the growing risks from climate change, digital disruption, and income inequality.
It is therefore useful to ask why China has become the favourite “look over there” distraction, and how much it deserves blame.
China’s economic influence has risen as its economy has grown. While China’s GDP is unlikely to catch that of the United States in the foreseeable future, China’s scale and its role in global value chains has changed the pattern of production across the world. China’s export led growth strategy included keeping its exchange rate undervalued by accumulating foreign exchange reserves and subsidising production. Combined with a shift toward robotics, the offshoring of production to China led to major structural changes in employment in the United States, just as the removal of tariff protections had done to Australian manufacturing in the 1990s. The impact on manufacturing regions of this shift remains a motivating factor in US distrust of China.
It appears to be politically easier to use concerns about China than to argue for income redistribution policies on social grounds, or decarbonisation investments on climate grounds.
For Australia, the expansion of China’s economy brought a mineral commodity boom that has boosted the coffers. Not only did production of iron ore, coal, natural gas and other minerals expand in response to the growing demand, China’s income growth created new markets for Australia’s barley, wine, lobster and beef. As China became the major export market for Australia, perceptions of China were positive overall, reflected in the Lowy Institute Poll numbers up to about 2018. This view changed as China decided to punish Australia over technology bans on Huawei, comments on human rights in Xinjiang and Hong Kong, and for seeking an investigation into the origins of Covid-19. China’s punitive tariffs and other economic coercion directed at Australia has rightly reduced the public’s view that China is a reliable economic partner.
Covid was the turning point, particularly China’s reluctance to provide information about the source of the virus. And as China shut down factories and ports in 2020 to contain the spread, it became apparent that production in many countries relied on China for critical inputs. What is often forgotten is that shutdowns at home, and the disruption to global shipping, also had a major impact on supply through much of the pandemic. It was China’s ability to scale up the production of personal protective equipment (PPE) that supplied the massive growth in global demand for PPE. Yet a suite of industry policies to on-shore and “friend-shore” production are now being justified by concerns about supply chain security.
With some chance of a Trump victory in November, making sure Australians appreciate there are two sides to every geopolitical contest becomes even more important.
The Lowy Institute Poll last year showed broad public support for friendshoring. But the justification from government is to shift away from China so that it cannot exploit its role in the supply chain as an economic weapon (described as “derisking”). Just how valid this justification is, and the extent to which economic integration can be untangled to actually derisk, needs to be questioned, given that it appears to be politically easier to use concerns about China than to argue for income redistribution policies on social grounds, or decarbonisation investments on climate grounds.
The pandemic disruption to supply chains, the huge stimulus payments in many developed countries, followed by the disruption to oil and gas supply resulting from Russia’s war against Ukraine saw the first real break out of inflation in over three decades. High inflation is always destabilising, as households face rising costs of living and rapid rises in interest rates to curtail demand to stop an inflationary spiral. But it is under-appreciated how China’s export growth and policy of undervaluing its exchange rate had helped to keep inflationary pressures low for several decades.
The reserve currency status of the US dollar allows the US government to continue to fund budget deficits that other countries cannot. It can be argued that this “American exceptionalism” has been accepted because the United States has largely supported a rules-based trade and investment order that has benefited many countries, including China and Australia. It may also be that US military heft has reinforced the acceptance of the reserve currency status and US domination of the financial system, in part in exchange for the US security blanket. Australian attitudes are shaped by much of the Australian media that reflects US views on China, which are based on the American desire to continue its global hegemony.
The Lowy Institute Poll showed 51% of Australians agreed with the statement that it was more important to have a stable relationship with China than working with allies to deter China’s use of military force, compared to 45% who thought it was more important to work with allies. These numbers need to be framed by the 71% who thought that a military threat from China was likely or somewhat likely in the next 20 years. It is hoped that the need to “sell” the AUKUS deal will not increase the influence of American views on the attitudes of Australians to China. Australia and American interests sometimes align, but are not the same. With some chance of a Trump victory in November, making sure Australians appreciate there are two sides to every geopolitical contest becomes even more important.
Download the 2024 Lowy Institute Poll and explore two decades of Poll data on our interactive website.
About the author
Jenny Gordon
Dr Jenny Gordon is a Nonresident Fellow at the Lowy Institute and also a Honorary Professor at the Centre for Social Research and Methods at the Australian National University.
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