The US or China? Australia can’t afford to make mistakes

Despite President Barack Obama’s charms, Australia must focus on China. AAP Image/ Scott Barbour

Australia’s recent fleeting love affair with President Barack Obama notwithstanding, Australia’s future lies with China and the North, not the Pacific and the East.

This is not simply a matter of economics. Australia may seem from some perspectives to be becoming a Chinese economic colony, but Australia or at least Australian interests retain considerable financial investment in the USA, and certainly much more than in China.

Australia’s future rests with China for social and cultural reasons, and even to a certain extent for geographical and geopolitical reasons.

We are a small country in the southern hemisphere removed from the attention of people and governments in Europe and North America by several time zones. This has its advantages too, including somewhat easier access to China for business and pleasure. It’s certainly a psychological closeness felt the other way round in China, which helps explain why China is now our largest annual source of migrants.

We could, of course, see this interest from China as just a one-way street. The Chinese economy has been growing phenomenally for thirty years and its society and politics are now considerably more open than they were before the reform process started in 1978.

All the same, there is still a long way to go. According to the World Bank in 2010, the average GDP per person across the whole country was USD$4,393 compared to USD$42,131 in Australia.

As my colleague James Reilly has recently cogently argued in Strong Society, Smart State: The Rise of Public Opinion in China’s Japan Policy the more open China is matched by state intervention when it is strategically important. Particularly given the amount of the earth’s natural resources now moving from Western Australia and Queensland to China – after all one-third of China’s iron ore imports currently are sourced here – Australians could be forgiven for thinking that China has more to gain from us, in terms of ideas as well as resources, than we from them.

This would be not one, but several mistakes.

The first mistake is to think that China is “behind” Australia in its development of technology. It’s important not to minimize the problems China faces, especially in rural areas, and especially away from the Eastern seaboard. At the same time, it is clear that for a range of reasons (late development and access to advanced technology, state strategic planning, the maintenance of genuine competition in large-scale markets) China is in many areas way ahead of Australia.

Telecommunications are efficient, effective and cheap, as are urban public transport systems. There are those who criticise the new high speed rail system for its costs and one well-publicized accident but even they presumably might be attracted by the prospect of travelling from Sydney to Canberra in an hour.

These days any first time traveller in China can readily observe that while there may be things China can learn from Australia, there are also lessons to be learnt in return.

This is related to the second: it would be a mistake to remain as overwhelmingly reliant on our mineral exports to China as we are at present. This would be self defeating, not simply because natural resources are necessarily limited, but because by not working synergistically with China and Chinese economic enterprises we run the risk of missing opportunities for innovation and future development in our own economy.

Minerals and mining may have the current headlines but increasingly Australian technology is entering the China market, not just in solar panels but in all kinds of new technological areas (grid technology, green buildings, provision of health centres for starters) to meet the challenge of an expanding economy.

Importantly though the areas for cooperative development are those where the Chinese think Australia has expertise which may not necessarily be identical with those where we think we excel.

And the third mistake would be the worst: to misjudge China’s scale and potential. China is not an economy like Germany, Japan, or Australia, it is more like a series of Germanys, Japans and Australias.

Development in the cities of the Eastern seaboard – Beijing, Shanghai, Qingdao, Hangzhou, Guangzhou and many more – has already been spectacular delivering not just growth but high standards of living to much of their populations in a relatively short period.

But this is only the start. The scale of what will occur as development moves westwards across China means that new ideas and new technologies – social as well as industrial – will also emerge alongside new economic opportunities. Australia and Australians should not refuse shares in the future.