SYDNEY // Australia's diplomatic ties with China, its biggest trading partner, are facing their most serious challenge in years amid accusations of industrial espionage and support for an alleged terrorist. Relations soured when Stern Hu, a senior Australian mining executive involved in sensitive iron ore negotiations, was arrested by Chinese agents in July. He was initially accused of stealing state secrets and although charges were later downgraded to embezzling classified commercial information, the case has unsettled a once rosy friendship between Canberra and Beijing.
Tensions were aggravated further when Australia granted a visa to Rebiya Kadeer, an exiled leader of Muslim Uighurs, the largest ethnic group in China's westerly Xinjiang province that borders on the former Soviet states of Central Asia as well as Mongolia, Russia and Afghanistan. China has claimed that Ms Kadeer instigated deadly riots in Xinjiang this year and regards the former businesswoman as a violent separatist, allegations she has strenuously denied.
Her recent visit to Australia deeply upset the Chinese and John Wong, a professor of modern history at the University of Sydney, believes the diplomatic rift that followed was caused by a clash of ideologies. "She had broken no law, so from a western democratic perspective there was no reason to bar this person. But then, of course, the Chinese perspective would be rather different," Professor Wong said. "For Australia to have allowed what the Chinese government perceives to be the ringleader of the troubles [in Xinjiang] to come to Australia and to be given a heroic welcome, the Chinese could not help wondering what this was all about."
Although China cancelled a ministerial visit in protest, it has limited its disapproval to diplomatic small arms fire compared to the heavy bombardment of ambassadorial expulsions or more punitive sanctions. The respective governments are keen not to let these disagreements interfere with business deals that are of strategic importance to both nations. Analysts have said steelmaking (and the importation of the key ingredient, iron ore) is crucial to China's development, while the resources sector is likely to underpin Australia's economic growth in the years to come.
"The present diplomatic tensions have not, so far, seen any major spill-over into commodity trade, especially Chinese demand for Australian goods," said Malcolm Cook from the Lowy Institute for International Policy. A decade ago Australia did more business with Taiwan than with mainland China. That changed with China's seemingly insatiable appetite for iron ore, copper, nickel, liquefied natural gas and coal, which has grown as its economy became such a red-hot performer. China is also the main source of foreign students in Australia, where education is the third-largest export.
Trade between these Asia-Pacific partners is now worth US$60bn a year, much of it in favour of Australian mining companies, and lucrative gas contracts are proof that bilateral commerce has largely been insulated from the political quarrels ignited in the past few months, but there is one critical area that has become tainted by intrigue and suspicion. "Iron ore is by far the most important and contentious trade we do with China," Mr Cook said. "China frequently argues that Australian companies are unfair in their negotiations and charge China too high a price."
Talks aimed at settling a dispute over rising prices between China, the world's largest steelmaker, and its main supplier of iron ore in Australia, the mining giant Rio Tinto, were abandoned this month, but despite the acrimony sales have continued. The company has stressed that the breakdown of discussions was not connected to the detention of Mr Hu, its chief iron ore representative, although clearly his arrest has created much ill-feeling. Rio Tinto has denied its employee had engaged in industrial spying.
Frank Tudor, national chairman of the Australia-China Business Council, said the case was disconcerting but would not derail important deals. "Our membership certainly functions most effectively when there is political stability, when the legal frameworks are well understood and transparent. Anything that damages that in any way will have an impact on the way that people perceive their business operations between the two countries," said Mr Tudor. "The business community is looking beyond the immediate political issues and there are some signs even at the political level that dialogue is picking up."
This has been a time for delicate diplomacy and the Australian foreign minister Stephen Smith told reporters in Canberra that ties with China needed "to be managed in a careful, cautious [and] sensible way", although some experts believe there could be more trouble on the horizon. "There could be a couple of triggers for more diplomatic disputes before the end of the year. In the first week of December his holiness the Dalai Lama is scheduled to visit both Australia and New Zealand, which will undoubtedly lead to more angry words from Beijing. Probably within a month or two the trial of Stern Hu should start, which I'm sure will lead to more Australian interest in the case," Mr Cook said.
foreign.desk@thenational.ae
