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How China Attempted to Economically ‘Break’ Australia

Jonathan Walker
Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
Published: December 6, 2021
China has restricted trade with Australia since last year in an attempt to sabotage the Australian economy after Australia called for an investigation into the origins of the pandemic. (Image: pixabay / CC0 1.0)

Kurt Campbell, the Indo-Pacific coordinator for the Biden administration, recently warned that Beijing has resorted to “dramatic economic warfare” in an attempt to “break” Australia economically. He made the comments while delivering a speech at the Lowy Institute, a Sydney-based think tank.

China’s animosity towards Australia was triggered last year when Canberra called for an international investigation into the origins of the COVID-19 pandemic. Beijing soon imposed trade barriers and import restrictions on the country. 

During the past 18 months, China has imposed over $20 billion worth of trade strikes on exports from Australia. When Campbell met with Chinese leader Xi Jinping last month, he raised Washington’s concerns about how Beijing was treating the U.S. ally.

“China’s preference would have been… to break Australia. To drive Australia to its knees. And then you know, find a way forward… I don’t believe that’s going to be the way it’s going to play out. I believe that China will engage because it is in its own interest to have a good relationship with Australia,” Campbell stated.

The Indo-Pacific coordinator revealed that roughly seven to eight years ago, Australia and the UK were the two countries that were expected to drift away from the U.S.’s sphere of influence. However, both nations stuck with Washington, which Campbell believes is “largely driven by Chinese actions.”

In September, the three countries signed the AUKUS trilateral security pact according to which the UK and United States will help Australia acquire nuclear-powered submarines. The Australian army, navy, and air force will acquire long-range strike capabilities under the agreement. 

The pact will strictly focus on military capabilities, making it distinct from the intelligence-sharing function of the Five Eyes alliance which includes the three nations plus Canada and New Zealand. In addition, the pact also includes increased cooperation in cutting-edge technologies like quantum tech, artificial intelligence, and cyber capabilities. China has called the AUKUS alliance a demonstration of the West’s “cold war mentality.”

The AUKUS agreement represents a “shared ambition” to support Canberra’s aim to have a fleet of nuclear subs, Campbell stated. When asked whether working together with American forces might take away Australia’s sovereignty, Campbell replied that the aim is to create more “strategic intimacy” by providing “new capacities.” 

For instance, the agreement means American sailors will be able to serve on Australian vessels and vice versa. American subs porting at Australian ports will also become a common affair.

According to Campbell, Washington is also concerned about Beijing’s increasing capabilities in nuclear deterrence, anti-satellite, and hypersonic systems. Such actions might trigger a “misunderstanding” or an “unforeseen crisis.”

Writing for Foreign Policy, Jeffrey Wilson, the research director of the Perth USAsia Centre, states that China’s attempts to restrict Australia through sanctions has been a failed endeavor. The reason why this has happened is that when a trade barrier is set up, the sellers, unable to offload their products, will look for alternative markets. As such, trade only gets adjusted rather than being eliminated.

For instance, China banned Australian coal imports in mid-2020. To fulfill its coal needs, China turned to Indonesia and Russia. 

“This, in turn, took Russian and Indonesian coal off the market, creating demand gaps in India, Japan, and South Korea—which Australia’s stranded coal was able to fill. What’s more, the global energy crunch has pushed up the price of coal, leading Australian coal producers’ export earnings to rise this year—not exactly the effect China had in mind,” Wilson wrote.