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Melbourne car dealer Nick Zhao may or may not have been approached by Chinese state operatives offering $1 million for the Liberal Party member to run for parliament. He’s dead and a coronial inquiry is underway. The new head of the Australian Security Intelligence Organisation, Mike Burgess, has said that ‘Australians can be reassured that ASIO was previously aware of matters that have been reported today, and has been actively investigating them.’ That’s good, if sobering, news because it tells us the allegations published in The Age and Sydney Morning Herald and aired on 60 Minutes are credible.

And apparent defector Wang Liqiang may or may not be an intelligence operative who worked for the Chinese Communist Party to compromise and disrupt pro-democracy students and groups in Hong Kong and who ran similar activities to disrupt Taiwan’s democracy. Wang has also reportedly said spies from Beijing were ‘operating with impunity in Australia’.

On Zhao, details are sketchy, so we’ll need to hear the results of the coronial inquiry and ASIO’s investigation.

With Wang, however, his account of the Chinese state’s covert work to interfere in Hong Kong and in Taiwanese and Australian politics came with reams of public detail. What he’s revealed aligns well with things we already know about Chinese intelligence work. What’s new is that he’s added important details on individuals, companies, places, times and activities which can be followed up. For ASIO, this will provide leads to better understand and disrupt this covert and corrupting Chinese state activity.

We can be pretty confident Wang is who he says he is and the Chinese agencies, companies and operatives he worked with did what he says they did. That’s even more likely given the Chinese embassy’s rapid denouncement of Wang that quoted a hastily issued statement from Shanghai police after Wang’s allegations were first reported. There’s no record of his supposed fraud conviction before the statement was issued and it seems like the kind of coverup you’d expect when a Chinese intelligence operation is compromised.

What does all this mean? Put bluntly, it shows that outgoing ASIO boss Duncan Lewis was spot on when he observed in September that terrorism had plateaued as a threat, but foreign interference was ‘on a growth path’. He noted that, ‘Unlike the immediacy of terrorism incidents, the harm from acts of espionage may not be present for years, even decades, after the activity has occurred. These sorts of activities are typically quiet, insidious and have a long tail.’ That’s an insight our political leaders and the broader Australian public need to take to heart.

Let’s suppose the alleged plan to get Zhao into parliament had actually worked. He would’ve been a Liberal backbencher working diligently on constituency issues in the Melbourne seat of Chisholm and showing his potential. Two or three elections from now, he might have aspired to an outer ministry and later, perhaps, higher things. An ability to bring in plenty of cash to the party over that time, no doubt with help from his Chinese government handlers, wouldn’t have hurt. That’s the kind of ‘long tail’ damage Lewis was talking about.

Every Australian political party now needs to take the threat of Chinese covert interference in our democracy seriously and work with government agencies to reduce the prospects that our public debate and our parliamentary decision-making will be compromised. It’s not undemocratic for the Greens, the Liberals, Labor and the Nationals to take advantage of the knowledge and expertise of Australia’s national security agencies.

In the face of well-organised and lavishly funded interference from President Xi Jinping’s powerful authoritarian state it’s essential to protect the vibrancy and independence of our political system. It’s also worth noting that our Australian Chinese community is not even the most likely place to look for political figures who might be candidates for long-term cultivation.

Nowadays, it’s almost routine for former politicians and senior civil servants involved in the public debate on China to be performing advisory work for or receiving sponsorship from Chinese entities. Many of these entities are harmless, but some, no doubt, have close links to CCP institutions that these public voices and the Australian public need to understand, not dismiss. Remember it was the scandal around former Labor senator Sam Dastyari—not a Chinese Australian—that crystallised a series of events ending in the passage of the foreign interest transparency law by a thumping bipartisan majority in August last year. That law doesn’t yet cover politicians and their staff—a glaring gap that must now be closed.

Finance Minister Mathias Cormann was right to say we would be ‘getting a bit ahead of ourselves’ to suggest the government complain to Beijing over the allegations about Zhao. Refreshingly, he went on to say that ‘issues will arise that need to be dealt with and where there is bad and inappropriate conduct, we will call that out and seek to have that addressed’. He emphasised that ASIO’s investigation needs to take its proper course.

In contrast to the case of Chinese state hacking into our parliament and three major political parties earlier this year, once this investigation is complete Burgess needs to take the same approach he took as head of the Australian Signals Directorate and come out of the shadows. That’d be best done with him sitting in a booth in parliament while Prime Minister Scott Morrison or Home Affairs Minister Peter Dutton makes a public statement on the topic.

The sensitive and corrosive issue of Chinese state interference in our democracy needs to be handled in a calm and orderly way. At the same time, the government must be honest and open with the Australian people about the challenge we are facing and how it is being dealt with.

In this special episode, ASPI Executive Director Peter Jennings and Defence, Strategy and National Security Director Michael Shoebridge discuss the unprecedented leak of hundreds of pages of internal Chinese government documents.

The trove of information was revealed by the New York Times and shows details behind the program of the mass incarceration of Muslims in Xinjiang.

Although the rapid escalation of violence in Hong Kong seems terrifying enough, things may be about to get much worse. The communiqué of the recently concluded fourth plenum of the 19th Central Committee of the Chinese Communist Party indicates that President Xi Jinping is planning to tighten his grip on the former British colony at any cost. He should prepare to rack up a formidable bill.

The communiqué includes two ominous pledges. First, China’s central government will ‘control and rule’ (guanzhi) Hong Kong (and Macau) using ‘all the powers vested in [it] under the constitution and the Basic Law’, the mini-constitution that defines Hong Kong’s status. Second, it will ‘build and improve a legal system and enforcement mechanism to defend national security’ in both special administrative regions.

A few days after the plenum, the CCP’s plan to assert its control over Hong Kong became clearer when it released the full text of the resolution endorsed there by its central committee. China’s central government intends to change the process for appointing Hong Kong’s chief executive and key officials, and reform the system governing how the Chinese National People’s Congress Standing Committee interprets the Basic Law. Moreover, China will support the strengthening of Hong Kong’s law-enforcement capabilities and ensure that the city government enacts legislation to enhance national security. It will also deepen Hong Kong’s economic integration with the mainland and expand ‘education’ programs to cultivate a ‘national consciousness and patriotic spirit’, especially among civil servants and young people.

Though the details of the plan have yet to be worked out, it seems evident that China’s leaders intend to gut the Basic Law, exercise more direct control over the appointment of key officials, weaken or eliminate Hong Kong’s judicial independence, curtail civil liberties and suppress political dissent, including through ideological indoctrination. In other words, they have decided effectively to abandon the ‘one country, two systems’ model, which Deng Xiaoping promised to uphold for 50 years after Hong Kong’s return to Chinese rule in 1997.

China’s leaders must know that they will run into powerful resistance. While some initial steps will be taken in Beijing, the plan’s most substantive measures will require action on the ground in Hong Kong. And if the ongoing protests have shown anything, it’s that Hong Kong’s people won’t go down without a fight.

In fact, China has tried to get Hong Kong’s legislative council to pass national security legislation before, in 2003, but more than half a million residents took to the streets to protest, forcing the government to withdraw the bill. Likewise, China’s attempt in 2012 to institute ‘patriotic education’ in Hong Kong by changing its history textbooks ignited a rebellion among parents and students, forcing the government to back down.

As the CCP attempts to exert total control over Hong Kong, even larger demonstrations, marked by even more violence, are likely. The city will descend further into chaos and become ungovernable. But that may well be what China’s leaders want: an excuse to deploy security forces and impose direct control over the city. In that sense, the fourth plenum may mark the beginning of the end of Hong Kong as we know it.

What Xi and the CCP seem not to understand is how much this approach will hurt them. After all, China is likely to lose much of its access to the global financial system as countries revise their relationships with the new Hong Kong.

Already, the US House of Representatives has adopted a bill that, if also passed by the Senate, would mandate an annual review by the State Department to determine whether Hong Kong remained sufficiently autonomous to justify its special trading status under US law. As China’s central government tramples on Hong Kong’s rights, more Western democracies—including those that have hesitated to support US President Donald Trump’s efforts to contain China—are likely to support comprehensive economic sanctions.

It should be obvious that this would be a devastating development for Xi and the CCP, whose legitimacy depends on continued economic growth and improvements in living standards. But in a country whose top leadership brooks no dissent, there are few safeguards against bad policymaking.

Two years ago, Xi declared that by the time the People’s Republic of China celebrates its centenary in 2049, it should be a ‘great modern socialist country’ with an advanced economy. The fourth plenum communiqué reiterated this objective. But if China’s central government reneges on its obligations to Hong Kong, that goal is likely to become little more than a distant dream.

China’s dominance of the rare-earths industry is the result of a 40-year campaign by the Chinese state that has given it a market share of between 80% and 90% of the mining, processing and manufacturing of the minerals and their end-use products.

Rare earths are a tiny market worldwide—the total value of mine production is only around US$4 billion—but their uses in high-technology applications have multiplied over the past two decades.

China had been mining rare earths since the 1950s as a by-product from an iron ore mine, Bayan Obo, in Inner Mongolia. It set up a research institute into rare earths near the mine site in the early 1960s, but it remained an essentially cottage industry until the 1970s, when a Chinese chemical scientist, Xu Guangxian—who had played a key role in China’s nuclear program—developed a method of separating the various rare-earth elements, which are usually found combined in the ore.

Production of rare earths from the Bayan Obo mine soared from 1,000 tonnes in the late 1970s to 11,860 tonnes by 1986, which surpassed production in the United States.

The 1970s and the early 1980s were a period of intense resource nationalism around the world. OPEC was formed, and producer groups, with varying aspirations to control market prices, were established in the bauxite, copper, tin, uranium, phosphate and iron ore industries.

As the Cultural Revolution subsided and the administration of Deng Xiaoping began focusing on China’s economic development, exploiting natural resources and adding value to them became a priority. In 1986, Deng approved a national high-tech research and development plan to help China ‘to gain a foothold in the world arena; to strive to achieve breakthroughs in key technical fields that concern the national economic lifeline and national security; and to achieve “leap-frog” development in key high-tech fields in which China enjoys relative advantages or should take strategic positions’.

In 1992, on a visit to inner Mongolia and the rare-earths district of Baotou, Deng famously commented:

The Middle East has its oil, China has rare earth: China’s rare earth deposits account for 80 percent of identified global reserves, you can compare the status of these reserves to that of oil in the Middle East: it is of extremely important strategic significance; we must be sure to handle the rare earth issue properly and make the fullest use of our country’s advantage in rare earth resources.

China’s mercantilist approach to rare earths was reinforced by Deng’s successor Jiang Zemin, who, on a similar visit to Baotou in 1999, declared that China’s task was to ‘improve the development and application of rare earth, and change the resource advantage into economic superiority’.

China’s production of rare earths rose strongly, reaching 50,000 tonnes by 1996 and 120,000 tonnes by 2010.

At least 40% of China’s output was ‘illegal’ production by small-scale entrepreneurs in the south of China who found they could extract rare-earth oxides from clay soils either with strip mining or by soaking trenches with sulphuric acid.

Efforts to shut down these operations, which cause extensive environmental damage, have been only been partially successful, in a striking reminder that the power of the monolithic Chinese state diminishes with the distance from Beijing.

While building its own production, China has also sought to control the output of rivals. In 2005, the China National Offshore Oil Corporation bid US$18.5 billion for the US oil business Unocal. Unocal had large proven oil and gas reserves in Asia which were attractive to the Chinese oil company. Unnoticed during the heated US debates over the bid was that Unocal also owned the only rare-earths mine in the US, Mountain Pass (it was mothballed at the time). CNOOC’s bid raised a political storm in the US which ultimately led it to withdraw.

In May 2009, China Non-Ferrous Mining Company offered Australian rare-earth developer Lynas a financial lifeline after its funding had been torpedoed by the global financial crisis. The Chinese company would buy 52% of Lynas for $252 million and would provide guarantees for a further US$184 million debt package, which would be sourced from China. CNFMC would take four of the eight board seats and be guaranteed a share of its output.

Treasurer Wayne Swan had taken the papers from the Foreign Investment Review Board recommending that the offer be accepted with him to a meeting of the International Monetary Fund in Washington. Swan had earlier signed off on an FIRB recommendation that he approve the purchase by Chinese investors of a 25% stake in another rare-earths prospect, Arafura, which had also lost access to funding following the financial crisis.

In the US, Swan was startled to read a New York Times report detailing China’s dominant stake in the global rare-earths market. He then asked the FIRB to reconsider the Lynas deal. It came back, suggesting a maximum Chinese shareholding of no more than 49.9% and less than half the directors, leading the Chinese to withdraw their bid. Lynas was eventually developed with Japanese government finance.

The most striking example of the Chinese state seeking integrated control of the rare-earths industry was its 1997 purchase of the General Motors subsidiary Magnequench, which had, in the early 1980s, developed and patented the technology for making permanent magnets using the rare earth neodymium (Japan’s Sumitomo Metals patented a different method for making rare-earth magnets at the same time).

In the mid-1990s, GM was going through a period of corporate restructure, shedding ‘non-core’ subsidiaries, and the magnet-making firm was sold to a joint venture of two Chinese state-owned firms for US$70 million. The sale was controversial—regulators demanded a commitment that the Chinese buyers would retain the assets of the business in the United States for at least five years. There were suggestions the sale helped GM gain permission to establish an assembly line in China.

The buyers were impeccably connected: the new Chinese chairman of Magnequench, Hong Zhang, was married to the daughter of Chinese leader Deng Xiaoping, Deng Nan. Under its Chinese ownership, the firm established a parallel permanent magnet-manufacturing business at Tianjin in China. In 2002, the day after the five-year commitment expired, the US manufacturing operations were closed and the entire plant was shifted to China. The US has only regained a fraction of its capacity to manufacture rare-earth magnets.

Chinese investors remain active in securing stakes in rare-earth prospects around the world, including in listed Australian rare-earths companies Arafura and Northern Minerals.

Fears that China may use its dominant position as a weapon in its trade war with the US were sparked when China’s president Xi Jinping visited the leading rare-earths miner and magnet manufacturer JL Mag in June this year, a few days after the US had announced it would ban the export of technology-sensitive products to Chinese telecommunications giant Huawei.

He said rare earths were an important strategic and non-renewable resource, but he emphasised the importance of adding value through their application. ‘We should firmly grasp the strategic basis of technological innovation, master more key core technologies and seize the commanding heights of industry development’, he said.

One of Asia’s oldest democracies may be in jeopardy. Sri Lanka’s presidential election next month is expected to bring to power another member of the Rajapaksa family, whose affinity for authoritarianism, violence and corruption is well known. While Sri Lanka’s democracy survived the last test—an attempted constitutional coup by outgoing President Maithripala Sirisena a year ago—it may not survive a Gotabaya Rajapaksa presidency.

Gotabaya, as he’s popularly known, is the current frontrunner and previously served as Sri Lanka’s defence chief under his older brother Mahinda Rajapaksa, Sirisena’s predecessor. Mahinda’s decade-long tenure, which ended in 2015, was characterised by brazen nepotism, with the four Rajapaksa brothers controlling many government ministries and about 80% of total public spending. And by steadily expanding presidential powers, Mahinda created a quasi-dictatorship known for human-rights abuses and accused of war crimes.

Moreover, Mahinda’s pro-China foreign policy allowed for the swift expansion of Chinese influence in Sri Lanka—and rapid growth in Sri Lankan debt to China. It was the debt incurred during the last Rajapaksa presidency that forced Sirisena in 2017 to sign away to China the Indian Ocean’s most strategic port, Hambantota, along with 6,070 hectares (15,000 acres) of nearby land, on a 99-year lease. This Hong Kong–style concession was modelled on the United Kingdom’s 19th-century colonial imposition on China.

There’s little reason to doubt that Gotabaya would revive his brother’s corrosive legacy. Simply by becoming president, he could gain immunity from two lawsuits pending in US federal court over war crimes allegedly committed while he was Sri Lanka’s defence chief. (With the parliament’s restoration of presidential term limits prohibiting Mahinda from running again, Gotabaya renounced his US citizenship to become eligible to contest the election.)

Mahinda oversaw the end of Sri Lanka’s brutal 25-year civil war in 2009. But he was no agent of peace. During the war’s final years, thousands of people—from aid workers and Tamil civilians to the Rajapaksa family’s political opponents—disappeared or were tortured. And the final military offensive against the Tamil Tiger rebels was, according to the United Nations, a ‘grave assault on the entire regime of international law’, with as many as 40,000 civilians killed. According to the wartime military commander, Sarath Fonseka, Gotabaya ordered the summary execution of rebel leaders as they surrendered.

Despite the horrors they inflicted on Sri Lanka’s mostly Hindu Tamil minority, the Rajapaksa brothers became heroes to many among the country’s largely Buddhist Sinhalese majority. That emboldened Mahinda to step up efforts to fashion a mono-ethnic identity for a multiethnic country.

Renewing this approach, as Gotabaya is sure to do, will hardly ease the sectarian divide that triggered the civil war, let alone more recent tensions between the Sinhalese and Sri Lanka’s Muslims. Those tensions increased sharply in April, when Islamist militants carried out a series of bombings on Easter Sunday that killed 253 people and wounded hundreds more.

Not only was this one of the deadliest terrorist attacks in history, it was also the first major Islamist militant attack that Sri Lanka, where Muslims constitute one-tenth of the population, had ever experienced. But that doesn’t mean it was unforeseeable.

In fact, Sirisena admitted that defence and police officials had received an Indian intelligence report warning of an imminent attack and identifying the plotters, but that he had not seen it. Nor did Prime Minister Ranil Wickremesinghe—the target of Sirisena’s attempted coup last October—receive the warning. (Sirisena abruptly fired Wickremesinghe and swore in none other than Mahinda Rajapaksa, before dissolving parliament to avoid a challenge. His actions were reversed when the supreme court ruled them unconstitutional.)

The Rajapaksas have already used the Islamist bombings to fan the flame of Sinhalese nationalism. And Gotabaya has promised his supporters that, if elected, he will strengthen the intelligence services and reintroduce surveillance of citizens, in order to crush Islamist extremism. The prospect of an alleged war criminal still wedded to extrajudicial methods becoming president rightly terrifies minority groups, the media and civil-liberties advocates.

There’s more worrisome news, though. Gotayaba’s camp has also confirmed that, as president, he plans to ‘restore relations’ with China. Given Sri Lanka’s strategic location near the world’s busiest sea lanes, the implications of this pledge extend well beyond the island. Indeed, Sri Lanka could play a pivotal role in the struggle for maritime primacy between China and Indo-Pacific democratic powers (India, the United States, Japan and Australia). China’s ‘string of pearls’ strategy has been encircling India by securing strategic military and commercial facilities along major Indian Ocean shipping lanes. The Hambantota port, which Chinese President Xi Jinping described as central to his Maritime Silk Road project, is a particularly valuable pearl.

At a time of growing international skepticism toward Xi’s Belt and Road Initiative, the Rajapaksa family’s potential return to power in Sri Lanka is welcome news for China, which hopes to turn the country into a military outpost. But it’s bad news for practically everyone else. A Gotabaya presidency would block already-delayed justice to victims of his brother’s regime, deepen ethnic and religious fault lines, and help China gain strategic supremacy in the Indo-Pacific. Sri Lankan democracy appears more vulnerable than ever.