Australia’s experience in dealing with China provides an important lesson for any future Canada-China free trade agreement, writes Peter Layton. 

By Peter Layton, Dec. 5, 2017

Canada will seek a free trade agreement with China – only the timing is uncertain.  Integrating with the world’s largest economy (in purchasing power parity terms) offers too much to ignore.  In so doing, however, we should not ignore the attendant (and significant) security dimension.

This does not arise from concerns over Canadian security, or even over China’s. Rather, it arises from the insecurities of the Chinese Communist Party.  The principal way the Party addresses these insecurities internationally is through carefully focused economic statecraft – and it is into this that Canada’s future free trade agreement fits. After initially discussing the Party’s insecurities, some implications for Canada will be drawn out, mainly using Australian examples from its current bout of rampant China fretting – much of it well founded.

The Party runs China but is much more than a simple political party, being deeply embedded across Chinese society.  It has been astonishingly successful in modernizing China in a remarkably short space of time, lifting hundreds of millions of people out of poverty and dramatically improving people’s standard of living.  Amongst many Chinese, these achievements have earned the party respect and at times admiration.  Even so, as is normal for authoritarian regimes, the Party continuously fears for its own survival from internal forces.  The 2015 China’s Military Strategy is an interesting illustration of this paranoia.

In the document, the Party sees domestic perils aplenty given the Taiwan, Tibet and “East Turkistan independence” separatist forces; the last two having recently inflicted “serious damage” on China. Moreover, “anti-China forces have never given up their attempt to instigate a ‘color revolution’ in this country. Consequently, China faces more challenges [today then previously] in terms of national security and social stability.”  To some this may seem like an alternative universe – but not to the Party.

In a move reminiscent of Orwell’s 1984, the Party is now developing the Social Credit System that will monitor and rate all 1.3 billion citizens.

To counter these perceived threats, the People’s Liberation Army (PLA) is required to “actively participate in the country’s economic and social construction, and firmly maintain social stability so as to remain a staunch force for upholding the Communist Party of China’s ruling position.” It should be remembered that the PLA isn’t a national army, or even an army of the state, instead it is the Party’s Army.

Reflecting these worries of being overthrown from within, today’s Party has decisively clamped down on civil society, domestic dissents, local human rights lawyers, artists and cultural groups, internet access and usage, media censorship, and foreign non-governmental organizations. Moreover, in a move reminiscent of Orwell’s 1984, the Party is now developing the Social Credit System that will monitor and rate all 1.3 billion citizens.  Most amusingly for foreigners, but symptomatic of the Party’s insecurities, are some bizarre bans: Doctor Who as only the Party owns history and Winnie the Pooh because of his resemblance to current President Xi Jinping.

In this, the Party may appear trying to insulate China from the rest of the world but this would be a serious misreading. Chinese international tourism is booming. In 2015 Chinese took 128 million trips abroad; 60 percent in the 18-34 age group.  And therein lies a glimpse of the Party’s mounting problems.

Safety for the Party means it sees an imperative to control its environment – to ensure stability – and what constitutes the environment is now spreading beyond the domestic to the international.  If Chinese people, including large numbers of young students, are travelling overseas, they represent a potential threat to domestic stability through being possibly exposed to “color revolution” ideas. Carefully management is necessary.

There is a twist.  China thinks of the overseas Chinese as ultimately part of China as well, whether the people concerned like it or not. Indeed there is a view in China that “one cannot ever become un-Chinese.” With a large Chinese migrant population, Australia (and undoubtedly Canada) has become to some extent included in China’s domestic gaze. Our domestic is now their domestic.

Based on Australia’s experience, the Party’s insecurities have some broad implications for future Canada-China relations as these gradually deepen, including through a free trade agreement.

The Party’s insecurities have some broad implications for future Canada-China relations as these gradually deepen.

Firstly, China has an international grand strategy of building influence through economic statecraft. With more economic linkages, there will be more people in the target country benefiting from China. The Party expects that these people will then be grateful, more understanding of China, respect the country (read Party) and generally not cause trouble.

Secondly, if economic statecraft looms large, it also creates vulnerabilities in the targeted country that can be purposefully exploited if international relations hit some turbulence.  Several countries have had Chinese trade sanctions applied, including cutting tourism when they took foreign policy stances that the Party disagreed with.

South Korea, for example, recently installed an anti-missile system to defend itself against North Korea but this attracted China’s ire and damaging economic sanctions; to remove these South Korea had to agree to significant national defence restrictions. Through its economic ties, China is steadily gaining veto rights over South Korean foreign policy. The utility of its economic heft lies behind China’s strong preference for bilateral economic agreements rather than multilateral ones.

Thirdly, the Party actively seeks control of Chinese nationals and migrants overseas by capturing local associations, friendship societies and Chinese-language media, and by manipulating those people with family remaining in China.  This intrusion extends further into channeling donations through Chinese businesses or migrants to local political parties to try to help friendly politicians get elected and to influence those currently in power.

Fourthly, Chinese students form an important part of the international national education market; they are both cashed up and numerous.  Many are funded by the Party-State with explicit (and understandable) economic incentives to return home after their studies finish.  Academic institutions are at times reminded that their continuing cash flow depends upon Chinese students not being exposed to harmful perspectives. Extending this, Party-led networks are now being built in host countries to properly educate visiting Chinese students in correct patriotic views.  In a rare foray, Australia’s Department of Foreign Affairs recently publicly signalled the government’s displeasure concerning the deepening Chinese interference in Australian education institutions.

A future free trade agreement will help China undertake these various integrated activities across Canada but in this there is little choice.  Becoming prosperous from Chinese economic opportunities carries with it certain vulnerabilities. The principal way to manage the inherent risks is to build resilience by having diverse international trade relations, thereby limiting the economic damage if at some future time the Party feels threatened. Such a diversification concept lay behind the annoyance felt by several Asia-Pacific nations towards Prime Minster Trudeau’s actions over the multilateral TPP free trade agreement. These actions set Canada’s East Asian ambitions back but doubtlessly played well in Beijing.

The security dimensions of China’s economic statecraft are an inherent part of developing and sustaining productive trading links with the country. The bad comes with the good, with the onus on the host state to recognise the issues and take steps to limit the difficulties accordingly.  China is rapidly becoming the largest single economy in the global market and is actively shaping it. The emerging era of globalization with Chinese characteristics appears to mean that all of us will become ‘part’ of China to varying or lesser degrees. The age of the Middle Kingdom lies before us. Caveat emptor; let the buyer beware.

Peter Layton is a Visiting Fellow at the Griffith Asia Institute, Griffith University, Brisbane, Australia.

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