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26 May, 2022updated 12 Aug 2022 16:02

Sebastian Shehadi

Opinion: The Albanese government must mend Australia’s relations with China to reignite investment flows

Chinese investment to Australia fell by nearly 70% in 2021, similar to the year before. The new Australian government can rejig its approach to China without losing its ethical integrity.

The Australian Labor party has just defeated the Coalition government led by Scott Morrison. While it is still unknown whether the party, led by Anthony Albanese, will reach the 76-seat majority needed to govern in its own right, the new prime minister has already voiced his feelings about China. 

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In his first press conference as premier, Albanese said Australia’s relationship with China “will remain a difficult one”, but indicated that his government would take a less aggressive approach to pursuing Australia’s national interest.

“It is China that has changed, not Australia, and Australia should always stand up for our values, and we will do so in a government that I lead,” he said.

China-Australia relations are at their lowest ebb

It is no exaggeration to say that the Australian-Chinese relationship is at a 50-year low. China, Australia’s main trading partner, has imposed an unprecedented number of sanctions on Australian trade since late 2020, following what Beijing calls sinophobic policies and rhetoric from Canberra in recent years. 

Australia has indeed been one the world’s most vocal critics of Beijing, especially with regards to its human rights abuses. Alongside the US, Canberra has also helped pioneer the global slew of foreign investment screening mechanisms that are, in all but name, aimed at Chinese investors (for better and for worse). 


As a result, the past three years have been unusually bad for Chinese-Australian deals (even when accounting for the impact of the Covid-19 pandemic). For example, investment from China plummeted 61% in 2020, with that 12-month period seeing just 20 Chinese projects coming into Australia and across only three sectors: real estate ($461m), mining ($414m) and manufacturing ($153m). This compares with a peak of 111 projects in 2016 that went to all parts of the economy. 

Meanwhile, 2021 saw Chinese investment in Australia decline by 69.8%, from $1.9bn in 2020 to $600m (almost all of which went to mining and real estate). In short, billions are being lost. 

A more nuanced approach to China 

China is a semi-totalitarian state whose geopolitical threat and human rights violations should be taken seriously. Australia’s approach to this has been bold but clumsy. Racism (intentional or not) has very probably crept in too.

Sinophobia has only grown worse during the pandemic, with a 2021 Lowy Institute survey finding that nearly one in five Chinese-Australians have been physically threatened or attacked since Covid-19 broke out. 

Meanwhile, the past four years have seen an unprecedented amount of negative press in Australia about China’s allegedly nefarious influence. These sentiments grew exponentially after the release of Silent Invasion, a controversial 2018 book by an Australian professor who accuses China of undermining Australia’s democracy. 

For example, in Australia’s 2019 federal elections, there were reports of suspected foreign interference from Beijing, a spectre that Morrison made sure to raise in the run-up to the 2022 election. 

In short, an Australian version of McCarthyism has taken hold. Late 2020 saw the first Australian person ever to be charged under the country’s foreign interference laws. Australia’s touchiness was also on display in early 2021, when it overreacted to speculative announcements of a large-scale Chinese development in Papua New Guinea, much as it has to the recent revelations about China’s activity in the Solomon Islands (albeit it to a lesser extent).

China’s government, citizens, tourists and investors are not a monolithic bloc, worthy of knee-jerk suspicion. The more Australia views them as such, the more self-fulfilling that becomes – with all Chinese actors reducing their interaction with the country, as Chinese tourists began to do, even before the pandemic. Canberra needs to make it more clear that it does not hold or support such views. If Albanese sticks to his words about a less aggressive foreign policy, the Labor Party could usher in a new wave of investment into Australia. 

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