Australia’s economic reliance on China has revealed itself to be a weakness in the wake of the COVID-19 health crisis. Throughout the early 2000s, Chinese economic growth brought with it the conventional wisdom that liberalization, openness and freedom would permeate the authoritarian regime controlling China. However, this did not happen. With the outbreak of COVID-19, the global economy will suffer where nations are increasingly self-reliant, sceptical of trade opportunities, and incur higher levels of debt. Had Australia met Chinese economic growth prospects with more scepticism, focusing instead on developing certain industries and concentrating on innovation and opportunities in accordance with comparative advantage, it is likely that the economic impact of COVID-19 would not have been as high as it is proving to be.
For many years now, the conventional wisdom in Australia has been that its economic future will be tied to China. In the wake of the COVID-19 outbreak, this claim warrants healthy scrutinization. Australia only has itself to blame – forgoing trade opportunities with other nations has led to a situation where Australia is the world’s most China-reliant developed nation and will now have to bear the brunt of this decision in the post-COVID-19 world. Moreover, the state of Victoria has made an audacious attempt to sign up to China’s Belt and Road Initiative – the very same program that has come under increased scrutiny by think tanks, economists and international organizations.
As of November 2019, the Organization for Economic Co-Operation and Development (OECD) predicted a 2.25 per cent economic growth figure for Australia, with some hesitations around trade policy and monetary policy, the chief operation of its central bank. However, these figures were based on predictions absent of any COVID-19 impact given the November date. Considering the effects of COVID-19 now, a much grimmer picture appears. With unemployment figures high, debt rising, and low-interest rates, it will take Australia time to recover from the economic impact of the coronavirus. Fortunately, a strong safety net and welfare system with government intervention will mean that prospects for peace and stability will be unaffected.
Obviously, predicting the outbreak of COVID-19 was impossible. However, this should not mean the international community ignores some important lessons. Countries with unstable economies are at a greater risk of internal conflict and this is particularly the case with less affluent nations throughout the developing world. COVID-19 poses a health risk to these nations in its own right, however there are multiple effects that the disease has had and will continue to have on such nations’ economies.
While Australia still maintains the rule of law, democracy, and liberalisation, there are risks inherent in its economic reliance on China that smaller, developing nations must heed. This has already started to occur throughout the Pacific with “debt trap” policies. While “debt trap” wouldn’t pose a risk to Australia per se, there are risks of nations that are smaller and ever reliant on China’s economy falling into this trap. In tying economic policy to diplomacy, the audacious attempt by China to impose heavy debt burdens on smaller Pacific states that have no hope of paying such debt back only serves to undermine the autonomy of these smaller nations. This could have dire implication for global peace and security.
While it isn’t accurate to say that debt trap diplomacy leads to debt-equity swapping, the cancellation of debt in exchange for assets like ports, in the event that negotiations over debt take place, it is accurate that the power that China projects is quite large. Sri Lanka is a classic example of this, with the Hambantota port situation leading to China Merchants Port Holdings Company Limited (CM Port) owning a 70 per cent stake and a 99-year lease on the port itself. The 1.12 billion dollar sell-off was not used to clear the outstanding debt Sri Lanka owed on the port in question, instead, it was being used to service short term debt repayment costs. CM Port is owned by China Merchants Group, a state-owned corporation of China. This is a fact the international community must be made aware of in the post-COVID-19 era; where what appears to be private business decisions are really the decisions of proxy-government agencies that are beholden to the directives and decisions of the Chinese government.
The example of Sri Lanka is but one of many. In September 2019 the Solomon Islands severed official ties with Taiwan and established relations with Beijing. After a 36-year relationship with the island nation, it was revealed by senior government sources in The Guardian that bribery was an “open secret.” Similar stories also emerge from nations like Fiji, Vanuatu and Tonga.
It is clear that China is enacting an assertive approach to small pacific nations by lending capital to rebuild (in the case of Tonga), develop (in the case of Fiji and Vanuatu) and trade (in the case of Sri Lanka). Australia stands out as an exception, albeit a minor one, in the sense that is a developed nation with a larger population and economy with various industries and a strong safety net able to absorb the economic shock of a global recession. However, it is not immune to the shock and its ability to withstand will definitely be tested. The same cannot be said for countries without safety nets as strong as Australia’s.
On the other end of the world, while the spread of the COVID-19 has been relatively slow throughout Africa, there are already 120,000 cases. Shockingly, these numbers could be much higher as the African division of the World Health Organisation excludes Djibouti, Somalia, Sudan, Egypt, Libya, Tunisia and Morocco. Whether the spread can be contained will remain to be seen, however, the prospects are not overly positive with most cases in the north of the continent. There have also been reports of people escaping quarantine facilities in Zimbabwe and Malawi with fears that the virus may spread in those countries as well.
As some countries begin lifting lockout restrictions and the revival begins, the world must learn two things. Firstly, the international inquiry into the origins and response to COVID19 at the W.H.O. – spearheaded by Australia – must be conducted with openness and transparency. This will prove difficult, but the results will hopefully reveal some much-needed truth on the matter and where the disease itself originated. Secondly, the lure of easy economic opportunities with China must be met with more scepticism given that its political system of authoritarian control is the antithesis of liberal democracy and isn’t so easily divorced from its economy. Thirdly, there is also a very real threat that the outbreak of COVID-19 could indeed lead to higher instances of Sinophobia, racism and prejudice. This is why delineating between people of Chinese heritage and the Chinese government is essential.
Countries that have stable political systems are at low risk of civil war, corruption and electoral fraud. However, the reality of the COVID19 outbreak now means that countries – like Australia – that have for too long been lured by easy economic opportunities, will now face the consequences. Relatively speaking, however, the situation for Australia is nothing like smaller pacific nations and many African nations that have weaker health infrastructure, under-resourced hospitals and a severe lack of medical expertise. International organizations like Doctors Without Borders and the Red Cross should spearhead a campaign to provide resources and medical staff to Pacific and African nations in the wake of the World Health Organization’s lackluster performance and laggard response. The W.H.O. is also beholden to its membership body, and as a result, there will always be political tensions at play in what should be an apolitical organization.
Until such time as political jostling between great powers can be avoided, international organizations that specialize in health policy and outbreak responses will always be politicized. COVID-19 is an example of how outbreaks are a greater threat to world peace and stability than what the international community may have envisaged in the past.
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