Australia’s China Problem

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    This video is made possible by Shopify—theplatform behind Wendover and thousands of others’ e-commerce businesses. Among the many former British colonies thathave grown into some of the world’s most developed countries, Australia is unique. Specifically, its economy has developed intosomething unlike that of any other, and a big player in the story of that economy isChina… for better or worse. To understand China’s role in Australiaand the problem this poses down under, one has to start in a very different place—theUnited States. If it were not for the US, Australia mightnot exist. Prior to the American Revolutionary War, Britainwould primarily send their prisoners to the American colonies when sentenced to transportation. Once the colonies became the independent countryof the United States, Britain needed to find a new place to put their convicts and forthat, they chose what is now Sydney.

    The first fleet of convicts who arrived inBotany Bay were the origins of what is now the country of Australia, and they might nothave made the long trek to there if not for the founding of the United States. Beyond just this, the history of Australiaand the history of the US are eerily similar and interlinked. The two country’s foundings are offset fromeach other by 180 years, but parallel significantly. Australia is almost the exact same size asthe contiguous United States, and even has similar dimensions to the US. Both nations include similarly diverse landscapesand climates, and both started in the east. They then each expanded west, taking overindigenous land, largely fueled by the discovery of gold and its subsequent mining. While the scale is obviously quite different,both nations were quite isolated by distance to the European world, although close to anumber of other European colonies.

    Both nations started with their small Britishpopulations but then grew primarily through immigration from English-speaking countries,secondly through immigration from non English-speaking European countries, and thirdly through immigrationfrom the rest of the world. They even share the same story in the foundingof their capital cities—they each built a planned city in a central location betweentheir two major population centers as to not favor one over the other. The similarities go on and on, but the pointis that Australia and the US were largely dealt the same cards, but got vastly differentresults The US quickly developed into one of the mostpolitically, economically, and socially powerfully countries on earth with a population wellover 300 million. Australia, however, never grew into more thana small, regional power, with a small population of just 25 million.

    Now, Australia is no doubt a highly successfulnation. It’s among the world’s most wealthy countries,the world’s most developed countries, it has one of the world’s lowest unemploymentrates, one of the world’s lowest poverty rates, and is one of the highest scoring inthe world happiness index. What the country is definitively not, though,is a superpower. While you can never forget the role of purechance, given the similar starting position of both countries, the first thing one hasto look at for a reason behind this is Australia’s geography. Despite their similar sizes, what differentiatesAustralia from the US is its desolation. About 35% of the landmass is considered desert,which generally cannot sustain large population centers. There are of course exceptions to this, mostnotably in the Middle East where huge cities such as Dubai, Doha, and Riyadh sprung upin the middle of deserts, but each of these largely developed as a result of oil boomsin their respective countries.

    While the deserts of Australia do have oildeposits, none of these are at a similar scale to those of the Middle East, have not beensignificantly exploited, and, in addition, it’s largely Perth, on the western coast,that has emerged as a hub for oil, rather than an inland city. With limited arable land and a harsh climate,the inland of Australia just isn’t conducive to most human life. That results in a fairly striking populationdensity map. Just five major population centers have emerged—Brisbane,Sydney, Melbourne, Adelaide, and Perth. Each of these is directly on the coast. The largest city in Australia that’s notdirectly on the coast, in fact, is Canberra—the capital—which has a population of just 400,000and was a planned city, meaning its development cannot be a perfect indicator for the viabilityof inland life in Australia. Even then, it sits a mere 70 miles or 115kilometers from the coast.

    If you’re talking about population centersthat are significantly offset from the coast, in the outback, as it’s called, the largestwould probably be Alice Springs—a northern territory town of just 24,000. This desolation can be further exemplifiedby the country’s road network. The primary highway linking the populationcenters of Brisbane, Sydney, Melbourne, and Adelaide to Perth is just a single, two-laneroad, traversing the southern coast of the country. The same is the case for the Stuart highwaywhich serves as the primary link from the south coast to the north coast up the centerof the country—it too is just a two-lane road. What this all means is that much of Australia’sland just doesn’t lend itself to the development of large-scale human settlements, leavingit fairly empty. Australia’s vastness served a crucial rolein developing it into one of the world’s wealthiest economies, though. The country is now the world’s largest exporterof minerals. It has huge amounts of coal, iron, lead, diamonds,gold, uranium, and more, mostly in its vast, open, outback.

    That means that the primary economic activityin Australia’s interior is mining, and with natural resources making up a majority ofthe country’s exports, it were these minerals that played a major part in growing Australiainto a wealthy economy. They also cemented who Australia’s economicpartners would be. Nearly 30% of Australia’s exports go toChina, primarily driven by China’s significant demand for minerals. China, in fact, in the number one spot, buysmore from Australia than the number two, three, and four countries combined—Japan, the US,and South Korea. Beyond just Chinese companies buying mineralsfrom Australian mining companies to use in their factories, there are also sizable amountsof investment coming in from Chinese companies. Overall, it’s safe to say that the Australianmining sector would not be what it is without China, but Australia also relies on the billionpeople up north to act as customers for another crucial aspect of their economy—education.

    As strange as it might sound, universities,which in most cases are non-profits, form a sizable part of the Australian economy asAustralian universities are some of the most successful in the world at attracting internationalstudents. The country is home to about 875,000international students across all types of schools. Now, of course, remember, the entire populationof Australia is only about 25 million. What that means is that, in the entire country,1 out of every 28 people are international students. Of these international students, the highestproportion, by far, are Chinese, at 30%. That represents a quarter of a million Chinesestudents studying in Australia. On the flip side, that means that at any giventime, 1 out of every 5,000 Chinese people are studying in Australia. Within universities, Chinese make up 10% ofthe average student body, however, considering they tend to cluster together, certain universitieshave far higher proportions.

    At UNSW the proportion is 23%, at the Universityof Sydney, it’s 24%, and numbers are similar at other hotspots. All in all, these Chinese students contributemore than about $10 billion a year to the Australian economy. There are also plenty of other sectors thatplay a part of China’s huge economic influence in Australia such as tourism, manufacturing,services, and more. Given how much the two economies are interlinked,therefore, as China has risen, so too has Australia. This link to the success of one of the biggesteconomic success stories ever has helped Australia earn an impressive record. It has gone 28 years, since 1991, withouta recession.

    While the rest of world struggled throughthe Asian Financial crisis, the collapse of the dot-com bubble, and the Great Recession,Australia just kept on going with quarter after quarter after quarter of economic growth. By most measures, in modern history, no developedcountry has ever gone such a long period without a recession. But this all, of course, has a flip side. Such heavy economic reliance on a countrythat politically, Australia doesn’t always agree with is dangerous. An Australian-Chinese trade war would certainlycause a lot more damage down under than up north. At the same time, there are quite a few effortsby China to influence Australia. China has made plenty of attempts to tip politicsin the country in their favor. As one, small example, Chinese Communist Partyrun or affiliated WeChat accounts, a popular social network in China, released posts criticaland mocking of Australian politician and current prime minister Scott Morrison in the run-upto the May, 2019 Australian election.

    Beyond that, the Chinese government has beenknown to unofficially sponsor certain pro-China, ethnically-Chinese candidates for variousAustralian offices through a variety of methods. In media, China has been known to impart vastcontrol over Chinese-language outlets in Australia and responds harshly to criticism throughdefamation lawsuits and more. On university campuses, the Chinese CommunistParty is known to have vast amounts of influence, with accusations that the government has builtspy networks within Australian universities to monitor Chinese students and their politicalviews. In one instance, a Chinese student studyingin Brisbane participated in a rally supporting the anti-Beijing protests in Hong Kong, anddays later, the student’s family back in China were visited by the authorities.

    There is a very clear but unspoken threatby China to Australia—if you make things difficult for us politically, we’ll makethings difficult for you economically. How things typically work in China is that,in order to achieve business success, even when running a fully private company, oneneeds to be cosy with the Chinese Communist Party that runs the government. Therefore, even if a Chinese company is fullyprivate, it knows that it needs to act in a way that aligns with China’s politics. Of course, while some of China’s tools ofeconomic warfare are more traditional, like tariffs, a lot of its influence stems fromthe actions of the private sector. Any private Chinese company knows that, ifAustralia suddenly took a hard pro Hong Kong independence stance, for example, the CCPmight not be happy about continued business with the country. Australia’s therefore in a tricky spot whereit’s a western country socially and politically, but in many ways, an eastern country economically. As a result, taking a political stance againstany actions by China comes at a much higher cost than that of a less economically linkedcountry. Australia quite literally cannot afford tolose China. A trade-war with China on the scale of theUS’ would devastate the Australian economy.

    China no doubt has done wonders for Australia,but the point is that too much reliance on any economy, no matter how strong that economymay be, is a risky strategy. When that strong economy is run by a foreigngovernment that can adjust its flows in an instant, that’s even riskier. According to one study run by the ReserveBank of Australia, if China’s GDP contracted by just 5%, that would result in Australia’sGDP falling by 2.5%. That is a clear-cut case of economic reliance,so, if Australia wants to keep up its unprecedented period of economic growth irregardless ofhow China’s doing, diversification is crucial. I know a lot of Wendover Productions viewersare the type of people who already run or would like to run their own businesses, andone of the fastest growing industries out there is, of course, e-commerce. Traditionally, starting any sort of businessthat involves selling physical goods required a ton of work to build out the infrastructurenecessary to do that, there was a huge barrier to entry, but nowadays, it’s super simple,especially thanks to platforms like Shopify. Shopify now powers more than a million onlinebusinesses meaning you’ve almost certainly bought something through Shopify, but on themerchant side, it makes setting up, marketing, running, and managing your business easy.

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