Below is a speech by Dr Geoff Raby Australian Ambassador to China:
Australia, China and Jilin Province:
The Benefits of Stronger Cooperation
Jilin University, 17 August 2009
It is an honour for me to deliver this speech today at Jilin University, and I thank Professor Zhan Tao for the invitation. As Ambassador, it is always an honour to give public lectures at China’s universities, and speak directly to the country’s future leaders.
I am aware of the prestigious history of Jilin University, and the excellent reputation it enjoys within China as one of the nation’s top 10 universities, and the largest by student population. Awareness of Jilin University is also growing internationally, with universities in 130 countries now having established exchange and cooperation links with your university. I am pleased to say these include the Australian institutions Macquarie University, the University of Newcastle, Curtin University and the University of Sydney. I am sure these links with Australian counterparts will continue to grow stronger.
This is my second visit to Jilin University in the past 10 months, having called on President Zhan shortly after his appointment in November last year. During that meeting 10 months ago, I became aware that several of Jilin University’s specialist areas of research – including biotechnology, environmental sciences and minerals exploration – were directly related to the work that Australian companies were doing in Jilin Province, and areas in which Australia and Jilin Province were seeking greater bilateral cooperation. There is therefore a strong basis for Jilin University to strengthen further its ties with Australian institutions, some of who possess considerable experience and expertise in these fields. The Australian Embassy in Beijing will do what it can to help promote these links.
The main point I want to convey today is that Australia and China’s futures are inextricably linked. Our economies are complementary, our interests in regional stability and prosperity are shared, and the main challenges that our two countries face - be it the response to the global financial crisis or climate change - can best be resolved by us working together.
Rapid Development of the Bilateral Relationship
Before talking about the future of the relationship, I would like to look back briefly to the past, to illustrate how quickly the Australia-China relationship has progressed in recent decades. I first served in the Australian Embassy from 1986 to 1991, for some of that time working alongside Australia’s current Prime Minister Kevin Rudd. During this posting, I also made my first visit to Jilin Province. At that time I travelled to Changchun on a steam train, and it really was a big adventure to come here from Beijing. If I think back to my recollections of Jilin at that time, compared to what I have seen on my two visits in the past year, the transformation has been quite incredible.
The transformation in the bilateral relationship over this time has mirrored the remarkable changes within China itself. For example, when I arrived in Beijing in 1986 to begin my posting, Australia’s merchandise trade was growing quickly, but was still worth only about A$2 billion a year – although I remember at the time that this was still double China’s trade with the then-Soviet Union. Services trade was negligible - very few, if any, Chinese students were studying in Australia, as Australia had only that year introduced regulations allowing fee paying overseas students to study at Australian universities. China’s first investment in Australia at Portland Aluminium was being finalised, and it was not until the following year that China’s first major overseas investment, the Mt Channar Iron Ore venture in Western Australia’s Pilbara, was established. There was no substantial regional forum in which Australia and China could work together on Asia Pacific issues.
When I returned to Beijing as Ambassador in 2007, the situation was vastly different. Annual bilateral merchandise trade was worth over A$50 billion – it was worth A$68 billion in 2008 - and China would later that year overtake Japan as Australia’s largest trading partner. Bilateral services trade was worth A$5 billion annually, with well over 100,000 Chinese students enrolled to study in Australia. Two years later, there are 127,000 Chinese students enrolled to study in Australia, a greater number than what study in the UK. Chinese investment in Australia totalled over A$6 billion, and boomed over the following 18 months as a further A$34 billion of Chinese investment applications have been approved. Australia, as the 2007 APEC host, was working closely with China and other regional partners on a range of economic and human security issues. Of course, Australia and China also enjoy close cooperation through other regional forums, including the East Asia Summit.
When I was in China in the 1980s, we had hoped and believed that this sort of integration between Australia and China may be possible. But we never expected it would happen so quickly, and on such a grand scale.
The key point about this spectacular progress is that it came about as a result of deliberate policy decisions taken by our respective governments. The most significant of these was of course China’s decision to pursue a reform and opening up policy, which resulted in the flourishing of China’s relations with a host of countries as trade and investment flows and people movements grew rapidly, and led to a marked and sustained improvement in living standards for the Chinese people.
China’s 2001 accession to the WTO also delivered significant benefits to China and trading partners such as Australia, although there was much debate within China at the time about the benefits of joining the WTO. It took 15 years of effort for China’s accession to become a reality, and this can now clearly be seen to have delivered a higher rate of economic growth to China. On a personal note, when I first came to the Beijing Embassy in the 1986, I dealt with the then-Ministry of Foreign Trade and Economic Cooperation in relation to its application to join the GATT. When China finally acceded to the WTO in 2001, I was Australia’s Ambassador to the WTO in Geneva. So for much of my professional career I have had a connection with China’s WTO accession.
On the Australian side, successive governments have since 1972 invested heavily in the bilateral relationship. Bilateral trade began to take off in the mid-1980s when leaders on both sides came to appreciate fully the strong complementarities between our two countries. At that time, agreement was reached on an iron and steel initiative, driving a strong increase in Australia’s iron ore exports to China that has continued to this day. The resources trade continues to underpin heavily our bilateral commercial relationship.
In more recent years, our two governments worked hard to facilitate the A$25 billion, 25-year contract for Australia to supply LNG to China, with ships now leaving several times a week from Western Australia to Dapeng Port in Guangdong. Tomorrow, we will witness the signing in Beijing of another major bilateral energy deal.
We have also worked together to put in place the necessary agreements for Australia to export uranium to China. When I was Deputy Secretary of DFAT in Canberra, I led the negotiations to bring this agreement about. China’s nuclear industry will continue to expand in the future, forming an essential element of the country’s efforts to deal with climate change. Australia has 40 percent of the world’s uranium supplies, and is well placed to be a secure, long-term supplier to China.
Just as these developments in the relationship did not happen naturally, but were the result of considered policy decisions, so too will the future of Australia-China relations be shaped by the decisions that we make today. If we are to move the bilateral relationship to a higher level of engagement, as Prime Minister Rudd and President Hu agreed to do at their meetings last year, then we must continue to explore creative ways and dynamic ways of broadening the relationship between our economies and peoples.
On the Australian side, one aspect of this engagement has been an increased focus on China’s fast growing north-eastern, western, and central regions. A number of Australian Government ministers have in the past year travelled to Harbin, Chongqing, Kunming, Wuhan and Hefei. I hope that in the near future, an Australian Minister will be able to visit Changchun, to witness first hand the city’s rapid economic and social development, and also witness the important relationship now developing between Australia and Jilin.
China’s Economic Rise: Implications for Australia
So I see Australia and China’s future very much as a shared one. When I consider both the short-term and long-term challenges facing Australia and its region, be it the recovery from the global financial crisis, developing regional architecture, or addressing the threat of climate change, there is not one issue in which China is not already playing a central role. Equally, as a long-term, stable supplier of clean energy, raw materials and agricultural products for China’s growing economy; as a world class provider of financial and legal services and education services; and as a most attractive investment destination; Australia’s importance to China’s future development will only deepen further.
A quick look at the data confirms the importance of China to Australia’s economy. Despite the global economic downturn, the value of our merchandise exports to China increased by 47 percent year-on-year over the first half of 2009. During this period, China once again overtook Japan to become Australia’s largest trading partner. Even more remarkable, for the first time ever, China overtook Japan to become our largest export market. We always anticipated this would happen in six or eight years time, but the fact that it has happened so rapidly demonstrates the impact of the global financial crisis.
But we need to look beyond the data to fully understand the integration of our two economies. Everywhere I travel in China I encounter examples that demonstrate this country’s growing links with Australia, be it an Australian-owned factory in Anhui province that supplies parts for China’s Chery automobiles, or the fact that China’s famous Tsingtao beer uses barley imported from Australia in its brewing process. Australia is also the second largest supplier of imported bottled wine to China.
The 2008 Beijing Olympics were also an advertisement for the growing links between our two nations. Building on our experience of hosting the Sydney 2000 games, Australia worked closely with BOCOG on a full range of issues from providing food and beverages in the stadiums to security. Australian architects also designed some of the landmark Olympic venues including the “Water Cube” National Aquatic Centre, the Olympic Green Tennis and Hockey Centres, and the Olympic Sailing Course in Qingdao.
Jilin has its own examples that demonstrate the depth of the bilateral relationship. For example, this morning I visited Changchun Railway Company, where 626 rail carriages for Sydney’s CityRail network are being built. Australian company Downer-EDI is handling design and project management, and CRC is carrying out the manufacturing. This contract, on behalf of the New South Wales Government, is the largest of overseas order of its kind in Australia’s history. Yesterday, I visited the world-class gold mine in Baishan operated by Australian company Sino Gold and local miner Jilin BMZ. This mine operates to the highest level of environmental and safety standards.
Given the increasing integration of our economies and societies, it is natural that Australia fully welcomes China's return to its historical status as a major economic power. Australians are comfortable with this reality, understanding that as China grows, so does Australia.
Chinese Investment in Australia
One important aspect of China’s rapid economic growth has been an increase in the amount of Chinese investment abroad. This has attracted the attention of the media recently, with the global financial crisis providing an opportunity for China to utilise part of its vast currency holdings to make overseas investments, particularly in energy and mineral assets. Australia warmly welcomes China’s increased investment, and Australia and has a non-discriminatory policy of approving all foreign investment based on the national interest test. No matter what country the investment comes from, all are subject to this test. Australia has been a beneficiary of such investment, in the same way that we benefited from increased investment from countries such as Japan and Korea in the 1970s and 1980s.
I noted earlier the rapid growth in the volume of Chinese investment in Australia over the past 18 months, with A$34 billion in applications approved during this time. Recent examples of approved Chinese investment in Australia’s resources and energy sector include: Chinalco’s initial 9.33 per cent stake in Rio Tinto; Minmetals’ 100 percent purchase of Oz Minerals; and Hunan Valin’s acquisition of a 17 per cent stake in Fortescue Metals Group. Just last month, Australia approved Shenhua’s bid to buy large tracts of land in the coal producing regions of northern New South Wales. And Wuhan Iron and Steel Company was given approval to purchase a 60 percent stake in two iron ore projects in South Australia.
We would like, over time, to see on a reciprocal basis expansion of Australian investment in China. This is currently limited to around A$7 billion, partly because of China’s restrictions on foreign investment. These restrictions are particularly apparent in China’s minerals and resources sector. It is not in China’s interests to restrict Australian investments in this area, given the skills and technology that Australian companies can bring to Chinese partners based on our long mining experience. This is demonstrated by Sino Gold’s Baishan mine – gold at that site would not have been recovered were it not for Sino Gold’s expertise and capital.
Australia-China FTA
One of the best things Australia and China could do to raise the bilateral relationship to a higher level would be to conclude a Free Trade Agreement. An FTA would not only lead to greater integration between our economies, but also build confidence in the wider region and send a signal that our countries are open to trade and investment. Unfortunately, to be frank, 2009 has to date been a difficult year for our bilateral FTA negotiations. This is disappointing, because last year our two Leaders agreed on the need to bring negotiations to a speedy conclusion, and take the bilateral relationship to a higher level of engagement.
The benefits to both our countries of concluding an FTA are clear. China needs reliable and secure suppliers of clean energy and mineral resources, and Australia has the capacity to meet this demand. Australia is also a world-class provider of financial, education, telecommunication and other services, and access to such services will become increasingly important for China to make the transition to a consumption-driven, tertiary-sector led economy. An FTA will also provide a foundation for the establishment of a long-term, mutually beneficial investment relationship, and give China improved access for its goods and services to one of the largest and most sophisticated markets in the region.
The high-level political will exists on both sides to conclude an FTA. Over the past year our Prime Minister, Trade Minister, Foreign Minister, Agriculture Minister, and Minister for Resources, Energy and Tourism have all visited China and emphasised the importance of further developing our economic relationship, particularly through an FTA. But it is important that we do a good FTA, and not settle for a sub-standard one.
Enhanced Cooperation with Jilin
Concluding an FTA with China will also be beneficial for Australia-China cooperation in three areas central to Jilin Province’s economic and social development – mining, agriculture and education.
In terms of mining, as I noted before, the Sino Gold gold mine in Baishan is a great example of mutually beneficial cooperation between our countries in the mining sector. Sino Gold and Chinese partner Jilin BMZ have established a model partnership, with great support from all levels of government in Jilin. Thanks to the technology and expertise brought to the operation by Sino Gold, gold was first poured at Baishan mine in October 2008, just four years after the ore body was first discovered. The mine’s world-class carbon-in-leach processing plant is extracting high quantities of gold from the ore, with overall gold recovery of 80 percent. This maximises the revenue from the operation to the local community.
Most importantly, benefits are flowing to the local community through employment creation. Eighty percent of the mine workforce is from the Baishan area, and the entire on-site management team is Chinese. For those local villagers displaced by the mine, Sino Gold has constructed a new village with improved housing and community facilities.
Finally, Sino Gold is committed to ensuring its Baishan mining operation is sustainable and environmentally friendly. The company has constructed a world’s best practice tailings dam to prevent leaching of chemicals into the soil, and the entire site will be rehabilitated once the gold reserves are exhausted, allowing the land to be used once again for farming.
As I told Baishan City leaders during our meeting yesterday, the Sino Gold mine represents the tip of the iceberg in terms of the assistance Australia can provide to Jilin Province, and China as a whole, to locate and develop its mineral reserves. Only 10 percent of China’s 200,000 known mineral deposits have been explored or assessed properly. Although China is estimated to have the world’s third-largest known minerals reserves in the world, only three percent of global exploration takes place within China. Opening China’s mining sector to Australian companies through an FTA would bring the technology and know-how to develop further China’s minerals reserves, boosting China’s domestic production and reducing its reliance on overseas supplies. Greater cooperation with Australia could also improve the efficiency and safety of China’s mining industry. Australia has an outstanding record in mining safety. For example, our coal mine fatality rate is one of the lowest in the world.
As shown by the Sino Gold Baishan mine, China’s cooperation with Australian companies is not about giving away strategic mineral reserves to other countries. Rather, it is about locating and exploiting valuable resources that would otherwise remain in the ground. This is to the great benefit of both local Chinese communities and foreign investors. Australia also welcomes investment from Jilin mining companies in its resources sector, a good example being Jilin-based Ji En nickel’s purchase of a 20 percent stake in Metallica Minerals in May 2009. This investment makes it the largest shareholder in the company.
Australia would also like to boost its cooperation with Jilin Province in agriculture through an FTA. Australia understands that this is a sensitive issue for China. But it is important to point out that Australia has neither the capacity nor the desire to flood the Chinese market with our agricultural products.
Our agricultural industries are complementary rather than competitive. For example, Australian wool does not compete in the domestic market with local Chinese wool. Australian fine wool is very different from the coarser Chinese wool used in products such as carpets. It instead provides an essential input for China’s clothing and textile industry.
In terms of grain production - a major agricultural industry for Jilin - Australia can be a reliable source of supply to help China achieve its goal of food security. Driving yesterday from Changbaishan to Changchun, it was an impressive sight to see everywhere the corn in the fields, ready for harvest. But the reality is that China will have to import more grain as ongoing urbanisation increases consumption demand, and reduces the amount of arable land.
Importantly, Australia has the technology and expertise to help China increase the productivity and quality of its food crops, and enhance livestock production through world-leading animal husbandry and pasture management techniques. This will help China to achieve food self-sufficiency and improve the living standards of farming populations in major agricultural provinces like Jilin. Australian companies already export high-quality Holstein dairy cattle to Jilin, helping to boost dairy production in the province. Australia and China have already undertaken almost 200 capacity building projects under the Agriculture Capacity Building and Cooperation Activities (ACCA) program, and this transfer of knowledge and skills can be extended by a bilateral FTA.
Perhaps the best argument to make as to why China should not worry about increased agricultural exports from Australia is that our seasons are the reverse of each other. You could say our agricultural trade is counter-seasonal. We are very well suited to accept more imported products from China during our non-growing season, and export more to China during its winter.
A speech at a university would of course not be complete without discussing education. This is now a major part of Australia’s relationship with China, and a field in which we should be looking to strengthen cooperation with Jilin. I had a good discussion over lunch with President Zhan as to how we could do this.
127,000 Chinese students enrolled to study in Australia in 2008, compared to just 4000 a decade earlier, making China by far our largest source of overseas students. These students contributed about $3.1 billion to the Australian economy, or 11 percent of our total exports to China. Beyond this financial contribution, Chinese students are extremely welcome in Australia for the contribution they make to their universities and the wider Australian community. This flow of students promotes closer people-to-people links, and a better understanding of the cultures and societies of both countries. There is now a strong alumni of Chinese graduates of Australian institutions, making business exchanges much easier. These graduates maintain close strong personal links with Australia, and collectively will act as ambassadors for the bilateral relationship in the future. The demand for Australian education from Chinese students and their parents has remained strong despite the global financial crisis. If current growth rates continue, there will be 200,000 Chinese students studying in Australia by 2013.
As Jilin’s rapid economic development continues, we look forward to accepting many more students from this province. As a respected centre of education within China, there are many other opportunities for Jilin to boost cooperation in this area with Australia, particularly in the fields of vocational education and scientific research, where Jilin is considered a national leader. Such links would boost further research capacities in both our countries in priority areas such as climate change and clean energy. Beyond Jilin University’s ties with the four Australian universities I mentioned earlier, I note that other universities in Jilin Province also offer joint degree programs with Australian universities in areas such as computer science and e-commerce. Under an FTA that gave our education providers greater access to each other’s markets, this sort of cooperation would surely increase to our mutual benefit. There may also be opportunities for Jilin University to establish a Confucius Institute in Australia. Nine such institutes have been established in Australia, and Jilin Province has established six institutes with universities in the US, Europe and elsewhere in Asia. These institutes are now an important component of the bilateral relationship, promoting greater awareness of Chinese language and culture in our country.
Conclusion
I hope today I have been able to give you a sense of how far the Australia-China relationship has come in a relatively short time, and provided some food for thought on areas where our two countries can intensify their engagement in the future, particularly in areas central to Jilin Province’s continued economic and social development. Despite the gains we have already made in the relationship, I feel that we have only scratched the surface in terms of what is possible. This feeling is particularly strong when I come to a rapidly developing province such as Jilin, and see first-hand the many areas in which greater cooperation and integration with Australia is possible. This is indeed why I have back to Jilin for the second time in less than 12 months.
You all would have noticed that several issues have emerged in recent weeks in relation to the bilateral relationship. These have attracted much attention in the media in both countries, and also from netizens. As so often happens in the media and internet forums, much of the debate has been exaggerated and blown out of all proportion.
Of course we do have to recognise that, despite all the positive elements and tremendous growth in the bilateral relationship over the past 20 years, there are fundamental differences between the political and social systems of our two countries. How we have achieved so much over the past 20 years is to recognise the mutual benefits that flow to both countries from the relationship, recognise and build on complementarities, and manage differences as they arise. That is exactly what we are doing now. I am very optimistic about our ability to handle the current differences - even if does mean working longer hours and having fewer weekends just at the moment – and very confident about the future of the relationship.
To conclude, I would like to emphasise again that Australia welcomes return of China to its historical status as a major economic power. We understand that our future in the Asia-Pacific region is a shared one. We also understand that what is good for China’s development is also good for Australia.
It has been a pleasure to return to Jilin University and meet once again my old friend Professor Zhan, and I thank you once again for the opportunity to speak here today. I am now happy to take any questions you may have.