China’s annual economic growth rate has slowed from double digits during most of the past 33 years to about 7.6%. The slowdown reflects weaker exports as a result of lower growth in the global economy and an unwinding of the aggressive macro stimulus program China introduced during the global financial crisis. The stimulus program led to excessive investment and a large increase in debt. The central bank and the new government now want to deleverage the economy and increase the role of consumption as a growth leader.

A plenary session of the Communist Party Central Committee in November 2013 announced far-reaching reforms to enhance the economy’s performance during the next decade. The plenary communique emphasised that market forces must now play a ‘decisive’ role in shaping China’s economy, whereas previous communiqués said that they’d play only a ‘basic’ role. Under the new plan, China will liberalise its financial system, increase dividends from state-owned enterprises, enhance the role of small and medium-sized enterprises, liberalise the Hukou system (a registration system that determines the citizenship rights of rural people moving to urban centres), terminate the four-year work detention program for criminals or political dissidents, and relax the one-child policy. China needs to increase its birthrate because the labour force is now shrinking and the population is rapidly ageing. The new policy could produce 1.5–2.0 million more babies in two years compared to the 16 million born in 2012. Read more

Australia has a vital interest in preventing its region, defined as the Indo-Pacific in the 2013 Defence White Paper, from becoming an arena of great power rivalry. This includes between India and China. Developing a close strategic partnership with India is an important part of this strategy. However, there’s a fundamental disconnect between Australian and Indian perceptions of the Indo-Pacific. While Australia is keen to avoid being part of any formulation that appears to contain China, mainstream thinking in India opposes the inclusion of China and is increasingly anxious about its visibility in the Indian Ocean region. Australia finds itself stuck in a cleft stick in managing China’s and India’s different views of the Indo-Pacific.

Australia is unlikely to push a concept that’s seen as excluding China. The danger, as argued by Andrew Phillips and Nick Bisley, is that ‘[v]iewed from Beijing, the idea of the Indo-Pacific… appears to be to keep the United States in, lift India up and keep China out.’ However according to Rory Medcalf, ‘[w]hile the new name of the region may suit India, the quintessential Indo-Pacific power will be China, and the indispensible one will remain the United States…far from excluding China, Indo-Pacific Asia includes it by definition.’ At least at the official level, idea of the Indo-Pacific is being promoted as an inclusive concept, in line with Australia’s foreign policy goals of a strong alliance with the US, a strong economic relationship with China, and its overriding aim of preventing instability.

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In the Chinese Buddhist tradition, as we flail in the ‘bitter sea’ of existential illusion, we only need to ‘turn to the other shore,’ constituted by the Buddhist path, in order to find Enlightenment. Australia is now being urged by China to seek its own enlightenment—to give up the ways of illusion constituted by alliance with the United States and to turn to the other shore, a shore provided by closer political and strategic alliance with the PRC.

The kerfuffle at the recent Australia–China Forum held in Canberra in late November—the third in the series – was an excellent example of these efforts by China. The Chinese delegation to this 1.5 track conclave was led by Ambassador Li Zhaoxing who heads, among other organisations, a People’s Liberation Army front organisation known as the China Association for International Friendly Contact. Despite the bland press release on the conclave offered by the Australian Foreign Minister , with its perhaps less than accurate headline ‘Australia-China Forum forges closer ties,’ a newspaper report by Peter Hartcher, who also attended the conference, more accurately describes what transpired at the event.

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In a recent Strategist post, Harry White offers some insightful analysis on China’s recently announced ‘air defence identification zone’ (ADIZ) over the disputed Senkaku/Diaoyu islands. Many commentators simply see ADIZ as a mistake—one likely to generate the type of hawkish reaction from Japan and the United States that it has so far sought to avoid. As Ben Schreer points out, it’s the type of action that seems ill-suited to what China has labelled its ‘peaceful rise’.

White instead argues that this latest episode should be seen as deliberate signal that China is willing to ‘contest those issues it considers in its vital interests’ in the East China Sea. As such, the ADIZ should be construed as the result of strategic deliberations and planning, as opposed to being an ill-conceived mistake. As he notes, ‘most of the responses so far have been obvious’. He’s also quite critical not only of the prevalent view that China’s ADIZ is a bluff but even that Obama has a strong reaction to this dispute. Read more

In the flurry of criticism over China’s air defence identification zone in the South China Sea, the fact that New Zealand’s Defence Minister Jonathan Coleman has been visiting his Chinese counterpart has been lost in the noise. And while the United States and a number of its Asian allies—Japan, Australia, South Korea and the Philippines—have been barking at Beijing, Dr Coleman’s purpose appears to have been quite different. In some remarkable comments reported by the New Zealand Herald, Coleman explained that his trip was designed to ‘balance out our diplomacy with the United States’ and that Wellington was ‘walking this path between the US and China’.

I’ve seen no sign of a formal New Zealand statement on the East China Sea crisis, and certainly nothing along the lines of Australia’s reaction. According to the Herald, Coleman ‘said he would be telling his hosts that New Zealand did not take sides in disputes and wanted them resolved through international processes’. This seems a more deliberately neutral and backseat approach than Australia’s adoption of the Japanese formula. In opposing unilateral changes to the East China Sea status quo, Canberra’s language has clearly China signalled as the culprit. In contrast, there seems no chance that Wellington will be announcing any time soon that it has called in the Chinese Ambassador for an explanation of the new zone. Read more