Ross Babbage has deep concerns about China’s growing military power and assertiveness. His concerns are magnified by his pessimism over the economic outlook for the United States throughout the next decade.

In Australia’s Strategic Edge in 2030 (Kokoda Paper No. 15, February 2011) Babbage asks what Australia should do to ‘offset and deter’ the rapidly expanding Chinese People’s Liberation Army (PLA) in the Western Pacific.

His answer is at once contradictory and radical; it is panicky, even extremist — a surprising response from a senior strategic thinker who was on the ministerial advisory panel for the federal government’s 2009 Defence White Paper, the key findings of which he seems to reject.

Babbage says the rise of China’s military power faces Australia with its greatest security challenge since the Second World War. He likens Chinese strategic thinking to that employed by the Japanese in planning their attack on Pearl Harbour. He dismisses the ambitious military modernisation program set out in the White Paper as ‘not very effective.’ Instead he proposes a ‘highly asymmetric’ counter to China, involving acquisitions and policies that he says would be seen in Beijing and elsewhere as ‘game-changers.’

Babbage says Australia should acquire 10 to 12 American nuclear attack submarines, base major US combat capabilities in Australia, arm ‘arsenal’ ships with cruise missiles, join the US in building and deploying a new class of advanced stealthy strike aircraft, expand cyber warfare capabilities, and possibly join the US in developing and employing an advanced missile system.

He says Australia’s counter-strategy might include ‘seriously damaging the capacities of China’s strategic leadership to govern’ and ‘threatening the cohesion of the Chinese state.’ He proposes developing linkages with dissident Chinese ‘to stir serious internal disruptions and even revolts.’ How Australia might achieve such objectives against a Leninist nuclear power with a quarter of the world’s population is not explained.

At the same time, Babbage argues that ‘the United States and its allies should not seek to confront China.’ Australia, he says, should pursue ‘deep engagement’ with China and ‘should encourage friendly engagement and many forms of co-operative partnership with China while simultaneously keeping a weather eye on Beijing’s assertive military and intelligence capabilities and operations.’

Babbage does not say how this deep engagement might be possible if Australia was simultaneously pursing its ‘game-changing’ strategy, including making clear to the Chinese leadership ‘that were the PLA to threaten serious damage to Australia’s vital interests, China’s core leadership would be taking a serious risk and, potentially, would pay a very heavy price.’ Nor does he canvass the potential implications for Australia’s critically important trade and economic relationships with China.

Babbage’s proposals are a recipe for confrontation with China. They turn reasonable concerns about China’s military expansion into responses that verge on hysteria. The proposals are ill-defined and uncosted, although he suggests the nuclear attack submarines alone and their essential supporting infrastructure could cost some $28 billion. Babbage has been quoted as saying that Australians should prepare for a 40 per cent increase in defence spending to combat the rise of China.

Although Babbage’s proposals would seem self-evidently counter-productive and contradictory in terms of Australian policy towards China, he claims ‘a group of senior Australian strategic leaders were polled for their views on the relative merits of the main capability options.’ But he does not identify these leaders and does not reveal what questions they were asked. So far there has been no official political or senior support for Babbage’s plans in Canberra of which we are aware.

Note that the 2009 Defence White Paper sets out a (roughly) costed and coherent defence policy that is already focused on defending Australia’s approaches from an attack by a major power. It involves a major military expansion program that includes 12 conventional submarines, three air warfare destroyers, cruise missiles, new frigates, up to 100 F-35 Joint Strike Fighters, as well as other advanced armaments.

Babbage’s aim seems to be to strengthen radically the White Paper’s finding that Australia should have the independent military means to substantially harm a major power adversary. He wants Australia to be able to rip an arm off China. Such an approach would provoke rather than deter Beijing, or perhaps tempt it towards preemptive action. It would certainly be extremely risky. Beijing will view the Babbage proposals as an attempt to contain China.

A clearly preferable Australian policy is to neither appease nor provoke China, but to build up the military capacity to enable Australia to defend itself and to support efforts by the US to address any credible threats that might emerge from Beijing’s military expansion or other serious military contingencies in the longer term.

Babbage’s paper fails to answer key questions: What would be the through-life cost of 12 nuclear-powered attack submarines? What would be the cost of the infrastructure necessary to support them? Where would the crews come from? How many more US bases would he consider necessary? Where would they be located? Why propose new ‘arsenal ships’ to carry cruise missiles when the White Paper clearly says that they will be fitted to the air warfare destroyers, future frigates and submarines?

There is, as Babbage says, a good case for boosting Australian efforts to counter cyber warfare, of which China is a major global exponent. But again the White Paper specifically commits Australia to do so, saying that the government will invest in a major enhancement of Defence’s cyber warfare capability.

Babbage has rightly identified China’s military expansion and recently aggressive behaviour as transforming events in the Western Pacific, but he seems to assume it is only about countering US naval assets in the region. That may be true, but it is not the whole story.

China also has an interest in protecting its sea lines of communication; as a rising power it is asserting itself as rising powers have always done. Its primary objective is to build a modern naval force capable of dominating what it calls ‘the first island chain’ stretching from Japan to Taiwan and the South China Sea.

As the Pentagon has noted, China’s primary aim is to be capable of fighting and winning short-duration, high-intensity conflicts along its periphery against hi-tech adversaries. But the Pentagon also states that China’s ability to sustain military power at a distance remains limited.

There is no doubt that Beijing is also developing longer range capabilities that will have implications beyond China’s immediate territorial interests. As these are developed there will undoubtedly be greater potential for misunderstanding and miscalculation between China and the US and its allies, including Australia. But China will not be able to sustain large military forces in combat operations far from China until well into the 2020s. And China’s military is utterly untested in modern combat.

Moreover, the bluster about the rapid emergence of the Chinese military is undermined by Chinese national defence industries that produce inferior equipment. China’s armed forces are, and will long remain, no match for those of the US in our view. America has vast resources to support military innovation and make unpredictable breakthroughs — as the former Soviet Union discovered to its cost.

Babbage barely considers the possibility that China might find military expansion less urgent as it increasingly integrates into the world economy. It is also possible that China, beset by domestic problems, will not sustain its present growth trajectory.

A cooler Australian response to China’s military expansion is to strengthen the alliance with the US by ensuring that our maritime re-equipment program goes ahead as planned, on time and on budget. Australian conventional submarines and surface ships armed with cruise missiles can provide powerful capabilities to defend Australia as well as adding — if required — significantly to US capabilities in the Pacific. And that is what they should concentrate on doing.

Paul Dibb AM is Emeritus Professor and Chairman of the Advisory Board at the School of International, Political and Strategic Studies at the Australian National University. He is former Australian Deputy Secretary of Defence and a senior intelligence officer who opened defence intelligence relations with China in 1978. Geoffrey Barker is a Visiting Fellow at the Strategic and Defence Studies Centre at the Australian National University who had a previous career as a very senior Australian journalist.

1. China: Not about to attack Australia
2. US military bases in Australia: Don’t circle the wagons yet
3. US-China power play puts heat on ASEAN

Foreign business negotiators in China face greatly increased uncertainty now that detained Rio Tinto executive Stern Hu, a Chinese-born Australian, has been formally charged with espionage offences.

The affair underscores the need for businessmen to understand Chinese communism and Chinese culture, history and attitudes, as well as the commercial and legal systems, when they deal with Chinese officials and business executives.

Here we offer a primer on what foreign businessmen need to know about China. Some crucial advice was given by Peter Phillips, Director (Asia) for the Canberra lobbying firm Government Relations Australia. Phillips is a Chinese linguist and a former diplomat and China intelligence analyst for the Office of National Assessments.

Learn the language, Phillips says. Make sure you understand the Chinese system and how power works—and know where the people to whom you are talking fit into the political and economic structure. That may seem self-evident, but it can be costly and potentially dangerous not to do so.

The detention of Stern Hu suggests that even those who possess linguistic skills and cultural understanding are at risk when China decides to throw its weight around. A telling context for the affair was China’s attempts to force the Melbourne international film festival and the National Press Club to suppress the views of Uighur leader Rebiya Kadeer.

It is worth noting that there are now 206,590 people of Chinese ethnicity in Australia; last year the number of Chinese visitors to Australia exceeded 350,000. Most are doubtless entirely reputable—but four years ago two defecting Chinese diplomats, Chen Yonglin and Hao Fengjun , claimed there were ‘thousands of Chinese spies’ in Australia. Reports from the US, UK, Germany and Canada have revealed widespread and costly Chinese espionage operations. In Australia since the end of the Cold War, ASIO has seen its counter-espionage skills greatly diminished.

There are certain abiding truths about doing business with the Chinese Government. First, China is not a democracy and it does not remotely resemble the sort of rules-based political environment Western businessmen are accustomed to. The People’s Republic of China is an authoritarian state in which the Communist Party holds absolute political power and will brook no opposition.

Second, there is no separation of the power of the Communist party from the judiciary or from those who hold high government and commercial positions. On the contrary, the Party appoints the judges, runs the military and security organs, and places its loyal apparatchiks into every position of authority throughout the country.

Third, the relationship between the Communist Party and the 2 million–strong People’s Liberation Army is seamless. In China the most powerful position in the country is not President or even General Secretary of the Party; it is Chairman of the Central Military Commission. Business travelers to China need to be acutely aware of the importance of the military and intelligence agencies in China, and that doing business with them risks being accused of betraying state secrets.

Fourth, the Chinese Embassy in Canberra and its consulates in capital cities are actively involved in intelligence gathering. When you visit the embassy you risk having your every word recorded and when you visit China it is common practice for Chinese intelligence to bug your hotel rooms. You need to be alert to the danger that behaviour which we consider to be within normal commercial practices may be viewed as compromising state economic secrets in China.

Fifth, locally engaged staff in China will be expected to deliver intelligence on your operations to the authorities if your business is perceived to be sensitive to Beijing’s broad definition of ‘national security’. For them to refuse would put at risk not only their careers but the well-being of their families.

Sixth, Beijing is not reticent about using its diaspora of overseas Chinese. In a recent speech in Beijing, Politburo member Wang Zhaoguo exhorted the Eighth National Congress of Returned Overseas Chinese to do more to unite the broad masses of overseas Chinese, their relatives, and overseas Chinese nationals ‘to participate in and provide support for socialist revolution, construction and reform’ in the motherland. He said this required the unremitting efforts of all sons and daughters of the Chinese nation to make China prosperous and strong.

So Australian businesses need to be alert to the danger of Chinese employees in Australia with relatives in China coming under pressure to provide information in the interests of their country of birth. And when they visit China every person of Chinese ethnic origin will be of interest to Chinese intelligence and may be approached. If they refuse to help, their future trips to China and their relatives resident in China might be compromised.

A key lesson from the Stern Hu incident is that there should be no illusions in the minds of foreigners that China will act to protect what it sees as its vital identity — particularly against ethnic Chinese, whether or not they carry an overseas passport. Peter Phillips advises foreign businessmen to beware of being compromised when offered hospitality or gifts in China. If there is no danger of compromise, there is no problem with accepting hospitality or gifts.

Foreigners should also be aware that China believes the world owes it a favor. Having been one of the world’s most imposing economies until the 1830s, China is now roaring back into prominence. Consequenly, China regards it as vital that the Middle Kingdom resume its place as a lofty and majestic world civilization superior to most other cultures.

There is an ancient Chinese predisposition to regard all non-Chinese as barbarians and to be concerned about what Chinese officials have called ‘spiritual pollution’. That may be Stern Hu’s real offence. If so, he is essentially a pawn in China’s pursuit of historic greatness and Beijing will remain blind and deaf to concerns about its violations of his basic human rights.

This article originally appeared in the Australian Financial Review on August 13.

Paul Dibb, Professor Emeritus at the Strategic and Defence Studies Centre (SDSC) at the Australian National University, was a senior intelligence officer who opened defence intelligence relations with China in 1978. Geoffrey Barker is a visiting fellow at the SDSC.

1. Crimes against business in China
2. China’s new National Energy Commission
3. The Stern Hu trial – Results and follow-up on the verdict

The Australian Labor government’s first full year in office became a momentous political and economic challenge as it moved to deal with the impact of the deepening global financial crisis while seeking to advance national foreign policy and security interests.  By year’s end it seemed inevitable that Kevin Rudd’s government would be judged primarily by its economic management over 2009-10.

But Rudd remained committed to expanding Australia’s role as an activist, if largely conformist, middle-power. Despite changes of emphasis, and new multilateralist initiatives, he left little doubt that there would be more continuity than change in Australian foreign and defence policies while the government’s economic management would be cautious, orthodox but consistent with giving a nudge to global big spending stimulatory economic policies.

A clear mark of Rudd’s caution was the minimal greenhouse gas reduction targets announced towards the end of the year. The decision pleased Australian business, but it seemed at odds with the fanfare and the bloated rhetoric that surrounded Rudd’s early prime ministerial decision to sign the Kyoto accord.

In broad strategic terms Rudd Labor in 2008 was trying to balance and to respond to the short-term and long-term challenges facing Australia.  The major short-term challenges were economic:  the financial crisis, falling employment, and concerns within Australia’s ageing population over superannuation and savings losses.  The long-term challenges were geo-political: historic demographic and economic shifts that could diminish Australia’s regional and global relevance, the rise of China and India as major regional powers, and the global impact of climate change.

These short-term and long-term challenges were connected.  The geo-political implications of the financial crisis were coming into focus by the end of the year, although questions were clearer than answers.  What would be the security consequences of a major collapse of Chinese economic growth? Would the world economy be able to avoid devastating protectionism? Would Australia face more markedly authoritarian, ambitious and expansionary regional states and leaders if the world economy did not recover reasonably quickly? And how would climate change impact on global security and security relationships.

The Rudd government’s response to the economic crisis, like that of most countries, was to introduce stimulatory economic packages to encourage spending. At the end of the year the packages totalled some A$22 billion with promises of more to come if necessary.   At the same time interest rates tumbled as the Reserve bank moved to ease the economic pain of home-buyers with mortgages.  The government claimed Australia could still avoid recession and a deficit budget, but it was going to be a close-run thing if it did.

Rudd proved an inveterate traveller in the pursuit of Australian diplomatic and security interests.  His efforts were perhaps most dramatically focused when he attended the G20 meeting on the economic crisis in Washington in November, but his travels took him to the US, Britain, China, Japan, Malaysia, South Korea, Singapore, Indonesia, New Zealand, Romania, Belgium, Peru, and Afghanistan.

In multilateral mode Rudd proposed, with little promise of immediate success, the establishment of an Asia-Pacific security community; he established a commission under former Labor foreign affairs minister Gareth Evans to pursue the eventual elimination of nuclear weapons; he launched a new bid for an Australian seat on the United Nations security council.

In bilateral mode he stressed the importance of Australia’s relationship with the US and was delighted by Barak Obama’s election. He also sought to use his knowledge of China and its language to advance Australian interests in the middle kingdom. Rudd responded quickly to criticism that he had ignored the importance of Japan, and made a hastily organised visit to Tokyo.

Rudd made it clear that he would not modify the massive rearmament program put in place by the former government –although it remains to be seen how the demands of the financial crisis will affect Australian plans to spend tens of billions of dollars on new fighter aircraft, surface ships and submarines.  Canberra defence orthodoxy maintains that Australia has to maintain a technological edge over regional powers because the country has a relatively small population from which to draw its military forces.  How successfully it can continue to do is still unclear.

A national security policy statement released late in the year was received with faint and generally damning praise and a definitive statement of long-term national security policy is expected in a new defence white paper due around March 2009. A major issue for Rudd will be how to respond to expected US pressure to commit more troops to Afghanistan.

The future of the Rudd Labor government already looks like being determined by how successfully it can balance the inter-connected demands of economic crisis management with the demands of defence and security management in a dynamic and uncertain regional security environment. This will not be an easy job.

–

Geoffrey Barker was formerly senior security and defence columnist with the Australian Financial Review.

This is part of the special feature: Reflections on developments in Asia in 2008 and the year ahead

1. Australia has a valuable role in the “great balancing act”
2. Australia: not spared but prepared to manage the worst
3. Australia: a country racked by division and drift

Barack Obama’s decision to nominate Hillary Clinton as Secretary of State is based a on a political calculation that will be familiar to all students of political conflict. Stalin summed it up nicely: hold your friends close and your enemies closer. Old Labor Party factional warlords put it less elegantly but no less accurately: better have her inside the tent pissing out than outside the tent pissing in.

Barack’s defeat of the Clintons to win the Democratic nomination was a remarkable achievement against Hill and Bill, two of the most ruthlessly professional campaigners seen in US politics since the Kennedys. It was arguably a tougher achievement than winning the general election.

The fact is that Obama humiliated the Clintons at their own best game and in so doing made two powerful enemies who would relish a serious stumble by the uppity junior Senator from Chicago. You can bet that Hilary still lusts after the Oval Office and would sell her soul to the devil for another shot at nomination and election. By accepting Obama’s offer she has ensured that her political profile will remain prominent for the next four and possibly eight years, and all she has to do is to acknowledge that Obama ultimately has the last word on foreign policy. She will not be too old in four or eight years’ time to hope to become the first woman president to lead the United States provided the times them suit her.

Obama meanwhile has removed a possible (probable) source of carping if covert criticism from from two powerful Democrat activists who still have a solid following among the party faithful. That’s good for Obama, although he might sometimes shudder at the prospect of Bill Clinton emerging as the grey eminence behind the arras in Hillary’s State Department office.

Clinton’s foreign policy record was patchy although not nearly as disastrous as that of George W. Bush. So it’s what the Americans call a plus-sum game all round. Obama gets peace; Hilary gets profile. The main requirements for a workable union now are that Obama gets across the complexities of foreign policy quickly and asserts his authority over it and that Hilary restrains her natural inclination to act first, second and third in her own perceived interests. It’s really just about them learning to be the best of enemies.

Geoffrey Barker is a Visiting Fellow at the Strategic and Defence Studies Centre, Australian National University.

1. ‘After Hillary’ era concerns Southeast Asia
2. Hillary Clinton: Japan should engage in Asian nukes reduction