Australia Feels Chill as China’s Shadow Grows

If outlanders tend to associate Australia with kangaroos, broad-brim leather hats and an opera house, many Australians are different. They think of iron ore and bauxite, copper and coal, nickel, gold and uranium, a trove of mineral riches that is their nation’s birthright and the bedrock of its prosperity.

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Which explains much of the breast-beating that has ensued since the Chinese announced plans this year to buy a big chunk of it.

Since three state owned Chinese companies said they would buy stakes in Australia’s storied mining industry totaling $22 billion — as much as China’s entire investment here in the last three years — some of this nation’s 21.3 million people have reacted with aggrieved nationalism.

The government of Prime Minister Kevin Rudd, which generally favors the sales, has been savaged as naïvely cozy with China, a view some in his own military appear to share. Opposition politicians have flogged the specter of an Australian future more or less as a giant open-pit mine in which the locals toil, but Beijing takes the profits.

“It’s the Communist People’s Republic of China, 100 percent Communist-owned, buying up sections of the country and minerals in the ground which they will then sell to the Communist People’s Republic of China,” said Barnaby Joyce, who is a leader of the National Party in Parliament. “And we’re going to live off the commission on the way through. They’ll try to make sure we get as little as possible.”

But a few months after the first of the deals was announced, a sharp initial backlash has given way to a more subtle queasiness over whether Australia’s place in the region, anomalous but secure for so long, is about to be altered by the new Chinese giant looming over its horizon.

Nor is Australia alone. From the Philippines to Vietnam, China’s neighbors are recalculating the benefits — and potential deficits — of life in the shadow of a newly dominant nation.

Australia has always been the West’s outpost in the East, the British penal colony with American spunk and European joie de vivre. But seemingly overnight, China has become Australia’s biggest trading partner, one of its biggest tourism customers, the largest single buyer of its government debt, a major buyer of farmland and real estate.

China’s hunger for steel gobbles up half of Australia’s iron ore exports, and its textile factories buy more than half of Australia’s wool. Over 120,000 Chinese students throng to Australian schools and universities.

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Although China’s purchases remain dwarfed by cumulative investments of the Americans and the British, they are growing much faster.

And suddenly, Australians are stepping back, realizing that their new best friend is someone they really do not know very well, much less trust.

“The momentum has shifted from being broadly receptive to these deals to having a hard think at this,” said Alan DuPont, who heads the Center for International Security Studies at the University of Sydney. “This is not just about China and Australia. It’s about how the world sees China playing its role in the future as a great power.”

Surviving Corporate Invasions

This is not a new question. More than a century ago, Australians fretted about becoming vassals of the resource-hungry British Empire; then, in the mid-1900s, they feared becoming an American subsidiary. When Japan Inc. began snapping up companies in the 1970s, suspicion of Tokyo ran rampant.

The British and Americans proved good corporate citizens, however, and Japan’s expansion faded amid economic problems. Now, Australians are asking whether China will be different.

In one way, it assuredly is. Western companies, if at one time equally ravenous for Australia’s resources, are not direct appendages of their national governments. The dominant shareholder in major Chinese resources companies is the Chinese government.

China has 115,000 state owned companies; the cream are more than 150 giants controlled by the central government. Those corporations — in mining, steel, finance, communications and other crucial areas — seek to make profits much as Western companies do. Government boards audit them, appoint their top executives and evaluate their performance, but in general, the companies insist, Communist Party leaders do not meddle in business strategy.

Even if that is true, China has long insisted on maintaining state control over companies in crucial industries, blurring the line between national and corporate interests.

CONTINUED : China's growing resource needs

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