The Heavy Down Under

Is Australia doing some heavy lifting?

Australian Paralympic powerlifter. Source: Wikimedia

In the world of bilateral national relationships, the US-China nexus is tops. Together, our two countries constitute almost a third of global production, and our combined economic growth creates the equivalent of a new Australian economy every year.

But the Australia-China relationship is also critical. Australia exports the raw materials that China needs to build its roads, factories, and ports. This connection allowed Australia to avoid a recession during the global financial crisis. Indeed, the last time Australia’s economy contracted was 27 years ago, in 1991. The combination of a free economy and a mammoth-sized industrializing neighbor has been a winning combination for the Aussies. Their trade surplus with China now constitutes 3.8% of their economy.

Monthly A$ value of Australia exports to China. Illustration: Toby Hudson. Source: Wikimedia

It can be a challenge to have such a powerful partner – especially one with a vastly different political culture. There are indications that the Chinese Communist Party (CCP) is finding ways to influence Aussie politicians, and China is prosecuting ethnic Chinese Australian citizens who are business leaders. Rio Tinto executive Stern Hu was found guilty of taking bribes; e-tourism magnate Matthew C. Ng was jailed for bribery and later released, as was biomedical magnate Du Zuying. The Chinese military and Communist Party are working together to increase China’s influence in the world stage, and they’re doing it one nation at a time: Australia, Singapore, and Taiwan are in their sights.

History isn’t over. The post-enlightenment, liberal-democratic model of political economy is no longer on the rise. China has co-opted tens of thousands of student organizations to eliminate “reactionary factions,” and to make sure their students come home with western skills in science, technology, and math – but not western ideas about democracy, politics, and human rights. Strong-arm governments are working to further their own interests.

Whether it’s Russian bots on social media or CCP talking points mouthed by compromised Aussie pols or the Saudi government canceling scholarships for Saudi students in Canada, the authoritarian model is competing with the democratic model on many fronts. There are huge benefits for everyone when we get economic engagement. But they don’t come without risk.

Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”

By |2018-08-07T14:18:21-04:00August 7th, 2018|Global Market Update|Comments Off on The Heavy Down Under

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