Why Australia's luck may be running out

Australians of a nervous disposition should probably avoid reading the Chinese press and social media at the moment. A combination of tensions over the South China Sea and the Olympics has made Australia the target of wild invective by Chinese nationalists.

The current problem started with last month's adverse ruling by an international tribunal on China's claim to most of the South China Sea. Along with the US and Japan, Australia called on China to respect the verdict. The reaction in Beijing was furious. The Global Times, a nationalist newspaper that is a subsidiary of the Communist Party's People's Daily, accused Australia of a "delirious" reaction to the United Nations ruling and added: "China must take revenge... If Australia steps into the South China Sea waters, it will be an ideal target to warn and strike."

Even the Olympic swimming pool has become disputed water. When Mack Horton, an Australian swimmer, accused a Chinese rival, Sun Yang, of being a "drug cheat", the media in China lit up with abuse aimed at the "racist" and "uncivilised" Australians.

These events should not be dismissed as silly summer stories. Their significance goes beyond the confines of Sino-Australian relations. They speak to the broader tensions between a rising China and the West. For more than a generation, the Chinese public has been fed an official history that stresses the country's "century of humiliation" at the hands of foreign powers. The notion that the West still conspires against China is widespread.

Australia, an outpost of the Western alliance on the edge of the Asia-Pacific region, is in danger of becoming a lightning rod for Chinese anger towards the West in general and the US in particular.

For many decades, Australia has been known as the "lucky country". Some 24 million Australians enjoy their own sunny, mineral-rich continent - and are separated from the world's trouble spots by vast oceans.

Australia, an outpost of the Western alliance on the edge of the Asia-Pacific region, is in danger of becoming a lightning rod for Chinese anger towards the West in general and the US in particular.

But Australia's historic good fortune was partly dependent on the fact that friendly countries controlled those vast oceans. Australia was part of the British Empire when Britannia ruled the waves. And since 1945, the United States Navy has dominated the Pacific.

However, if the South China Sea and the wider Pacific Ocean become contested waters, Australia potentially faces a tricky choice. Should it accommodate itself to the idea that China will eventually dominate the Asia-Pacific region? Or should Australia place its bet on the continuing dominance of a like-minded, traditional ally - the US?

This dilemma has provoked a lively debate among Australian strategists. Dr Michael Fullilove, head of the Lowy Institute, Australia's leading foreign policy think-tank, is a strong supporter of the US-Australian alliance. But he acknowledges that there are question marks over whether the US has the will and the power to dominate the oceans around Australia long into the future. As Dr Fullilove puts it: "Our 'great and powerful friends' are becoming less great and less powerful."

Until recently, anxieties about the strategic implications of the rise of China seemed relatively insignificant compared to the economic benefits that Australia derives from Asia's dynamism. A key reason why Australia has not suffered a recession for a quarter of a century is the strength of Chinese demand for its minerals. Successive Australian governments have intelligently surfed the wave of Asian growth.

However, even the economic side of the Australian-Chinese relationship is now throwing up difficult issues. China's demand for Australian raw materials and food is uncomplicated good news for the Aussies. But China's emergence as a major buyer of Western and Australian assets is more problematic. Earlier this year, the Australian government blocked a Chinese company from buying S. Kidman & Co, a company that owns roughly 1 per cent of the Australian land mass. Last week the Australians blocked two Chinese bidders from buying Ausgrid, a large power generator.

The fact that Canberra cited security concerns when blocking the Ausgrid sale shows that the tension between Australia's economic and security needs is becoming more obvious. Until recently, it was relatively unproblematic for Australia to place its economic bets on the rise of China - while looking to the US as its main security ally.

In the present climate, however, both China and America are becoming more demanding partners. The Americans have made it clear that they would appreciate some company from the Australian navy if and when the US conducts future "freedom of navigation operations" and sails past the artificial islands that China has constructed in the South China Sea.

The Chinese have made it clear that they might react very harshly to any Australian participation. Chinese pressure is still more likely to be psychological and diplomatic rather than military or economic. But the chances of a Chinese backlash aimed at Australia are likely to increase if Beijing feels that Canberra is discriminating against Chinese investors.

All of these developments suggest that, unlikely as it currently sounds, Australia could emerge as a geopolitical flashpoint in the coming decades. The 20th century was kind to the lucky country. The 21st century may not be so lucky for Australia.

THE FINANCIAL TIMES

A version of this article appeared in the print edition of The Straits Times on August 17, 2016, with the headline 'Why Australia's luck may be running out'. Print Edition | Subscribe