Australia's continued escalation of tensions prompts Chinese companies’ diversification drive
Analysts say nation could hit back hard against provocations
Published: Apr 22, 2021 09:23 PM

Jacaranda blossoms are seen near Sydney Opera House in Sydney, Australia, Oct. 22, 2020.(Photo: Xinhua)

Jacaranda blossoms are seen near Sydney Opera House in Sydney, Australia, Oct. 22, 2020.(Photo: Xinhua)

Another downward spiral in China-Australia relationship serves as a fresh warning to the Chinese corporate sector that their businesses will not be hijacked by the deterioration of the tensions, industry insiders told the Global Times on Thursday.

Souring bilateral ties are already prompting Chinese businesses to think twice in their dealings with Australia, even in some of the most profitable areas, given the prospect of foreseeable trade decoupling between the two.

Australia unilaterally escalated bilateral tensions on Wednesday when its federal government tore up an agreement between the state of Victoria and China on the Belt and Road Initiative (BRI), becoming the first country to withdraw from the China-proposed, open initiative that has received increasing international participation.

In China, the move was seen as an "unreasonable provocation."

An anonymous insider of a Guangdong-based natural gas group company, with the annual gas transport capacity up to billions of cubic meters, told the Global Times on Thursday that the company was in preliminary talks with potential suppliers from Australia, Qatar and Russia. However, with the continuous escalation of trade tensions between China and Australia, the company is considering a diversion of its business from Australia to other countries.

"Australia was a major focus of our future cooperation project, but we are now concerned that the escalation of trade tensions will bring about more risks and uncertainties to our business," said the insider, and the company will diversify its import sources to reduce these risks if bilateral relations deteriorate.

A manager working at a gas-fired power plant told the Global Times on condition of anonymity that the government has an influential sway over energy supply, which is a matter of great significance.

"Shifting away from Australia will add some costs, but national interests overweigh costs, and there are plentiful suppliers from countries that have no bilateral trouble with China," the person said.

Although there has no a big withdrawal for the energy sector, Chinese experts said that the Australian action, and the continuous fueling of anti-China sentiment by politicians in Canberra, could send bilateral trade and investment ties into a further downward spiral, further exposing the country's weakness as the economy is most dependent on China's.

As more Chinese businesses and the general public feel Australia's increasing antagonism toward China, a trade decoupling is expected to gain pace in the immediate future. 

"For Chinese companies, diversifying their import sources will definitely be a trend. It is crucial to emphasize the diversity of sources in this growing trade complex, not only for companies, but also at the national level," Dong Xiucheng, a professor at the University of International Business and Economics told the Global Times on Thursday. 

Dong said in recent years, Australia has been headstrong in acting as a deputy sheriff for the US, and it has deliberately created troubles. Such action has put energy cooperation between China and Australia in serious peril. 

Even for iron ore, the most valuable export so far unaffected by tensions, the tremor before an earthquake can be felt. Chinese companies are diversifying their exploitation of iron ore in Africa, such as in Algeria, at a record pace amid soaring prices. 

A long list of Australia's exports to China, from wine and lobster to timber and hay, ran into problems as bilateral ties took a dive starting in 2018 when Australia became the first country to ban Chinese telecoms firm Huawei's 5G. 

However, in a matter of months, most Chinese wine importers shifted away from Australia and placed orders in other countries.

China's Foreign Ministry asked Australia to reverse its decision over the BRI deal, or, the ministry warned, China will hit back hard.

China's deputy head of mission to Australia Wang Xining said on Wednesday that "China is not a cow. I don't think anybody should fancy the idea to milk China when she's in her prime and plot to slaughter her in the end."

Chen Hong, a professor and director of the Australian Studies Center at the East China Normal University, noted that tearing up the BRI deal will deny Chinese help in infrastructure, which is overdue for an update and further development, and jobs for Victoria.

Australian media outlets also are fueling the flames.

On Wednesday, the Sydney Morning Herald carried a commentary describing Australia's approach to China as "meek and muddled."

Song Wei, an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times that the US intends to keep Australia as its pawn in the Asia-Pacific region in its strategy to contain China. 

The rising uncertainty from continuing frayed relations will force an increasing number of Chinese companies to look for alternatives to Australia, and that will slow the country's post-virus economic recovery, Song said.