After years of slow deterioration, diplomatic relations between China and Australia have taken a sharp turn for the worse. The disputes range from pressure on journalists, to spying allegations, to an investigation of Australia’s wine exports. Beijing holds most of the cards, but Australia does have one doomsday weapon at its disposal. It’s better not used.
The conflict echoes China’s widening disputes with other countries. Two journalists working for Australian Broadcasting Corp. and the Australian Financial Review newspaper fled China this week, after a third Australian working for state-run China Global Television Network was detained. For their part, Australia’s intelligence services have interviewed at least one Chinese journalist in a probe of alleged covert foreign influence of a state legislator, according to reports in Xinhua news agency and the Sydney Morning Herald.
Recent years have been a minefield of clashes over Australia’s foreign-influence laws, China’s human rights record and response to COVID-19, and even competitive swimming.
These diplomatic disagreements are spilling into the economic arena. Having slapped tariffs as high as 80.5 percent on Australian barley exports in May over alleged dumping, China has now started an equally improbable investigation of the wine industry. Canberra last month prevented China Mengniu Dairy from buying local milk, juice and beer producer Lion from its Japanese owner Kirin Holdings for reasons that aren’t really clear.
Through all this, the bedrock of their trading relationship has been surprisingly solid. China‘s imports from Australia are up 75 percent year-to-date on the same period of 2016, the last time there was a meeting between the country’s leaders.
The core of this is a product that’s absolutely central to Beijing’s ability to direct the Chinese economy: iron ore. The 700 million metric tons China imported from Australia over the last 12 months is more than double the levels that prevailed when relations