Tag Archive for: China

Trigger warning. The CCP’s coordinated information effort to discredit the BBC

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Chinese Communist Party (CCP) diplomatic accounts, Chinese state media, pro-CCP influencers and patriotic trolls are targeting the UK public broadcaster, the BBC, in a coordinated information operation. Recent BBC reports, including the allegations of systematic sexual assault in Xinjiang’s internment camps, were among a number of triggers provoking the CCP’s propaganda apparatus to discredit the BBC, distract international attention and recapture control of the narrative.

In ASPI ICPC’s new report, Albert Zhang and Dr Jacob Wallis provide a snapshot of the CCP’s ongoing coordinated response targeting the BBC, which leveraged YouTube, Twitter and Facebook and was broadly framed around three prominent narratives:

  1. That the BBC spreads disinformation and is biased against China
  2. That the BBC’s domestic audiences think that it’s biased and not to be trusted
  3. That the BBC’s reporting on China is instigated by foreign actors and intelligence agencies.

In addition, the report analyses some of the secondary effects of this propaganda effort by exploring the mobilisation of a pro-CCP Twitter network that has previously amplified the Covid-19 disinformation content being pushed by China’s Ministry of Foreign Affairs, and whose negative online engagement with the BBC peaks on the same days as that of the party-state’s diplomats and state media. 

To contest and blunt criticism of the CCP’s systematic surveillance and control of minority ethnic groups, the party will continue to aggressively deploy its propaganda and disinformation apparatus. Domestic control remains fundamental to its political power and legitimacy, and internationally narrative control is fundamental to the pursuit of its foreign policy interests.

Engineering global consent: The Chinese Communist Party’s data-driven power expansion

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The Chinese party-state engages in data collection on a massive scale as a means of generating information to enhance state security—and, crucially, the political security of the Chinese Communist Party (CCP)—across multiple domains. The party-state intends to shape, manage and control its global operating environment so that public sentiment is favourable to its own interests. The party’s interests are prioritised over simply the Chinese state’s interests or simply the Chinese people’s interests. The effort requires continuous expansion of the party’s power overseas because, according to its own articulation of its threat perceptions, external risks to its power are just as likely—if not more likely—to emerge from outside the People’s Republic of China’s (PRC) borders as from within.

This report explains how the party-state’s tech-enhanced authoritarianism is expanding globally. The effort doesn’t always involve distinctly coercive and overtly invasive technology, such as surveillance cameras. In fact, it often relies on technologies that provide useful services. Those services are designed to bring efficiency to everyday governance and convenience to everyday life. The problem is that it’s not only the customer deploying these technologies—notably those associated with ‘smart cities’, such as ‘internet of things’ (IoT) devices—that derives benefit from their use. Whoever has the opportunity to access the data a product generates and collects can derive value from the data. How the data is processed, and then used, depends on the intent of the actor processing it.

Australia-China law enforcement cooperation

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Australia and China have an extensive and growing economic relationship underpinned by diverse people-to-people connections. China is Australia’s largest two-way trading partner in goods and services (A$195 billion in 2017–18). Chinese investment into Australia’s real estate industry increased by 400% in the five years to 2015, to A$12 billion in 2014–15. Money flows from China into Australia almost doubled between 2011–12 and 2015–16, from A$42 billion to almost A$77 billion. China is Australia’s largest source of overseas students (over 157,000 studied in Australia in 2016) and second largest and highest spending inbound tourism market (with 1.2 million visits in 2016).

This economic relationship is mutually beneficial, but it also creates opportunities for criminals. The large volume of money, goods and people moving between the two countries makes it easier to conceal crimes, such as trafficked drugs or laundered money. Much activity also takes place online, making the cyber realm a major vector for cross-border criminal activity. It’s therefore important that the two governments work together to fight transnational crime where there are links between Australia and China, or where either’s citizens play key facilitator roles.

Agenda for change – 2019

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In 2018, many commentators pronounced the rules-based global order to be out for the count. This presents serious challenges for a country such as Australia, which has been an active contributor and clear beneficiary of that order. The government that we elect in 2019’s federal election will be faced with difficult strategic policy choices unlike any we’ve confronted in the past 50 years.

This volume contains 30 short essays that cover a vast range of subjects, from the big geostrategic challenges of our times, through to defence strategy; border, cyber and human security; and key emergent technologies.

The essays provide busy policymakers with policy recommendations to navigate this new world, including proposals that ‘break the rules’ of traditional policy settings. Each of the essays is easily readable in one sitting—but their insightful and ambitious policy recommendations may take a little longer to digest.

Previous Agenda for change publications are also available here: 2016 and 2013.

Launch Event

Huawei and Australia’s 5G Network

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Over the course of 2018, ASPI staff and writers for The Strategist participated in a dynamic public debate about the participation of Chinese telecommunications equipment manufacturer Huawei in Australia’s 5G network.

Australia’s 5G network is critical national infrastructure and this was one of the most important policy decisions the government had to make this year.

ASPI felt it was vital to stimulate and lead a frank and robust public discussion, in Australia and throughout the wider region, which analysed and debated the national security, cybersecurity and international implications of Huawei’s involvement in this infrastructure.

In this report, in chronological order, you’ll read a range of views written up in The Strategist, The Australian and The Financial Times.

These articles tackle a variety of issues surrounding the decision, including the cybersecurity dimension, the broader Australia–China relationship, other states’ experiences with Huawei, the Chinese Government’s approach to cyber espionage and intellectual property theft and, importantly, the Chinese party-state’s view of state security and intelligence work.

When it comes to important national security, cybersecurity and critical infrastructure decisions, ASPI will continue to stimulate Australian public discourse and fill gaps in global debates.

We also encourage the Australian Government to take a more forward-leaning approach to its participation in public discourse so that the public and key stakeholders are as informed as possible when hard and complicated policy decisions like this need to be made.

Mice that Roar

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This report argues that over the past five years, there’s been an increase in coastguard and maritime border response capabilities across much of ASEAN. ASEAN states have primarily focused their new capabilities on enhancing physical presence patrols and response within their respective exclusive economic zones (EEZs). Coastguards have become important strategic cushions between navies in ASEAN.

Underpinning this regional maritime strategic trend is an assumption that coastguard vessels are less threatening, in terms of their potential use of force, to the captains and crews of other nations’ vessels during unplanned encounters at sea. It isn’t all plain sailing for this model. Emboldening fishing fleets, coastguards or militias by removing the risk of a military response to aggressive actions in others’ jurisdictions may well be a negative for the maritime security of ASEAN nations.

The report highlights an opportunity for Australia to cooperate and collaborate with partners across the region on surveillance, maritime domain awareness (MDA) and maritime patrols.

Australia’s strategic relationship with the US ensures that Chinese leaders pay close attention to its diplomatic and military activities in ASEAN. The promotion of greater regional coastguard cooperation won’t deeply offend Chinese Government sensitivities, it will attract Chinese Government attention because it is against the Chinese state’s preferred bilateral engagement model, and because it may be effective in creating regional cohesion in dealing with maritime security issues. These efforts will send a clear message to Beijing that the region is taking measures to protect the sovereignty of its waters.

Australia’s management of strategic risk in the new era.

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Australia’s strategic outlook is deteriorating and, for the first time since World War II, we face an increased prospect of threat from a major power.

This means that a major change in Australia’s approach to the management of strategic risk is needed.

Assessing the South China Sea award

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The Philippines had a major, if unenforceable, win against China in the 12 July South China Sea Arbitration under the United Nations Convention on the Law of the Sea. But the implications go beyond the bilateral dispute between China and the Philippines and it carries great legal weight as an authoritative ruling by an international judicial body.

Bearing in mind that the award is legally binding only on the parties to the arbitration, there’s the question of what might this assertion mean for third countries who may opt to exercise navigational rights based on the Tribunal’s rulings on the status and maritime entitlements of features in the Spratlys.

The South China Sea award has produced a diverse range of opinions on ASPI’s blog The Strategist. This Strategic Insights assembles a selection of those articles.

Authors: Sam Bateman, Allan Behm, Anthony Bergin, Jay L Batongbacal, William Choong, Helen Clark, Malcolm Davis, Peter Jennings, Amelia Long, Donald Rothwell & Feng Zhang.

Chinese investment in the Port of Darwin: A strategic risk for Australia?

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Few strategic issues have galvanised public attention in Australia as the decision by the Northern Territory Government to lease key facilities in the Port of Darwin to a Chinese company, Landbridge. This Strategic Insights brings together items published on our blog The Strategist as well as articles by ASPI staff published in other media outlets such as The Australian and The Australian Financial Review. The authors are Paul Barnes, Sam Bateman, Allan Behm, Phoebe Benich, Anthony Bergin, Patrick Cronin, Neil James, Peter Jennings, Geoff Wade, and Feng Zhang. Our aim is to bring this material into an accessible format, in part, to assist the deliberations of the Senate Economic References Committee which, over January and February 2016, is conducting an inquiry into the foreign investment review framework including with reference to the Port of Darwin lease.

The Port of Darwin lease highlights an urgent need to review how Australia takes account of its national security interests in making decisions about foreign investment.

The Shanghai Cooperation Organisation: An Australian response

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The Shanghai Cooperation Organisation (SCO) is the first multinational security body outside the US orbit to emerge since the Cold War’s end. This Policy Analysis outlines the SCO’s origins and development, analyses the group’s internal dynamics and offers an Australian policy response.

Tag Archive for: China

Sports diplomacy: a potent weapon in the Pacific against China’s coercive grasp

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Hindering China’s influence in the Pacific islands should become a key goal in the forthcoming update to Australia’s sports diplomacy strategy.

As China’s coercive influence tightens around the Pacific islands, Australia finds itself in a high-stakes contest for regional influence. Beijing’s aggressive tactics, including debt-trap diplomacy, opaque security agreements and the erosion of democratic values, threaten to destabilise the region and undermine Australia’s strategic interests.

While traditional diplomatic tools have their place, sports diplomacy can be a potent weapon in Australia’s arsenal to counter China’s coercive influence and strengthen ties with Pacific Island nations.

The strategic significance of Pacific island nations to Australia cannot be overstated. They are not merely neighbours; they could be Australia’s front line. China’s growing presence in the region, exemplified by the April 2022 security pact with the Solomon Islands, poses a direct challenge to Australia’s security interests.

Australia’s response to China’s growing assertiveness has been largely reactive and focused on traditional diplomatic tools and aid programs. However, these measures are proving increasingly inadequate.

Sports diplomacy, the use of sports to influence diplomatic relations, offers a compelling solution.

The power of sports diplomacy to transcend political tensions was exemplified by the cricket diplomacy between India and Pakistan in the early 2000s. Following the 1999 Kargil War, cricket matches between the two nations acted as a catalyst for dialogue and de-escalation. The series of matches, held in both countries, generated immense goodwill and created a platform for political leaders to engage in discussions on a range of issues. This diplomatic breakthrough, initiated by a shared passion for cricket, ultimately led to a ceasefire and a renewed commitment to peace talks.

China’s sports diplomacy is characterised by stadium construction and events sponsorship. These grand gestures and monetary incentives often lack the authenticity and personal connection that underpin successful sports diplomacy. So, it struggles to replicate Australia’s successes in supporting Pacific sport.

Furthermore, China’s human rights record and perceived lack of respect for democratic values undermine its efforts to win hearts and minds through sports in these countries, which suffer from their own democratic deficits.

Canberra needs to effectively counter Beijing’s narrative and developmental approach by offering a genuine alternative to Pacific Island nations.

In the Pacific islands, where sports hold immense cultural and social significance, this approach has the potential to be particularly effective. Rugby league and rugby union are deeply ingrained in the cultural fabric of the Pacific islands. These sports provide a sense of identity, community and pride.

Australia, moreover, already has a solid foundation in sports diplomacy in the Pacific. The PacificAus Sports program, launched in 2018, supports Pacific athletes through coaching and development, and promotes gender equality and social inclusion through sports. The NRL’s Pacific Outreach program has produced numerous stars who serve as role models, and foster a sense of connection with Australia.

By investing in sports development and fostering genuine relationships with Pacific Island nations, Australia will gain four advantages. First, it will counter China’s narrative. Sports diplomacy provides a positive and engaging counter-narrative to China’s economic coercion and political interference.

Second, it will strengthen people-to-people links. Sporting exchanges foster cultural understanding and goodwill, builds trust and strengthening bilateral relationships.

Third, it will promote economic development. Sports tourism and related industries create jobs and generate revenue, offering an alternative to Chinese investment.

And, finally, it will enhance Australia’s soft power. A robust sports diplomacy program will bolster Australia’s image as a supportive partner in the region, as opposed to China’s, which inevitably ends up being viewed as the sole benefactor.

With the forthcoming update to the 2019 sports diplomacy strategy, it should build on its successes and include:

—Increased investment in PacificAus Sports. By significantly expanding the program’s reach, it will provide more opportunities for Pacific athletes and coaches to compete at the elite level.

—Expansion of sporting partnerships. By partnering with other sporting organizations, such as the AFL and Cricket Australia, to promote their sports in the Pacific islands, they will gain new fans, players, and teams to compete against.

—Focus on grassroots development. Investment in grassroots sports programs will promote physical activity, healthy lifestyles and community development, strengthening the stability of the islands over the long-term.

—Diplomatic engagements. Sports diplomacy will offer more chances to engage with local governments, allowing for greater alignment with their priorities and needs.

—Promotion of gender equality and social inclusion. Ensuring that sports diplomacy programs are inclusive and accessible to all, regardless of gender, ethnicity or socioeconomic status, will help to promote social stability into the future.

China’s aggressive pursuit of influence poses a direct threat to Australia’s national interests and regional stability. While traditional diplomacy remains essential, it is no longer sufficient alone. Australia must embrace sports diplomacy as a strategic tool to counter China’s coercive tactics and strengthen its relationship with the Pacific Island nations. By leveraging the power of sports, Australia can build genuine partnerships based on shared values, mutual respect and a love for the game.

From the bookshelf: ‘Zhou Enlai: A Life’

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Zhou Enlai was a giant of twentieth century international relations. Serving as China’s premier from the establishment of the People’s Republic in 1949 until his death in 1976 and also as China’s first foreign minister, Zhou set up China’s foreign service and skilfully guided China through the international events of the entire Mao Zedong era.

Zhou was a key member of the Chinese Communist Party’s leadership already in the 1920s, outranking Mao initially. He quickly established himself as the CCP’s indispensable person for getting things done. Later, as premier and foreign minister, he laid the foundations for China’s role as a leader of the global south in the 1950s, managed the Sino-Soviet rift in the 1960s, and was key to the opening of relations with the United States in the 1970s, helping to turn a crucial page in China’s history.

Zhou was the consummate political survivor. Under the mercurial Mao, this was no mean feat, as demonstrated by the fates of Zhou’s contemporaries. Following ideological disagreements in the wake of the disastrous Great Leap Forward, Mao shunned his anointed successor, Liu Shaoqi, who was detained by Red Guards and died in captivity. Lin Biao, another designated successor, was killed in a plane crash while fleeing the country following a power struggle, while Deng Xiaoping was purged twice, before rising to power following Mao’s death.

In stark contrast, Zhou learned to swallow his pride and was ultimately subservient to Mao. At the same time his diplomatic and organizational skills made him indispensable. However, Zhou’s record is mixed. He played a key role in tempering the chairman’s worst political excesses, particularly during the Cultural Revolution, and paved the way for the subsequent opening of China’s economy. But through his unwavering support he also facilitated Mao’s tyranny.

How did Zhou manage to survive over half a century of political turmoil, while at the same time deftly ushering China onto the global stage?

In Zhou Enlai: A Life, Chen Jian answers this question and many more. Chen is a professor of history at New York University and an emeritus professor at Cornell University. He spent the better part of 20 years researching this vivid and nuanced biography of a leader described by US Secretary of State Henry Kissinger as ‘one of the two or three most impressive men I have ever met’.

Zhou’s complex relationship with chairman Mao is at the centre of Chen’s narrative. In the 1920s at the CCP headquarters in Shanghai, Zhou was reluctant to become the head of the CCP, setting a pattern that would mark his entire career as the steadfast number two. On economic policy and even ideology, the moderate and reform-minded Zhou and the chairman never quite saw eye to eye.

The manipulative Mao used and abused the relationship, never entirely trusting Zhou. To survive the chairman’s whims, Zhou accepted frequent debasement and reprimands while only rarely receiving praise. When Zhou was diagnosed with gallbladder cancer in 1972, Mao prevented him from receiving potentially lifesaving surgery. It is widely assumed that Mao did not want Zhou to outlive him.

Throughout his career Zhou skilfully managed events, with a keen eye for detail. During the turmoil of the Cultural Revolution, he ensured that the Zhongnanhai leadership compound and the cultural treasures of the Forbidden City were protected from rampaging Red Guards.

Zhou’s list of international achievements is vast. He negotiated sensitive border issues with Indian leader Jawaharlal Nehru, managed conflict-ridden relations with Soviet leaders Joseph Stalin and Nikita Khrushchev, established ties with newly independent emerging economies and opened up relations with the West. As premier, Zhou also handled domestic issues. He led the drafting of China’s first five-year plan and worked hard to counterbalance Mao’s policy swings and mitigate the damage caused by the Great Leap Forward and the Cultural Revolution.

Chen also provides a Chinese perspective on the behind-the-scenes negotiations leading up to Nixon’s visit to China, which have been extensively covered from an American perspective. The early stages were particularly sensitive, with both sides inching their way towards negotiations and neither side wanting to lose face.

In late 1970, Zhou arranged for major Chinese newspapers to publish a picture of Mao meeting the American journalist Edgar Snow, intending to send a sign to the Americans. At the time serving as national security adviser, Henry Kissinger missed the signal and later admitted that the Chinese ‘overestimated our subtlety’. To ensure that everything went to plan, in the ‘ping-pong diplomacy’ that followed, Zhou ordered the Chinese players to ‘let the American players win a few games’.

Chen provides a fascinating account of the wrangling within the CCP that deepened the rift between Mao and Lin Biao, and of the power struggle within the top leadership as Zhou and Mao both prepared to ‘meet Karl Marx’. As Xi Jinping advances in age and China’s younger leaders position themselves for an eventual succession struggle, these lessons will become increasingly relevant.

The lives of China’s top leaders, including Mao and Deng, have been extensively covered, but a comprehensive account of Zhou’s life has been a long time coming. Thoroughly researched, detailed and balanced, in Zhou Enlai: A Life, Zhou finally has the biography he deserves.

No, Malaysia is not moving away from the West

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Australia should understand that, from Malaysia’s perspective, being closer to China does not mean moving away from Australia or the West. Premier Anwar Ibrahim’s pro-China statements should be no cause for alarm.

Misinterpreting Anwar’s actions as pro-China could provoke unnecessary tension between Australia and Malaysia and thereby weaken regional security and prosperity, not least because the two countries are partners in the Five Power Defence Arrangements (FPDA).

Writing in The Strategist, Euan Graham judges that Anwar is leaning towards China and away from the West, implying that Malaysia will be less reliable as Australia’s security partner, at least while the prime minister remains in office. Evidence includes frequent statements by Anwar and his ministers that would be agreeable to China and an absence of criticism of it.

In fact, the Anwar government’s engagement style with Beijing does not differ much from that of previous Malaysian administrations.

In 2021, when AUKUS was announced, then-Malaysian defence minister Hishammuddin Hussein stated his intention to consult Beijing about the matter. Incidentally, Anwar led the opposition party that criticised Hishammuddin for doing so. In 2016, Malaysia bought China-built warships under the premiership of Najib Razak, taking itself close to China in defence relations.

Further back, in 1974, Malaysia was the first among the five founding members of the Association of South East Asian Nations to establish diplomatic relations with China.

Given this history of close engagement, how should Australia view Malaysia’s more recent approaches towards China?

The answer lies in Malaysia’s strategic culture. Like other Southeast Asian states, Malaysia does not view its strategic environment through a binary lens. It chooses to work closely with China on specific issues and cooperate with the United States on others. Malaysia considers it possible to move closer to China without distancing itself from Australia or the West.

In its dealings with China, Malaysia prefers to adopt quiet diplomacy—a careful approach that acknowledges its limited resources in the face of China’s military might and seeks to avoid an escalation of tensions. Senior Malaysian politicians and diplomats have privately said they have resisted China behind closed doors when they thought it was threatening their nation’s interests.

Australia should know that Malaysia’s security concerns do not conflict with Australia’s. The two are aligned. Malaysian defence officials have privately said that they consider China’s military build-up and excessive maritime claims in the South China Sea to be significant security threats. Thus, Malaysia is bolstering its defence capabilities in East Malaysia, the part of the country that is closest to China’s claims in the South China Sea. Furthermore, senior officials have privately welcomed the United States’ role in countering China, indicating a shared understanding of security challenges.

In any reappraisal of Malaysia–Australia relations, it must be remembered that not only Malaysia benefits from strong bilateral ties; Australia does too. It is through the Malaysian air base at Butterworth that Australia has a military foothold in the region, conducting surveillance operations that cover parts of the Indian Ocean and Southeast Asia. Australia gained access to the base through Malaysia’s goodwill, which was in turn nurtured by Australian diplomacy.

Australia should also consider that its economic prosperity benefits indirectly from its military assistance to Malaysia. A safe and secure maritime environment is critical for Australia, as 99 percent of commodities that enter or leave the country do so by sea. The Royal Malaysian Navy, which trains with Australia in FPDA exercises, patrols the Straits of Malacca and the Sulu Sea, two critical waterways in the region.

Australia would be unwise to turn its focus away from Malaysia. Beijing would likely exploit any vacuum to assert its influence, as it did with Cambodia when the US reduced its engagement.

In its approach to the region as a whole, Australia must be uniform in its actions and words and project a coherent foreign policy. It has assessed that Southeast Asia is critical for its security, as outlined most recently in the 2023 Defence Strategic Review and the 2020 Defence Strategic Update. So its foreign policy must give the region a corresponding level of priority. Australia must invest in diplomacy and defence relations with the region.

Great while it lasted: Chinese demand for Australian minerals is sagging

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Australia’s 20-year-long economic party, funded by China, may be drawing to a close, with consequences for federal and state budgets, superannuation returns and living standards generally.

The iron ore price is the most obvious pointer to China’s declining demand for Australia’s raw materials: it has come down from an extraordinary peak of US$144 a tonne at the beginning of January to a spot price of US$92 this month, and the fall is expected to continue.

It is amazing that it has remained high for as long as it has, given that the construction of housing in China—traditionally accounting for 30 percent of its domestic steel use—has turned down since the biggest builder, Evergrande, struck financial trouble in 2021.

The subsequent collapse of Evergrande and other major builders has sapped Chinese consumer confidence, since housing is by far the biggest destination for household savings. Authorities sought to offset the housing decline by advancing further support to manufacturing and seeking growth in export markets.

China’s exports rose from an annual average of US$2.5 trillion between 2018 and 2020, reaching US$3.4 trillion over the past three years. While this has brought protest and retaliatory tariffs in many advanced nations, Australia was able to piggy-back on China’s export boom.

The prices Australia receives for its exports, relative to what we pay for our imports, have never been better than over the last two years. Our returns from trade have been even greater than during the peak of the resources boom in the early 2010s. The only other episode in Australia’s history that comes close was the wool boom during the Korean War in 1951, but that lasted barely a year.

The benefits of the bonanza have been widely spread. The resource companies and their shareholders, including most Australian superannuation funds, have achieved extraordinary returns. Resource company tax payments have delivered healthy budget surpluses to the federal government, despite its spending rising to the highest level in almost 40 years. Royalties have boosted the finances of the West Australian and Queensland governments.

The public at large gains not only from the spending on government services but also from cheaper imported goods with the strength of export prices boosting the value of the Australian dollar.

These extraordinary returns to Australia from trade have occurred while global trade has been flat. There has been no growth in world trade volumes since the beginning of 2022, and average trade prices are lower.  The International Monetary Fund attributes the weak global trade performance to the rise of protectionism and fragmentation, as trade within geopolitical blocs rises while trade between them falls.

The strength of Australia’s returns from trade over the past two years was not expected. Treasury has repeatedly predicted an imminent slump in iron ore prices to US$55 to US$60 a tonne (with similar falls in coal prices) in every budget since at least 2017.

But the Chinese authorities’ preference for stimulating their economy through subsidies to manufacturers, rather than through tax cuts or payments to consumers, has kept the rivers of cash flowing to Australia’s miners.

Although the past few years have been exceptional, Australia’s Chinese bonanza is now into its 20th year. Until the early 2000s, China’s economic growth was driven by light industry, but huge investments in infrastructure and heavy industry brought explosive growth in demand for Australian resources from 2004 onwards.

Until then, it was thought that Australia’s dependence on resource exports would bring ever-weaker returns from trade: from the mid-1970s until the early-2000s, the average returns from exports were gradually falling while the average cost of manufactured imports was rising. This was the outlook facing the Howard government for much of its term.

Instead, there has been a remarkable rise in Australian living standards. In 2004, Australia’s income per person ranked 23rd, behind the United States, all the major countries of Europe, Britain and Japan.  It now ranks ninth and has overtaken every larger country except the US (excluding tax havens), according to World Bank data.

But China is now bumping up against the limits of its export-driven economic model. Export growth is slowing and steel production is falling. Steel output in July was down 9 percent from the previous month leading the chair of China’s biggest steelmaker, Baowu Steel Group, Hu Wangming, to warn staff at the company’s half-year meeting that conditions were like a ‘harsh winter’ that will be ‘longer, colder and more difficult to endure than we expected’.

It is a chill that will likely be felt in Australia.  Already, Treasurer Jim Chalmers is warning that the federal budget balance will deteriorate, while the impact of weaker exports will flow through to superannuation returns, the value of the Australian dollar and the cost of imported goods. Living standards will suffer.

For the most of the past 20 years, it has been a seller’s market for Australia’s resources. The many efforts of China’s authorities to weaken the markets for major commodities have failed. How China will exploit its market power once it becomes a buyer’s market is an open question.

No, China isn’t really suppressing its production of fentanyl precursors

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China has announced new controls over the production of precursor chemicals used to make fentanyl, the deadly illicit drug that’s killing thousands of Americans every year. But the new controls do nothing to dismantle the domestic policies that have led to China’s fentanyl dominance, and they apply to only three precursor materials out of hundreds produced, promoted and exported by China over the past two decades.

On 7 August, The Financial Times reported the change in China’s regulation of the three precursors: 4-AP, 1-boc-4-AP and Norfentanyl. But, as the newspaper noted, UN member states agreed to those restrictions back in 2022. For almost two decades China has been a major global source country for synthetic illicit drugs or their precursors. Almost all of the methamphetamine is manufactured using precursors from China.

The new controls—a result of a cooperative agreement reached by presidents Joe Biden and Xi Jinping in November 2023—may appear to signal a commitment to counter narcotics, but China’s government has been subsidising the production of fentanyl through longstanding tax rebates.

Fentanyl, a synthetic opioid 50 to 100 times more potent than morphine, is a central driver of the US overdose crisis. In 2022, it was linked to around 71,000 of the more than 100,000 reported US drug overdose deaths. Even a 2 milligram dose can be fatal.

While fentanyl and other synthetic opioids are trafficked into the US by Mexican cartels, almost all the global supply originates from China. Fentanyl is also not an outlier. As reported in a paper by the US congressional Select Committee on the Chinese Communist Party, Chinese companies are the major global supplier for methamphetamines, ketamine, tramadol, nitazenes and xylazines.

That market dominance is the result of the promotion and protection of illicit pharmaceutical industries by the CCP.

The Financial Times article, written by Demetri Sevastopulo, reported that China’s new controls on three precursors signal improved cooperation with the US. On the Biden–Xi agreement, a Chinese Embassy spokesperson in Washington, Liu Pengyu, said, ‘China has always attached great importance to international counter-narcotics cooperation and is willing to co-operate with countries worldwide including the United States. We hope that the US side can work with China in the same direction and continue our cooperation based on mutual respect, managing differences, and mutual benefits.’

The Financial Times and Liu Pengyu overlook two inconvenient facts.

First, the CCP has not only allowed fentanyl and precursor exports but promoted them. It’s alleged that, in some cases, the manufacturing operations appear to have direct government links. In leaked documents, companies boasted that the CCP owned them and that their illicit products were tax-exempt.

China has a value-added tax (VAT) system that reduces or eliminates the tax on exported goods through a ‘refund rate’ mechanism, incentivising companies to manufacture and export certain products. It’s a trade policy tool to regulate export prices and boost international competitiveness. As far back as 2018, the VAT system is alleged to have incentivised the export of at least 17 illegal narcotics that are Schedule I controlled substances and have no legitimate purpose, including 14 fentanyl analogues. Analogues are chemically similar to existing substances, designed to mimic or alter the effects of the original while varying slightly in structure to evade legal restrictions or to enhance specific properties.

The CCP provided unusually high VAT rebates of 13 percent for synthetic narcotics, compared with the standard rebates of 3 percent, 6 percent and 9 percent for most other commodities. The select committee’s report of April 2024 on the US fentanyl epidemic reported that those subsidies remained in place as recently as that time.

Further, the CCP’s new controls address only three chemicals out of the hundreds produced and exported by China to make fentanyl. Synthetic opioids, such as fentanyl, can be made through various chemical processes that require specific precursors. The CCP subsidises, and has no control measures on, NPP and ANPP—the two precursors most valued by Mexican drug cartels. Not only that, but the US has begun to intercept higher volumes of boc-4-piperidone (the other fentanyl precursor that was proposed for international control), 2-phenethyl bromide (including one shipment of 660 kilograms) and para-fluorofentanyl. These findings suggest a diversification by traffickers into the illicit manufacture of more fentanyl end products, bypassing the agreements made between the US and China. Chinese criminals used a similar approach to produce ‘novel substances’ and avoid regulatory controls. ‘Novel substances’ are designed to mimic the effects of existing illicit drugs or to produce new psychoactive effects.

Other synthetic opioids may use different precursor chemicals. The production of all synthetic illicit drugs involves complex chemical reactions that typically require specialised knowledge and equipment.

China has long claimed that it cannot control illegal activities in its chemical and pharmaceutical industries due to the difficulty of identifying manufacturers exporting synthetic narcotics. But to receive a VAT refund, a company must provide details of the name and amount of the exported substance to the government, including complete identification and sales records. The US select committee’s April 2024 report also presented solid evidence that the CCP provided monetary grants and awards to companies openly trafficking illicit fentanyl online.

Without addressing the CCP’s systemic support for illicit narcotics, the new controls on three precursors are little more than a public-relations stunt to save face and obfuscate the party’s complicity in this deadly problem. If China wants to be a good global citizen, it must remove VAT subsidies on illicit pharmaceuticals, increase regulatory oversight and domestic law enforcement’s counter-narcotics efforts, and remedy international compliance deficits for all illicit pharmaceuticals.

While Australia doesn’t, at present, have a fentanyl problem, we do have a methamphetamine epidemic. Our epidemic, like the US one, is fed by chemical precursors produced in China. It’s imperative that Australia maintains an independent sovereign foreign policy, but there’s great value in Australia and the US adopting a shared stance against China’s illicit narcotics role.

To win the AI race, China aims for a controlled intelligence explosion

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China’s leader Xi Jinping has his eye on the transformative forces of artificial intelligence to revolutionise the country’s economy and society in the coming decades. But the disruptive, and potentially unforeseen, consequences of this technology may be more than the party-state can stomach.

While there are signs that the leadership is considering loosening the grip in this space, the Chinese Communist Party’s instincts towards overregulation, ideological conformity, and cautious incrementalism could stand in the way of China’s ambitions for global supremacy in AI.

Xi has made AI a strategic priority and wants its development to move quickly. Clearly frustrated by the perceived slow pace of China’s innovation and technological progress, Xi focused the third plenum meeting of the CCP on ways to accelerate his version of ‘Chinese modernisation’. At a politburo study session in January this year, he said he wanted China to ‘break away from the traditional economic growth model and productivity development path’ it has been on for the past 40 years.

To do this, Xi wants China to harness ‘new quality productive forces’ that will drive disruptive breakthroughs and not merely produce incremental improvements on existing technologies. Xi wants to encourage great technological leaps forward that will have a ‘profound impact on global economic and social development and the progress of human civilization’, according to a letter he sent to the 2024 World Intelligence Expo in June this year.

He also sees AI playing a central role in advancing China’s military power by pushing the People’s Liberation Army through multiple stages of military-technological development simultaneously rather than sequentially.

China hopes to acquire ‘leapfrog’ technology, particularly in military AI, which it hopes can change the military balance of power by giving the PLA an overwhelming edge. Debates about the future potential of AI by military analysts in China focus on developing the PLA’s ‘intelligentised warfare’ capabilities, referring to the aim of using AI to control the will of the enemy’s top decision-makers. If successful, AI has the potential to bring about revolutionary changes in the way militaries operate and warfare is conducted—comparable to mechanised warfare, information warfare, and even nuclear warfare.

The party-state apparatus is following suit. While there is, in theory, a ‘whole-of-society’ approach to science and technology development, the various parts of Chinese society in practice have different resources, outlooks, and priorities for how to develop and use AI. Ultimately, it is Xi who is pushing for this technology to be China’s deus ex machina, turbo-charging its economy out of a malaise, transforming its military power and capabilities, and catapulting the Chinese nation to the top of the global order.

Mixed signals are coming from the centre of the political system. In 2017, the State Council called for developing the resources to fuel major breakthroughs in AI by 2025 and to be the global leader in AI by 2030—but gave few details on how to do this. The Council has also urged administrative authorities and courts to adopt a cautious and tolerant regulatory stance toward AI. Following this year’s two session meeting, Premier Li Qiang emphasised the need for greater policy support for AI and to create ‘a relaxed environment for the development of the AI industry’.

Meanwhile, the clock is ticking. Xi sees advances in science and technology as a proxy measurement for China’s overall development. In a speech at the National Science and Technology Awards in June, he noted that, although great progress had been made, ‘innovation capabilities are still relatively weak, some key core technologies are controlled by other countries, and there is a shortage of top scientific and technological talent’.

The twin opportunities and risks of AI create a quandary for the CCP as it moves to put safety measures in place that could act as impediments to progress. Getting the behemoth Chinese party-state to head in one direction has historically been difficult but has been a large part of Xi’s focus over his first two terms in power. Chinese regulations are often described as ‘more reactive than proactive’, and this is generally a theme of Chinese policymaking in all areas. Regulation enforcement can be spotty.

Chinese authorities have begun taking regulatory action, including against deepfakes and harmful recommendation algorithms in 2018. Their top concerns, according to a white paper on AI-generated content published by the China Academy of Information and Communications Technology, are to maintain the CCP’s objectives for online information and network security.

But there are other known risks. PwC estimates that AI and related technologies, such as robots, drones and autonomous vehicles could displace around 26% of existing jobs in China over the next two decades—which would strike at the heart of the implicit social contract the CCP has with the people.

The biggest obstacles to AI success are in fact those the party-state itself has imposed to maintain its control on social stability and to manage disruption and change.

The data regulations and laws China has created, for example, have a heavy focus on national security, meaning protection of the CCP’s position of power must trump the easy flow of huge amounts of data needed for AI development and innovation. Legal restrictions on cross-border data transfers pose a significant compliance challenge for foreign companies operating in the country. Draft regulations on generative AI released in May signalled a shift towards more stringent security standards and regulatory oversight.

Thanks to the CCP’s obsession with information control and ideological conformity, Chinese regulators require AI-generated content to ‘reflect core socialist values and not contain content that subverts state power’, putting the country’s AI aspirations on a collision course with its censorship regime—not to mention precluding future research collaboration and exporting technology to liberal democracies.

Some Chinese companies have been better at threading this needle than others. Researchers from Fudan University created a benchmark to test compliance on different Chinese large language models (LLMs) and determined ByteDance’s ‘Doubao-Pro’ to be the best at responding in ways that were ideologically correct.

The party-state’s obsession with security is a straitjacket it chooses to wear. It is always free to loosen it—and there are some signs that it is at least considering that. But to make Xi’s AI dream a reality, China’s bureaucracy will need to walk a shaky tightrope to maintain the CCP’s ‘two miracles’ of economic development and social stability, while also tolerating the unavoidable disruption that comes with technology-driven transformation.

Foreign interference is a threat to Australia—including diaspora communities

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The Australian Security Intelligence Organisation (ASIO) has confirmed publicly that Iran isn’t the only foreign power interfering with a diaspora community in Australia. Responding to a question on whether India was similarly engaged (following a media report), ASIO Director-General Mike Burgess told ABC’s Insiders on 11 August ‘there is a range of countries that [commit foreign interference in Australia], not just Iran, many countries that would surprise your viewers. When [ASIO] find it we deal with it effectively.’

I’ll take Burgess at his word that those countries would surprise, as I have a suitably vivid imagination.

The Department of Foreign Affairs and Trade has previously confirmed interference by both the Chinese and Cambodian governments, and former Prime Minister Malcolm Turnbull specifically referred to reports of Chinese covert activities when introducing foreign interference laws in 2017. And similar allegations have been raised publicly against Rwanda, Ethiopia, Myanmar and Vietnam, among others.

What should surprise no one is that the director-general of ASIO would be highlighting this threat. For there is an unspoken contract between the Australian government and those who have come to make their home in Australia and contribute to its future: they have a right to be free of the coercion, politics and prejudices of authoritarian governments they’ve left behind; and our government has a duty to safeguard the social cohesion we strive for in Australia.

So, not only did the former home affairs minister Clare O’Neil specifically call out Iran’s misbehaviour last year; Burgess used his Annual Threat Assessment in February to detail efforts by unnamed foreign intelligence services to harm—even disappear—diaspora members here.

Now it’s a fact of international politics that everyone spies on everyone else. Study of publicised espionage cases between 1985 and 2020 identifies at least 176 separate instances of spying globally, including espionage not just by major powers but by nations such as Ghana, Greece and Ecuador—to name just three that might surprise—and in those cases the spying was directed at the US. And espionage can blend into foreign interference—use of covert, coercive or corrupt activities, typically by intelligence services, to influence other nations’ politics and policies.

But what Burgess and O’Neil were referencing is a particularly pernicious variant of foreign interference, especially for liberal, multicultural societies: interference directed at Australians with links overseas, characterised by surveillance, intimidation and harassment, and spanning Australia and origin countries (where extended family can be used as leverage over Australian residents). Such behaviour is increasingly common although also more commonly countered. According to ASIO successful disruptions of interference activities in Australia have increased by 265 percent since 2020.

What are foreign governments seeking when they do this? Sometimes it’s about regime security (for example, historically in Australia by the former Yugoslavia) or clumsy attempts to police nationals temporarily abroad (for example, international students). Sometimes it’s clothed in the language of countering terrorism. In other instances it’s to enable espionage against Australia (as with South Korean intelligence activities revealed in 2013, or the ‘nest of spies’ revealed in 2021) or to subvert political outcomes (per China’s documented efforts over the past decade). Sometimes Australians are simply collateral damage (for example, when Israel used Australians’ passports in a 2010 assassination mission).

It’s also important to distinguish this behaviour from other, legitimate, influence activities by foreign governments. As O’Neil said last year,

Foreign governments try to influence politics and decision-making in other countries all the time, in perfectly legitimate ways …. But what makes foreign interference problematic and illegal is covertness, and deception. That is, the attempts by foreign governments to secretly influence our cherished democracy, and coerce people living in Australia to behave in ways that undermine that democracy, for the benefit of a foreign power.

Since 2017 successive Australian governments have adopted a bipartisan, prioritised approach to countering foreign interference. In July, the government announced further measures, including expanding and making permanent the four-year-old, and invaluable, Counter Foreign Interference Taskforce. It also established a Foreign Interference Communities Support Hub to help affected Australians identify and mitigate interference threats, and it improved immigration processes intended to manage potential espionage and interference threats from visitors.

This commitment is matched by ASIO itself. Despite some misinterpretation this month when the national terrorism alert level was raised to ‘probable’, Burgess has been clear that espionage and foreign interference and politically motivated violence are now equally ASIO’s principal focuses.

However, ASIO can’t do this without maintaining relationships of trust with diverse communities across Australia. It also needs to be complemented by non-security measures, such as addressing the danger posed by the loss of diversity in home-grown foreign language media and the resulting segregation of non-English speaking residents from the rest of the community.

Countering foreign interference is a whole of nation effort and, even if we’re surprised by which countries are culpable, we should be clear-eyed about the threat it poses to all aspects of society, from the government and democracy to the media, the information we accept as news, and the well-being of our individual citizens and communities.

Hasina’s downfall may create new opportunities in Bangladesh for China

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The ousting of Bangladesh Prime Minister Sheikh Hasina may upset the fragile balance she established between her country and India, China and the United States. India, which has used its influence with Hasina’s government to hold down Chinese involvement in Bangladesh, may have the most to lose.

China, on the contrary, may have an opportunity to strengthen its presence on the Bay of Bengal.

Hasina’s diplomacy was characterised by a balancing act with the three major powers, allowing Bangladesh to extract maximum concessions and limit dependence and interference in its internal affairs.

Her departure on 5 August creates circumstances in which the stakes are particularly high for India, which sees China’s involvement in Bangladesh’s infrastructure projects as a threat. In 2016, New Delhi convinced Dhaka to abandon the Sonadia deep water port project China intended to build.

New Delhi also fears for the future of trans-shipment arrangements between Bangladesh and India’s northeast, which the new government in Dhaka may be tempted to revise. In this context, the ousting of Hasina is a setback.

Hasina’s return to power in 2008, with New Delhi’s support, initiated a close rapprochement between Bangladesh and India, ending Dhaka’s complacency in relation to several terrorist groups that are often supported by Pakistan. It did also open a new era of cooperation with India in trade, energy, infrastructure, defence, security and science. Under Hasina, Bangladesh moreover enforced stricter border controls to check for influxes of illegal immigrants.

India did not ignore the unpopularity of an increasingly coercive regime, but it underestimated the upsurge in opposition to the Hasina government following the January 2024 election, which was marked by an opposition boycott and an unusually low voter turnout of 40 percent. Bangladesh’s political proximity to India alienated Bangladeshis, generating an ‘India-out’ campaign in March 2024. India will need to adjust its relationship with Bangladesh.

China benefited hugely from Hasina’s tenure. However, because it has always presented a facade of political neutrality, perceptions of China in Bangladesh are predominantly positive, and China is less likely to suffer from the ousting of the regime. At the end of 2023, 700 Chinese companies operated in Bangladesh. During Hasina’s visit to Beijing in July 2024, the two countries elevated their relationship to a ‘comprehensive strategic cooperative partnership’. Defence cooperation also became an important component of the relationship. China delivered two refurbished submarines to Bangladesh, commissioned in 2023, and built the BNS Sheikh Basina submarine base in Cox’s Bazar. Today, China is Bangladesh’s most important arms supplier. China provided 73.6 percent of Bangladesh’s arms acquisitions between 2010 and 2020. Although their defence cooperation has been limited to arms sales and infrastructure building, it is increasingly operational. In May 2024, China and Bangladesh conducted their first-ever bilateral military exercise.

The military importance of China–Bangladesh cooperation should not be exaggerated. The May 2024 exercise was based on United Nations peacekeeping anti-terrorism operations. Bangladesh’s military cooperation with China still lacks the density of its cooperation with India, which involved 11 military drills between 2009 and 2023. However, the Bangladesh-China relationship does signal a proximity that would have been unthinkable a decade ago.

Recent tensions between Dhaka and Washington could serve the United States well in the transition period. Washington’s sanctions against Bangladesh’s Rapid Battalion Force—for human rights violations—and insistence that Bangladesh align with US democratic principles, are in keeping with the demands of Bangladeshi students during the recent uprising.

Dhaka had reached out to Washington to balance against India and China and get better terms from them. The US remains Bangladesh’s largest export destination, taking 14.5 percent of its exports. US arms sales to Bangladesh pale in comparison to China’s, but Washington maintains dynamic defence cooperation with Dhaka. However, the US cannot ignore the neutrality of Bangladesh’s recent Indo-Pacific strategy. Assuming the US views the current circumstances as an opportunity to push back against China’s influence in Bangladesh, it must be aware that the change of government may push Dhaka into Beijing’s welcoming arms.

Bangladesh’s future foreign policy orientation will ultimately depend on the new government’s composition. The Islamist movement, particularly the Jamaat-i-Islami, which Hasina had severely repressed, may be part of the new political set-up. This would most likely inhibit any US attempt to strengthen relations. For India, the re-emergence of the Islamist party on the Bangladesh political scene would mean the return of a pro-Pakistan government on its eastern flank, upsetting the regional strategic balance. How China would react remains unclear.

Sustainable critical materials can’t have a price premium without global standards

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If Australia and like-minded nations want secure, sustainable critical-minerals supply chains, they must tackle the interrelated challenges of price premiums and global environmental, social and governance (ESG) standards.

Australia and its miners are leaders in ESG performance in mining. Meeting high standards, however, costs more than working to lower ones.

Without minimum production standards, it’s hard, nigh impossible, to compete in critical-mineral markets flooded with products that are cheaper but come with inferior ESG compliance. This is not an argument for a reduction in Australian standards but for treating products that don’t meet minimum benchmarks as inferior and to be sold at a price discount.

Many agreements have been signed by like-minded nations to build more diverse supply chains than those currently dominated by China. Australia and its allies have committed to promoting high ESG standards for supply chains and agreed to explore how to achieve market price differentiation. For example, a May 2024 agreement between Australia and the European Union includes provisions for supply-chain transparency and promoting ‘market recognition for high ESG standards’.

As a recent ASPI report explained, there’s no common global standard for the sustainability of minerals supply chains or the ESG performance of miners. A recent proposal by several global companies for the London Metals Exchange (LME) to introduce a ‘green premium’ for nickel produced under high ESG standards failed for want of agreed standards and industry consensus.

The LME noted there were no common industry views about what should constitute ‘green nickel’ and that any standard to underpin premium pricing would have to cover everything from carbon footprints to labour rights. But why would there be such agreement when low standards are part of the business model for critical-minerals production in some countries, such as China and, for nickel, Indonesia? Buyers tend to be swayed by price as a primary consideration for supply.

Meanwhile, the suspension of much of Australia’s nickel production due to undercutting in the market by Indonesian production, backed by Chinese capital, has concentrated global supply while worsening environmental and social impacts.

Indonesia’s own attempts to diversify minerals investment away from China appear to be coming unstuck due to market conditions and poor ESG standards. In June, German company BASF and French company Eramet abandoned plans to develop a nickel–cobalt refining complex in Indonesia’s Weda Bay, North Maluku, citing availability of alternative supply chains to access ‘a secure, responsible and sustainable supply of critical raw materials for the production of precursor cathode active materials’.

So far, governments have largely left the development of ESG standards to industry, implicitly recognising that it’s the mining industry and downstream processors that have the incentive and expertise to develop standards.

While global consensus on standards will be difficult to achieve, more challenging will be establishing assurance mechanisms that critical-minerals supply chains meet the standards. Standards require government endorsement, but effective and trusted assurance mechanisms will need government-backed oversight and warranties.

Multiple global mining industry standards have been developed since 1997, when the Minerals Council of Australia (MCA) issued its Code for Environmental Management. (I was a co-author of the code). Those standards tend to apply to upstream extraction and primary and secondary processing, however. Few apply to the full minerals supply chain.

Several processes are underway to rationalise minerals supply standards, but not all appear to be coordinated, potentially continuing current fragmentation.

The Consolidated Mining Standard Initiative seeks to combine five mining industry standards into one global standard: the copper industry’s Copper Mark, the Mining Association of Canada’s Towards Sustainable Mining (also adopted by the MCA), the Mining Principles of the International Council on Mining and Metals, and two standards of the World Gold Council.

The Initiative for Responsible Mining Assurance is revising its 2018 Standard for Responsible Mining and Mineral Processing and a separate chain-of-custody standard for release by the end of 2024.

The Responsible Minerals Initiative, which has members from manufacturing, mining and processing, has developed the Global Responsible Sourcing Due Diligence Standard for Mineral Supply Chains, as well as standards for the processing and refining of several minerals.

The principal government-linked processes to facilitate the development of standards are conducted by the Organisation for Economic Co-operation and Development, which in May 2024 held its 17th Forum on Responsible Mineral Supply Chains, bringing together 1300 global industry, community and government representatives to discuss policy cohesion and responsible business conduct.

In 2016, the OECD issued the third edition of its Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, which has great relevance due to the rapid development of critical-minerals mining operations in several such African and Latin American nations. The OECD has also produced guidelines on environmental due diligence in mineral supply chains and on responsible business conduct.

How those OECD discussions and guidelines are to be translated and articulated with industry initiatives to produce globally accepted standards is unclear, but it needs to happen to achieve the critical-mineral supply-chain objectives of like-minded nations.

If new standards are agreed and recognised by governments, assurance mechanisms must be implemented with government backing and oversight.

Common standards and assurance mechanisms will provide an essential foundation to achieve differential pricing for responsibly produced minerals.

However, it will be very difficult to gain price premiums or to impose discounts for minerals not produced sustainably. Government subsidies via concessional loans or production tax credits are short-term and inadequate substitutes for market-driven pricing that meets full costs and margins. In any case, countering China’s willingness to manipulate markets that it dominates by withholding and dumping supply requires systemic global responses. For Australia, out-subsidising United States domestic production of minerals such as lithium is unlikely to be economically feasible and in any case is pointless.

It remains to be seen whether and how industry and governments can achieve differential prices for sustainably produced critical minerals that are needed to support their often higher costs. One thing that’s certain is that, without market demand for ESG standards, neither industry nor government will have much sway in promoting sustainable supply chains.

Under Anwar, Malaysia is moving away from the West

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Anwar Ibrahim would not be the first political dissident who has struggled with the transition from opposition to incumbency. In office, his grasp of complex policy issues, such as the South China Sea, has sometimes lacked depth, while his rhetoric often appears overblown.

Since he became prime minister, in November 2022, Anwar has recast Malaysia’s non-aligned, hedged foreign policy with his repeated embrace of neutrality as his preferred setting for Malaysia, his reluctance to say anything but positive things about China and his visceral reactions to the Israel–Hamas conflict.

This matters to Australia because Malaysia is one of its longest-standing traditional security partners in Southeast Asia and facilitates Australian Defence Force access into the sub-region. Anwar’s apparent anti-Western and pro-China leanings will very probably make Malaysia harder to work with while he is in office. The country may be unreliable if there is a major regional security crisis involving China.

So far, Anwar has not changed Malaysia’s official defence and security settings. And members of Malaysia’s armed forces generally prize their inter-personal and training ties with Western counterparts, including Australia.

Also, outsiders had qualms about some of Malaysia’s foreign policy proclivities under Anwar’s predecessors. During former prime minister Mahathir Mohamad’s long tenure (1981 to 2003, and 2018 to 2020), Malaysia often supported pan-Asianist and pan-Islamic initiatives and sentiments, while also sharply criticising the policies of Western governments. Still, Kuala Lumpur maintained close, if low-profile military links to the United States while also husbanding its residual Commonwealth security ties, including its position in the Five Power Defence Arrangements (FPDA) with Australia, New Zealand, Singapore and Britain.

There is a further domestic political context to some of Anwar’s foreign policy positioning. Nevertheless, doubts about Malaysia’s trajectory have notably risen under his leadership.

One obvious change factor is that the war in the Middle East has galvanised Anwar’s heartfelt attachment to the Palestinian cause, leading him to lionise leaders of Hamas as ‘freedom fighters’ and to mourn its political leader, Ismail Haniyeh, as a ‘dear friend’ after his assassination by Israel. This intemperate tone, and Anwar’s vitriolic outbursts against US support for Israel, will make it difficult for him to move closer to Washington for the remainder of his time in office, regardless of who wins the US presidential election in November.

Another hallmark of Malaysia’s foreign policy under Anwar has been the prevalence of pro-China sentiments voiced by him and his cabinet, including on Taiwan and the South China Sea. Beijing’s openly aggressive treatment of the Philippines and the near-permanent Chinese physical presence in Malaysia’s exclusive economic zone are overlooked.

On 19 June, during a visit of Chinese Premier Li Qiang to Malaysia, a joint statement by the two countries said, ‘Malaysia recognizes that Taiwan is an inalienable territory of the People’s Republic of China, in order for China to achieve national reunification and thus will not support any call for the independence of Taiwan.’ This unambiguous siding with Beijing prompted a protest by Taipei’s foreign ministry.

Anwar said in June that Malaysia had applied through Russia (in its current capacity as chair) to join the BRICS grouping, another signal of Kuala Lumpur’s willingness to align with China and Russia on the international stage. China’s state media has unsurprisingly welcomed the application. BRICS has notably failed to attract prominent new members, such as Argentina or Indonesia, and is now widely seen as a moribund forum, which even India, a founder member, has downgraded in its foreign policy.

Malaysian Foreign Minister Mohamad Hasan’s statement at the July ASEAN meeting of foreign ministers in Laos was a concerning precursor to what might be coming next year as Kuala Lumpur takes the reins as ASEAN’s rotating chair. In what was widely seen as a rebuke of the Philippines’ diplomatic efforts to enlist international support for its stand against China’s encroachment in the South China Sea, Hasan said, ‘If any ASEAN member … attempts to bring in external influence to solve its problems, it will lead to uncertainty in the Southeast Asian region.’

Malaysia’s desire to exclude other countries, such as Australia, Japan and the United States, from South China Sea disputes aligns with China’s preferences. It also helps China’s behind-the-scenes efforts to influence negotiations with ASEAN on a code of conduct for the South China Sea. It is particularly concerning that Anwar’s foreign minister explicitly equated the exclusion of countries apart from ASEAN members and China with the concept of ASEAN centrality.

Malaysia’s foreign policy tilt under Anwar naturally raises questions about its long-term value as a bilateral and multilateral security partner to Australia. Along with other ambivalent signals from ASEAN capitals, it should prompt an honest reappraisal of the Australian government’s determination to accord Southeast Asia a general priority within foreign policy. The Philippines and Vietnam aside, it’s not clear that beyond the ritual airing of ASEAN-centric bromides there is a collective vision or prize on offer to justify the ongoing level of diplomatic investment.