Happy Diwali!

1. UN

The UN system is very important to China, more so than for countries such as Australia. Last week, Xi marked China (PRC)’s 50th anniversary at the UN with a speech. In it, he called the UN resolution to recognise the PRC as one that “restored the legitimate membership at the UN” 恢复联合国合法席位.

“China” was actually a founding member of the UN. However, “China” was represented by the Republic of China at the UN until 1971, when PRC finally persuaded most of the countries to back it rather than the administration in Taiwan as the government of “China”, more than 20 years after the Civil War. Since then, Taiwan lost its representation at the UN, including the membership of the UN Security Council. Of course, any attempt now by Taiwan to join the UN as a separate country would be vigorously opposed by China.

The Chinese Government’s conception of a rules-based order is multilateralism centred around the UN, and is to be contrasted with a “US-led order”. This “UN-centred order” prioritises sovereignty and non-interference above anything else, including human rights and liberal values.

From its perspective, what countries like Australia call the rules-based order is just a “US-led order”. The invasion of countries without UN authorisation would be against its conception of rules-based order but is expected under the “US-led order”.

Its generally positive view of the UN contrasts with some countries’ view of the UN as a hugely inefficient global bureaucracy. China knows that it is currently not the top dog, so an “UN-centred order” is seen as a good alternative to the “US-led order”. Of course, if China was the most powerful country in the world, it would likely prefer a “China-led order” rather than an “UN-centred order”.

This admiration for a global bureaucracy is popularly reflected in many Chinese fiction and films. For example, in Wolf Warrior 2, an ultra-nationalistic film, the Chinese military would not act until it received authorisation from the UN Security Council. This would be inconceivable in American films. Putting aside whether such portrayal is realistic, it sends a message about the importance of the UN. In the Three Body Problem series, the UN also played a role by forming the Planetary Defense Council.

Due to the importance China attaches to the UN system, it has invested a lot of effort working the system, including lobbying members and vying for leadership positions. This has caused concern among countries about its influence in the UN. Its increasing influence is sometimes taken as another sign that the UN system is unworkable.

2. Resilience and dependence

Australia’s experience with economic coercion from China is being closely watched around the world. To understand power and leverage in a trading relationship, examining only current trade flow can be highly misleading. For example, just because China is Australia’s biggest export destination does not necessarily mean that Australia is “dependent” on China or that China has leverage over Australia. To really understand power and leverage, it is necessary to examine the market structure of different sectors.

This week, two new papers shed some light on this topic.

James Laurenceson, Thomas Pantle, Phillip Toner and Roy Green published a report on Australia’s export mix, industrial base and economic resilience. It found that Australia’s overall exposure to China is on par with other countries. The jump in exports to China between 2015 and 2020 was “overwhelmingly an iron ore price story”.

But Australia stands out in the goods export basket: Australia’s exports are heavily concentrated in primary goods. Yet this concentration in primary goods may have helped the Australian economy facing economic coercion from China, according to the next paper.

Scott Waldron, Victor Ferguson and Darren Lim authored a working paper on economic coercion. It examined nine Australian export sectors being sanctioned (informally) by China. For each of the sectors, the paper assessed the market dynamics (for example, market concentration) and what adjustments the Australian exporters made in the face of the sanctions.

According to the paper, the exporters used three ways to mitigate losses. The first one is the most well-known: reallocation. This is where the exporters find alternative customers. The paper found that reallocation was optimal, as it can be done in the short-term. In sectors where there are many customers, it is a lot easier for exporters to find customers. In contrast, if China was the dominant buyer, as is the case of lobsters, then it is harder for exporters to find alternative customers.

The paper also mentioned other factors contributing to the success of the reallocation method. One is the elasticity of supply. As global supply has not increased, the Australian exporters could find customers easily. Another factor is product homogeneity. The more homogenous the product, the easier reallocation.

The second way is “deflection”. This is where exporters try to circumvent sanctions through transhipment — also used in tariff evasion. In the nine sectors examined by the authors, the lobster industry was shown to have used this tactic. As China is a monopsony, it is not possible to export to other countries. Yet lobster is not a homogenous product and Chinese consumers have a distinct preference for Australian lobsters.

As a result, lobsters were smuggled through Hong Kong. Of course, this tactic relies on Chinese authorities turning a blind eye to transhipment. Unfortunately, it appears Chinese consumers do not have a similar distinctive preference for Australian wines, which is shown to be easily substitutable for other wines.

The third way is “transformation”. This is where exporters try to transform the products into something that is not on the sanction list or produce something else entirely. For example, the paper found that barley farmers planted different crops and timber exporters processed logs into chips.

What can the government do to support exporters that are targeted for economic coercion? The authors wrote that:

The factors that make the Australian economy competitive are in many ways the factors that make it resilient. Exporters can diversify when conditions require it, provided they are globally competitive, and can access well-functioning global markets.

The international system that supports global markets – open economies and consistent rules and institutions – is therefore critical to Australia’s success. Policies that encourage economic closure, or challenge the rules-based system, potentially undermine resilience.

So for governments, the best way to insure against economic coercion is to make the economy competitive and to support an open rules-based system. In the face of economic coercion, governments may be tempted to encourage economic closure to stop trade dependence. But this is exactly the wrong thing to do.

3. Chinese Australians

It’s report season in Australia it seems. Jennifer Hsu, Richard McGregor and Natasha Kassam just published an analysis on Chinese community organisations in Australia.

The key findings include: many Chinese Australians had little or no engagement with Chinese community organisations, and attacks on the community in Australia in some cases made them more receptive to messages critical of Australia.

While they’re not surprising to regular Neican readers, they may be surprising to those who view Chinese Australians solely from the lens of foreign interference and threats posed by the CCP’s united front.

The section that interested me the most was on participation in public life. As one of the few Chinese Australians who participate in public discussions about bilateral relations, I want to foster an environment where more Chinese Australians can do the same.

According to the report, many Chinese Australians interviewed said entering politics was a risky venture. They’re deeply impacted by the distrust of Chinese Australians: “People might point to me being photographed with this or that person.” The authors wrote:

This perceived distrust in Australia of Chinese-Australians may in fact work in China’s favour, further dislocating those people from Australian society and fostering more support for China’s political agenda.

Unfortunately, I have found that simply saying “distrusting Chinese Australians is bad for social cohesion and we shouldn’t do it” is not persuasive enough for most people. The only way that we can prompt any actions is to point to the fact that such distrust can be used by China.

“Social cohesion” by itself is not an issue that resonates with the policy community in Canberra — only by framing issues in foreign interference and national security terms can we see possible action.

4. Songs

A song in Mandarin has reached 22 million views on YouTube in just two weeks. The song is called Fragile 玻璃心 by Malaysian singer-songwriter Namewee 黃明志 and features Chinese Australian singer Kimberley Chen 陳芳語. It went viral among Chinese-speaking countries outside the PRC. Inside the PRC, it was banned, and the artists’ social media accounts were removed.

The song mocks the PRC nationalists online (colloquially called “little pink” 小粉红), alongside some of Xi’s signature policies.

In an interview with the Bang Xiao (ABC), Chen said:

I really hope that in the future, Australia will [provide] more opportunities for Asian actors and singers and celebrities in general. I feel like there's so much talent out there. And I hope that everyone has a platform and an opportunity to express and show their talent.

The Chinese Government, on the other hand, is promoting a video called 中美抗疫差距唱出来 The difference between Chinese and American approaches to COVID in song. The video features a woman playing two roles doing a rap battle against each other in English: one role as a blonde woman representing the US approach to COVID and one role as a nurse representing the Chinese approach to COVID. The video accuses the US of scapegoating China while doing nothing to contain COVID, and ends with “This is the freedom of America”.

Although the video is entirely in English, it did not go viral outside China. Authoritarianism and censorship are detrimental to soft power indeed.

5. MeToo

This is more in the breaking news territory. Famous Chinese tennis player Peng Shuai 彭帅 has alleged on Weibo that she was sexually assaulted by Zhang Gaoli 张高丽, member of the Politburo Standing Committee from 2012 to 2017.

This is the most high-profile sexual assault allegation so far. The Weibo post was promptly censored along with any reference to the matter. However, online discussions are continuing with commentators trying to avoid the censors.

Such an allegation is unlikely to ever be proven in China. And it is so surprising because it would take so much courage and bravery for the allegation to be made. Going against a senior CCP official (who is not already in trouble with the CCP) can ruin Peng’s life.

Neican Brief is supported by the Australian Centre on China in the World, Australian National University.