W
ith the US presidential elections fast approaching, one American ally is facing an existential crisis. Worried about how best to balance its traditional relations with China while also staying on Washington’s side, Australia is probably the least enthusiastic Asian Pacific country about the looming prospect of a Hillary Clinton presidency.

Clinton, one of the key architects of Washington's "pivot" to the Pacific, has been vocal about her hardline stance towards China and is likely to pressure Australia to give the cold shoulder to the mandarins in Beijing.

Therein lies the rub. Australia’s breakneck economic growth – the country has notched up 100 quarters without a single recession – has largely depended on forging very close ties to China, sometimes with critical national security implications. And it is this Faustian pact that is giving Australian decision makers sleepless nights. Canberra is heavily dependent on its economic ties with China, its largest trading partner. In 2014, 34 percent of Australian exports went to China, valued at around A$98 billion. Remarkably, from 2013 to 2014, exports to China constituted nearly 80 of growth in the value of Australian exports, dwarfing that of all other nations. Of particular importance to this relationship are Australian sales of iron, of which almost A$39 billion in value were sent to the Middle Kingdom in 2015. Beijing is also Canberra’s single biggest source of imports. In 2015, Chinese overseas direct investment in Australia totaled nearly A$75 billion, and trends suggest the figure will only continue to grow.

With such extensive economic ties between the two nations, China is regarded as an indispensible player in ensuring a prosperous future for Australia.

However, fears about the negative consequences of Chinese money are mounting. According to a recent survey, 59% of Australians have a negative view of Chinese investment in the country. There is growing concern that Chinese purchases of Australian property is driving up home prices, making housing increasingly unaffordable. In the same vein, some investments and attempts to purchase Australian strategic assets have raised national security questions. For instance, the decision to lease parts of Darwin Port to a Chinese company in late 2015 was an especially sensitive issue, given the presence of 2,500 US marines there. Despite strong US criticism, the deal was ultimately approved.

Add to this the fact that China has earmarked significant funds for Australian universities political parties, and media companies in what some see as “influence buying”. A former Australian ambassador to Beijing, Stephen FitzGerald recently wrote that Chinese influence is essentially challenging his country’s fundamentals “like freedom of speech and the media and enquiry, and the very validity of our political system". The diplomat pointed at that very influx of Chinese funds to opinion formers, which is destined to “generate among Australians and the Australian government a broad, uncritical approval of China's government and its foreign policies".

Another strong lever of Beijing’s influence over Canberra comes from the very strong Chinese diaspora active in all levels of Australian society. There are roughly 860,000 Chinese Australians, and China has made sure that its policies and narratives dominate Australia’s Chinese-language media outlets. President Xi Jinping has called out on all ethnic Chinese living abroad to “unite” and advance China’s causes. When Australian PM Malcolm Turnbull went to Beijing on his first official visit, a group of 60 community leaders from Australia’s Chinese community warned the leader against “irrational” or “incorrect” interpretations of the South China Sea territorial disputes.

What complicates Australia’s policies even more is that by trying to appease Beijing is has gotten itself between a rock and a hard place. When the government barred a Chinese company from buying the state owned electricity infrastructure company AusGrid, Beijing issued an angry warning, saying that such moves with severely hurt bilateral ties. And with so much of Australia’s economic output riding on China, odds are that Canberra will not be so bold next time when it comes to standing up to Beijing.

With such incidents straining Sino-Australian relations, a future Clinton presidency could make matters even worse. The US has already demanded more active contributions to the “pivot” from Australia in the shape of freedom of navigation exercises around the disputed islands in the South China Sea, and an assertive Clinton administration is likely to up the pressure on Canberra even further in its quest to contain China. Undoubtedly, such actions would not sit well with Beijing. A growing anti-China stance runs the risk that China could retaliate through imposing trade restrictions on Australia. Such a prospect is not without precedent. For example, in 2012, China restricted Filipino exports of bananas and other fruits over incidents surrounding a territorial dispute, resulting in losses of billions for the Filipino companies. Given Australia's high dependence on China, similar measures could do considerable economic harm.

In that context, Canberra seems to be hedging its bets. The decision to ditch a deal with China's rival Japan and instead purchase French submarines can be seen as an attempt to counter the perception that Canberra is locking itself into a long-term, anti-China alliance. But with everything else going on, it will take more than that to reassure Australia's most powerful Asian neighbor. With a future Clinton presidency likely on the horizon, it is highly likely that the U.S. will pivot away from Canberra and embrace stronger ties with other traditional allies, such as Japan or South Korea.

Top