State Premier Daniel Andrews was publicly criticised by Australian Prime Minister Scott Morrison for signing a memorandum of understanding (MOU) in October 2018. Local press reports also emerged last week, while the deal was also criticised by pro-democracy protests this week relating to China’s handling of Hong Kong.

Eighteen months after the Australian state of Victoria signed a controversial memorandum of understanding with China supporting its Belt & Road Initiative, the four-page document is back in the spotlight.

State Premier Daniel Andrews was publicly criticised by Australian Prime Minister Scott Morrison when he signed the memorandum of understanding (MOU) in support of the initiative in October 2018.

It is the only state in Australia to sign a MOU, and Andrews has been accused of selling out Australia’s national interests for Victoria’s own economic pursuits with China as well as for not aligning with the federal government’s decision not to support the initiative over strategic concerns.

Some of Australia’s neighbours, including New Zealand, have supported the initiative, and the MOU has generated more investment and trade interests for Victoria, according to the Australian business community, although they insist there was already plenty of interest in China’s plan to grow global trade both from local and Chinese enterprises across all states.

More of Andrews’ alleged disobedience of the federal government’s warnings were brought to light last week in the local press when The Sydney Morning Herald and The Age revealed the premier blindsided the federal government over the signing, ignored warnings and showed them only parts of the final MOU.

Andrews said he made clear the MOU was for trade reasons in the hope that further engagement with China would create more jobs and secure Victoria’s economic longevity, a move the state was allowed to make on its own.

This week, the state premier and the belt and road plan were also the focus of pro-democracy protests relating to China’s handling of Hong Kong and the new national security law.

Morrison first publicly rebuked Andrews in 2018 for not consulting him and for getting involved in foreign policy, and while the MOU does not legally bind Victoria to any particular project or commitment, it raised concerns of Beijing’s growing influence in Australia.

Andrews then signed a subsequent framework agreement in late 2019 mapping out how Victoria and China would work together on projects in key areas such as infrastructure, biotechnology, agriculture and food, and aged care in the spirit of the initiative.

Things came to a head last month when Victorian Treasurer Tim Pallas criticised the federal government for using language which “vilified China” in its call for an international inquiry into the origins of the coronavirus outbreak, a move suspected for motivating China’s imposition of a destructive 80.5 per cent tariff on Australian barley and suspension of beef exports from four Australian abattoirs. It set off a brawl among the local political factions with Victoria and its MOU becoming the latest victim of allegations of disloyalty.

Australia’s Home Affairs Minister Peter Dutton also called the belt and road plan a “propaganda exercise”, prompting Chinese Foreign Ministry spokesman Zhao Lijian to point out the “groundless accusations made by some Australian politicians” were “totally untenable”.

Last week, the Victorian government held its fifth conference call with the Chinese Development and Reform Commission to discuss plans under the MOU as well as more investments in tourism and education post COVID-19.

A senior lawyer at the China desk of a firm in Melbourne, who did not want to be named, said he had seen more interest from Chinese investors in Victorian infrastructure and energy, particularly renewable energy projects, since the MOU was signed, although they were not large multi-million dollar deals.

“Certainly [the investors] were energised by the MOU and many were considered under the auspices of the belt and road but none of them were traditional belt and road projects”

Senior lawyer in Melbourne

“Certainly the investors were energised by the MOU and many were considered under the auspices of the belt and road but none of them were traditional Belt & Road Projects,” he said.

“Many of these deals were instigated by private Chinese enterprises purely on a commercial basis, for example those wanting to capitalise on their solar energy technology.”

Belt & Road Trade Adviser, Overtures: Co’s Oscar Fong, said the MOU had certainly accelerated Australian interests in projects in Victoria, and even in other states, however even without the MOU, there was plenty of commercial interests between the two countries.

More questions were raised about the effectiveness of the MOU after the latest data on state trading performances for 2018-19 showed that there was no change in Victoria’s trade with China, while New South Wales and Queensland posted 8.1 and 27.4 per cent increases respectively.

Fong added that discussions were under way over several trade deals, such as the export of machinery permitted under the trade pillar of the initiative, but none had been concluded.

The MOU, according to Fong, paved an easier pathway for those seeking to do bigger deals that require Victorian government support such as licenses or expansions, but for smaller deals, it would not make a substantial difference.

The lack of support from both Andrews’ Labour Party colleagues and the federal government has also brought to light the seriousness of the current great divide across the Australian population on geopolitical lines, and the possible influence of the United States on Australia’s position with China manifested in domestic political scuffles, experts said.

Australia’s stance on the belt and road strategy had been positive to begin with, but weakened over time to its lowest point at the time when the US put out its strategic approach to China last month describing the Chinese government’s intentions, including the initiative, as “malign”, Australian Centre on China in the World director, professor Jane Golley, said.

“It is clearly problematic for the federal government for one of its states to adopt a position that doesn’t align with its own”

Jane Golley

“It is clearly problematic for the federal government for one of its states to adopt a position that doesn’t align with its own. But the question is who is making the decision that is genuinely in Australia’s best interests at this time?” Golley said.

“Is the federal government possibly being paranoid and doing the bidding of the US which clearly sees the belt and road initiative as a ‘malign’ policy?

Golley said it was an odd stance especially considering Australia had been welcoming Chinese investments for many years.

“Victoria has decided the economic outcome is significant enough [to sign the MOU] and that they trust the government enough to deal with any security concerns that may arise,” she said.

“The whole episode … for what it is, both the federal and Victorian governments haven’t handled it well”

Michael Clarke

Michael Clarke, associate professor at the Australian National University’s National Security College, agreed accusations pointed at Victoria were evidence of how the “China issue” had become a political football in Australia.

“The whole episode … for what it is, both the federal and Victorian governments haven’t handled it well. But when Victoria entered into talks with China there was no settled [federal] policy on what the approach to the belt and road should be,” he said.

“For the federal government to point a finger at Victoria is a bit hard to swallow.”

While there is no obvious evidence there has been American involvement in Australian politics, the US has placed pressure on its allies to follow with its preferences in economic and strategic decoupling from China, Clarke said.

“There is an opportunity for lesser states to strike pragmatic bargains between the two … playing off the tensions to their own advantage is one way to look at it”

Michael Clarke

But he warned it would be potentially damaging for middle states like Australia or Japan to choose between the US or China, and instead it would be better for them to band together to pursue their own interests, taking into consideration treaties already agreed with the US.

“Certainly with the Trump administration … quite a lot of people are sceptical with the US foreign policy,” he said.

“There is an opportunity for lesser states to strike pragmatic bargains between the two … playing off the tensions to their own advantage is one way to look at it.”

Author: Su-Lin Tan, joined the Post in 2020 after the Australian Financial Review where she covered Housing & Commercial Property, Asian Business and street talk and investigations. She is a qualified accountant and worked in investment banking and funds management both in London and Sydney before becoming a Journalist.
Editor’s Note: The article reflects the author’s opinion only, and not necessarily the views of the editorial opinion of Belt & Road News.