The bar at the Boao Forum Hotel was heaving. It was April 2014 and a dozen Australian chairmen and chief executives had flown into the southern Chinese island of Hainan to attend the annual talkfest.
Freed from their minders for the weekend, the likes of Qantas boss Alan Joyce, Macquarie’s Nicholas Moore, Gail Kelly from Westpac and mining billionaire Andrew Forrest took up residence in the bar where they casually chatted with diplomats, journalists and other business types, all searching for an angle on China.
“It was a moment when everyone wanted to learn and better understand China,” says Geoff Raby, Australia’s former ambassador in Beijing, who was at Boao that year.
While understanding China would prove elusive for most, that weekend in 2014 remains the high point of Australia’s business engagement with the mainland.
Six months later the political relationship would peak when Chinese President Xi Jinping addressed a joint sitting of the Australian Parliament and announced substantive negotiations on a long-stalled free trade agreement (FTA) had concluded.
In his speech Xi would acknowledge Australia was more than a quarry for the mainland, while joking about China being the “big guy in the crowd”, but one who wouldn’t push others around.
He then spent 30 minutes shaking hands with MPs, business people and those considered important to the relationship.
Those twin events were only six years ago, but they would be unthinkable today as tensions over trade and the COVID-19 pandemic have sent China-watchers searching for fresh adjectives to describe the depths plumbed by the relationship.
“What really surprises me is how quickly it has unravelled,” says Peter Arkell, a China-based recruiter and former chairman of the Australian Chamber of Commerce in Shanghai.
And while the deterioration over recent weeks, to levels not seen since the 1989 Tiananmen Square crackdown, may appear rapid, the demise began almost the moment Canberra and Beijing signed the FTA.
Arkell says the years leading up to the FTA gave both sides some focus and the discipline to put grievances aside.
“You could see both governments had agreed to something significant [in the FTA] and it gave confidence to everyone,” he says.
But that “confidence” would be shortlived and it lacked a deeper level of mutual trust. The FTA laid this bare.
It signalled while China was happy to have a skin-deep trading relationship with Australia, it was not prepared to enact major structural reform. The lucrative service sector, an area where Australian firms had a global reputation, would remain largely closed.
That meant tariffs on wine, beef and dairy products would be gradually abolished, but Australian fund managers, lawyers, architects and accountants would not be permitted to set up in China.
In return, Canberra would not countenance lifting strict limits on China’s state-owned enterprises investing in Australia.
“At Boao [in 2014] there was this sense that reform was coming to China,” says Raby. “There was a view that the market was being put in the front row.”
Those hopes, fanned by major policy documents from the Communist Party, proved premature and with China’s refusal to reform came frustration and anger at its more assertive foreign policy, relentless cyber hacking, and clampdown on minorities and dissenting voices at home.
And so relations gradually cooled to their current state which both Arkell and Raby say are worse than in 2009, the height of the so-called “iron ore wars”, when China jailed Rio Tinto executive Stern Hu.
The demise, framed by fights this week over beef, barley and steel, may appear rapid, but there were plenty of signposts along the way.
Just a day before then Prime Minister Tony Abbott welcomed Xi to Parliament in 2014 with the line “it is a joy to have friends come from afar”, he put a very different spin on this friendship.
In a private meeting with German Chancellor Angela Merkel, Abbott said the Australia-China relationship was characterised by “fear and greed”, according to the journalist John Garnaut who would later become an adviser to prime minister Malcolm Turnbull.
Abbott’s typically sharp characterisation spoke of a transactional relationship without the necessary ballast to support it through the inevitable difficult times.
Two years later, Turnbull would put his own label on the relationship by describing China as a “frenemy” of Australia. That’s someone you are friendly towards even though there is a fundamental dislike or rivalry.
Despite these off-the-cuff remarks over pre-dinner drinks one night in Sydney, Turnbull tried hard to “reset” the relationship on new terms around respect for each other’s intellectual property and sovereignty. He pushed for an end to cyber hacking and moderation of Beijing’s territorial ambitions in the South China Sea.
This “reset” was never achieved and on his last day in office Turnbull oversaw the banning of Chinese firm Huawei from the roll-out of Australia’s 5G network.
This bumpy history makes the road out from the current troubles all the more challenging, but not impossible, according to Michael Clifton, chief executive of think tank China Matters.
“There is a way to a better place but it will take time,” he says.
Clifton, who spent 20 years in the army rising to the rank of lieutenant colonel before becoming an adviser to trade minister Simon Crean and then the long-time head of Austrade in China, believes a lack of architecture on the business side has hurt Australia’s ability to repair the relationship.
“The infrastructure we have now is no longer fit for purpose,” he says. Clifton argues the Australia-China Business Council and the Business Council of Australia have yet to find a path for a deeper engagement with those opposite on the mainland.
At the same time the Australia-China CEO roundtable has not been convened for the past three years, because it is tied to visits by senior political leaders, which are no longer happening.
China doesn’t want any trouble with trade. But China is very unhappy with Australia’s policies. The relationship will be frozen for a while.
— Wu Xinbo, dean at Institute of International Studies, Fudan University
“Stronger relationships between senior business leaders could help in lowering the temperature and dialling down some of the heated rhetoric,” he says.
“China needs to understand that Australia is not going to bend the knee, but at the same time we have to move away from the view that practical engagement represents some form of appeasement.”
He argues if business ties were deeper, then discreet back channels could prove a useful complement to diplomatic efforts to restore a level of sensible, two-way engagement between Canberra and Beijing.
As someone who hails from the military establishment before swapping over to the trade side, Clifton is less likely to be shouted down by the security hawks, who often view the business community as too self-interested with little perspective on the broader national interest.
There’s no doubt how strained the relationship has become. “Even in 2009 when things were really bad, [China] never cut off high-level political dialogue and diplomats, like myself, were still getting good access,” says Raby.
“My worry is that even if Australia sought to mend ties, China would not be interested.”
This fits with the experience on the ground of Australian diplomats. They say China has begun ignoring or outright rejecting official requests for ministerial visits to the point where the Australian side has stopped asking for fear of further embarrassment.
From Beijing’s perspective, this snub stems from a belief that Prime Minister Scott Morrison is simply doing the bidding of Donald Trump in seeking an international inquiry into the origins of the COVID-19 pandemic.
This has been intensified by long-standing grievances over Australia’s imposition of steel tariffs on Chinese mills and the ban on Huawei.
“The economic situation in China is not good,” says Wu Xinbo, a dean at the Institute of International Studies at Fudan University.
“China doesn’t want any trouble with trade. But China is very unhappy with Australia’s policies. The relationship will be frozen for a while.”
He echoes a widely ventilated view in China that Canberra is being used by the US and that Australian politicians are “not sophisticated enough” to navigate the difficult international terrain.
“Trade ties between the two countries will deteriorate. [Australia] should have expected this outcome – if they did not they are too naive,” he says.
That warning, which echoes a threat made by China’s ambassador to Australia, Cheng Jingye, three weeks ago, will amplify fears that restrictions on beef and barley will spread to wine and dairy, before hitting tourism and education.
Richard Maude, a career diplomat who authored Canberra’s most recent Foreign Policy White Paper, sees this increasingly bumpy road as the “new normal”.
Writing for the Asia Society, he argued there is a “greater patience [from the Australian side] with cool political ties and more acceptance that the relationship is vulnerable to frequent flare-ups on any number of contentious issues”.
“China’s foreign and domestic policies are conflicting more often with Australia’s interests and values,” he wrote in the paper published this week.
He says it’s not impossible to see a “permanently adversarial relationship, with bilateral and multilateral co-operation severely limited and parts of the economic relationship regularly at risk.”
This lack of co-operation and strained economic ties was on display at the most recent Boao Forum held last year. Apart from Forrest, who has been a long-term sponsor of the event, the only other senior Australian business figure to attend was Grant King, the former head of the BCA.
Raby says Boao, like China itself, has become less interested in foreigners and their ideas.
“The foreigners have just become decoration,” he says.
Angus GriggNational affairs correspondentAngus Grigg is an investigative reporter based in Sydney. He has worked as a foreign correpondent in China and Indonesia, and has won two Walkley Awards. Connect with Angus on Twitter. Email Angus at [email protected]