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ANALYSIS: China gives Australia the big chill

August 21, 2009

By Sid Astbury
Asia-Pacific News
August 19, 2009

Sydney -- Australia's biggest ever trade deal was
signed in Beijing this week in a secret location
and without reporters present to record the fixed
smiles and token clapping as the ink dried on a
liquefied natural gas supply contract worth 50
billion Australian dollars (41 billion US dollars).

If an image were needed to illustrate the frost
that had settled on Australia's relations with China, this was it.

For those who needed the message spelled out in
print, China's Global Times newspaper provided
this headline: 'Australia must bear the cost of
the deteriorating Sino-Australian relations.'

Australia has fallen out of favour at the speed
of world-record sprinter Usain Bolt and Prime
Minister Kevin Rudd is being blamed.

Less than a year ago Mandarin-speaking Rudd was
chatting on the phone with Premier Wen Jiabao
about the global financial crisis and how China
ought to be invited to play a bigger role in
sorting it out. Now, the former first secretary
at the embassy in Beijing is portrayed in the
Chinese media as public enemy number one.

'Our relations with China are at the lowest ebb
they have been for many, many years,' opposition
Liberal Party leader Malcolm Turnbull said. 'He
[Rudd] obviously has no leverage with China left at all.'

Rudd came to office with the promise that his
understanding of China and his Mandarin skills
would turn up the gas on Australia's simmering relations with Beijing.

And that's exactly what happened. So much so that
Turnbull's line of attack a few months ago was
that the prime minister was spending so much
effort championing Beijing's cause that he had
become a virtual roving ambassador for China.

But now it's Beijing that's gunning for Rudd.
He's accused of blocking its bid to buy up
Australian mines and of fomenting ethnic violence
in China by allowing exiled Uighur leader Rebiya Kadeer to visit Melbourne.

Rudd ran into trouble with China when state-owned
resources company Chinalco put in a bid to double
its stake in Anglo-Australian miner Rio Tinto Ltd.

The play for Rio - it would have been China's
biggest ever foreign investment - failed not
because Rudd used his veto and blocked it on
national security grounds but because Rio decided
at the last moment to partner rival resources company BHP Billiton Ltd.

It seemed the best possible outcome for Rudd. He
avoided either angering China by blocking the bid
or infuriating fellow Australians by approving
it. But Beijing blamed him for the failed bid anyway.

The arrest of Shanghai-based Rio executive Stern
Hu followed. The Australian national is in
custody over industrial espionage claims that
some argue reflect Beijing's rage at the Rio outcome.

Russell Smith, regional director of strategic
issues consultancy IHS Inc, said Hu's arrest
showed the limits of Rudd's influence in China.

'Diplomacy takes a back seat when you talk about
national security,' Smith, a former military
attaché in Beijing, said. 'A better reflection of
the real state of the relationship is that we'll dance to China's tune.'

Rudd has not danced to China's tune. He didn't
lobby Rio to accept Chinalco's bid. He ignored
China's demands that Kadeer be denied a visa.
Supporters argue that he hasn't been bullied and
hasn't betrayed democratic ideals.

Rudd signalled right from the very start that the
leitmotif of his relations with Beijing would be
honesty and not appeasement. On his first visit
as prime minister he shocked his host by speaking
publicly, in Mandarin, about human rights abuses in Tibet.

When Chinalco proposed buying another chunk of
Rio, Rudd didn't cheer the deal on. And when Hu
was arrested, Rudd respected sovereignty issues and didn't demand his release.

Perhaps the real reading of that secret signing
ceremony in Beijing this week is that the
Australians came away with 50 billion Australian dollars in cash.

Beijing may huff and puff when it doesn't get its
own way, but perceived slights don't get in the
way of it securing the imports it wants.
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