China declares economic war on Australia

Australia is heading for a severe economic downturn as a consequence of China’s decision to place bans on imports from Australia’s coal, copper, wine, lobsters, cotton, wheat, sugar, barley and timber.

The move from Beijing is seen as a punishment for Australia’s initiative to demand an international enquiry into the origins of the coronavirus pandemic but its roots are much deeper.

Canberra formally established relations with the People’s Republic of China in 1972, switching recognition from Taiwan. Economic ties have flourished since the 1990s, although the two countries had their share of frictions. Relations began to crack in 2011 when the Australian government followed US President Barack Obama’s pivot to Asia, a policy meant to curb China’s geopolitical influence. Canberra became increasingly vocal about Beijing’s more aggressive policy in the South China Sea and alleged attempts to meddle in Australian political affairs.

Following the resignation of an Australian senator embroiled in a political donations scandal, involving a wealthy Chinese businessman, Australia passed legislation against foreign interference in 2017 – seen as a measure to counter Chinese influence.

Australia has blocked several Chinese investments on national security grounds in the past few years. Some analysts argue that, while certain decisions were probably justified, others might have been provocative and unnecessary.

Australia’s Government has plunged the nation into enormous debt as it tries to cushion the effects of the COVID-19 with billions borrowed and spent to subsidise wages and support industries. The tourism industry has largely disappeared; there is only a handful of international flights arriving at Sydney Airport each day, and most of them with restricted passenger loads, while the Sydney-Melbourne route, which before the COVID-19 pandemic was one of the busiest air corridors in the world, is now down to two flights each way most days.

Meanwhile, Australia is considering taking Beijing to the WTO over the various tariff disputes, and has just passed a bill giving the federal government veto power over agreements between individual states and foreign countries. The bill has all but invalidated the Victorian government’s Belt and Road memorandum of understanding with China. Canberra has so far handled the issue adroitly, not yielding to the threats and, at the same time, being careful not to inflame the situation further.