Author: Jane Golley

China faces huge challenges in striving for a balanced, sustainable development path, and Australia has a big role in promoting open trade and investment in China.

While China’s progress in the past three decades is striking, the Chinese leadership still faces huge challenges in steering the economy and its people towards a more comprehensive, balanced and sustainable development path, the three keystones of President Hu Jintao’s ‘Scientific Outlook on Development’. All of these challenges are substantially more difficult in light of the fact that China is still a reforming economy, with incomplete reforms in the banking sector and financial markets, labour markets and state-owned enterprises, to name a few.

These challenges often seem to be overlooked by Western leaders and the media, particularly in the United States, when it comes to criticising China: the country should improve its human rights record; its markets are not open enough; it must relax its capital controls, float its currency and allow the RMB to appreciate; subsidies to state-owned enterprises need to end. The list goes on. These criticisms are starting to rankle with Chinese officials, who are becoming willing to criticise in return, for example, suggesting that the Chinese style of economic management may well be superior to the US model, not only for China but for other developing countries as well. Despite having their share of problems, the Chinese have reason to feel confident in making such assertions, given the current economic climate in the US compared with that in China.

Perhaps it is time to give Chinese leaders some credit for their achievements, if only because a Chinese leadership that is made to ‘lose face’ in the international arena will use this to its advantage in drumming up nationalistic support at home. A rising tide of nationalism and xenophobia in China can only be detrimental to an emerging new world order in which China will play an important role. It is critical that the West play a positive role in reducing the likelihood of this outcome.

Australia has a role to play in the US-China relationship. The enormous benefits of the China-driven resources boom have left Australians feeling more positive than Americans about China’s rise. Australia’s Mandarin-speaking Prime Minister, Kevin Rudd, is highly respected in China, and the alliance with the US remains strong.

Still, there are signs of nervousness as Chinese investment pours into Australia, with Treasurer Wayne Swan saying that the government will increase its scrutiny of investments from overseas. This may appear to China as Australia wanting to have its cake and eat it too: benefiting from China’s growth in ways it deems fit while denying the Chinese opportunities to invest where they see fit. The worst-case scenario is that budding xenophobia in Australia will feed into tighter investment laws. This will frustrate the Chinese leadership and prove detrimental to a relationship that is at its strongest point in history.

It will be better if Australia can play the respected partner of both the US and China by promoting open trade, investment and dialogue across the Pacific, while focusing on policies to improve competitiveness at home. This strategy will not only best serve Australia’s economic interests, it will send a crucial signal to China and the US as well.

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This entry was posted on Monday, August 11th, 2008 at 2:33 pm and is filed under Institutions, International Relations, Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.