Minister for Defence – Australia and China – Partners in the Asia Pacific Century

I am very pleased to be here today at the China Institute of International Strategic Studies. 

I thank General Gong Xianfu for hosting me and for his interest in China’s strategic dialogue with Australia. 

The China Institute of International Strategic Studies has itself contributed significantly to the Australia-China relationship. Together with the Australian Strategic Policy Institute, the Institute conducts the Australia-China 1.5 track Strategic Policy Dialogue. 

I am pleased to be joined by Institute staff, along with staff of the Peking University Australian Studies Centre.

This is my fourth visit to China, my third as a Minister in the Australian Government, but my first as Minister for Defence. As a Minister I have previously visited Beijing, Shanghai, Chengdu and Chongqing.  I am pleased to be here again in Beijing and look forward to my visit tomorrow to the Guangzhou Military Region Headquarters and the South Sea Fleet in Zhanjiang. 

This year we mark 40 years since the establishment of diplomatic relations between Australia and the People’s Republic of China. Over that time, China has become Australia’s leading trading partner, two-way investment has flourished and our people-to people links have become exceedingly strong. We share strategic interests in the Asia Pacific region and our military to military and defence to defence relationship is growing from strength to strength.

Australia recognises the historic changes that have taken place in China since the reform and opening period was initiated by former leader Deng Xiaoping in the late 1970s. 

These reforms have transformed the face of China and the way its people live and work. 

It has gone from an impoverished and largely agrarian economy to an increasingly industrial and urban-centred economy and an engine of world growth. 

Up to 500 million people have been lifted out of poverty.

China has become the world’s second largest economy in purchasing power parity terms. 

The IMF expects China’s economic growth rate to stay above 8 percent in 2012 and 2013

It is the world’s largest exporter of manufactured goods. 

It is the world’s largest car market.

China’s economic growth is also reflected in China’s rate of urbanisation, which has important implications for Australia.

China’s level of urbanisation rose from 20 per cent in 1980 to 40 per cent in 2005. By 2030, it is expected to reach 70 per cent.  

Today more than 600 million Chinese are living in cities. There are an estimated 160 cities in China with more than 1 million people. In Australia, five cities have a population of more than 1 million. 

On some estimates, China is likely to need to accommodate at least 300 million more people in urban areas by 2030.

Australia welcomes the fact that the Chinese people, particularly those in cities, enjoy vastly greater opportunities and choices than those faced by their parents 30 or 40 years ago.  

As China has advanced economically, so to has the trade and economic relationship between Australia and China. 

Australia and China’s economic links are comprehensive.  

Last year, two-way trade reached 120 billion Australian dollars. China has become Australia’s largest export market.

China matters a great deal indeed to Australia.  But so too, does Australia matter to China. 

Australia, like China, is a member of the G20 largest economies in the world.  

Australia is the 13th-largest economy in the world and the fourth-largest economy in Asia after China, Japan and India.  

Australia has become China’s eighth-largest trading partner.  Australia is China’s 12th largest merchandise export destination. 

Australia is China’s largest source of mineral ores, its largest source of coal, its second-largest source of LNG and a top ten source of fuels.  

Australia has the largest uranium resources in the world, and we are a new supplier to China.  

Australia welcomes Chinese investment.

Since the end of 2007, Australia has approved over US$75 billion of Chinese investment. Around 380 foreign investment applications have been approved in this period.  

Only six proposals involved conditions or amendments to the application: none were rejected.

I am confident our trade and investment relationship will continue to grow in the future, all the more so if we conclude a comprehensive Free Trade Agreement that opens both of our economies to each other.  

The Australian and Chinese economies have continued to grow since the onset of the Global Financial Crisis four years ago, having avoided recession even in the worst times of the crisis.  

The strong trading relationship between our two nations has played a role in our resilience against the worst effects of the crisis.  

This relationship has traditionally been dominated by trade in goods, but is broadening to include greater two-way investment and more trade in services, including financial services. In 2010 China became Australia’s biggest services export market. Chinese demand for Australian education and tourism accounted for a large part of this.  

Australia has solid growth, low unemployment, contained inflation, strong public finances and a net debt-to-GDP ratio of about one-tenth of that of the major advanced economies.

By working together, Australia and China can remain strong even as many other parts of the globe continue to confront economic uncertainty. 

The continuing rise of China is part of the defining change in the world order. China is now a major stakeholder in, and substantial contributor to, the current global order.

China maintains the world’s largest standing military, with advanced capabilities, including ballistic missiles.  

With this rise comes added strategic responsibilities for China, including the need for greater openness and transparency in relation to capabilities and strategic doctrine.  

Australia is positive and optimistic about China’s emergence. Australia wants China to emerge as a constructive player in a harmonious global order.  

The current global order, an international rules based system, has helped raise the living standards of millions of Chinese.

The rise of China is a defining element of Asia’s growing influence, but it is far from the only or whole story.  

The United States presence in the Asia-Pacific has been a force for peace, stability and prosperity since the end of World War Two. Australia welcomes very much the fact that not only will the United States continue that engagement, it will enhance it. This was reinforced by the speech that US Secretary of Defense Panetta gave at the Shangri-La Dialogue in Singapore on Saturday. 

The rise of India is still underappreciated, as is the rise of the ASEAN economies combined.  

The major and enduring economic strengths of Japan and South Korea also need to be acknowledged. So must the great individual potential of Indonesia – as it emerges from a regional to a global influence.  

The ongoing shift in influence is, however, not just about economics or demographics, it is also about military power.  The Asia-Pacific is home to four of the world’s major powers and five of the world’s largest militaries – the United States, Russia, China, India, and North Korea.  

The implications of this historic shift continue to unfold.  

Australia’s interests are of course directly affected by China’s relations with the other major powers, notably the United States, Japan and India. 

The bilateral relationship between the United States and China is, I believe, the most consequential bilateral relationship that we’ll see in the course of this century. The relationships these two powers have with India, Japan and Russia will also play all important roles in the future shape of the region. 

We welcome the positive trajectory of these bilateral relationships.

As China’s economy grows, of course, so too will China’s strategic influence.  

Australia and China have greatly benefited from the Asia-Pacific region’s long period of peace, security, stability and prosperity.  

We owe this in great part to the creation and growth of regional institutions like ASEAN and its related forums, institutions that continue to build habits of dialogue and cooperation in the region.

Since coming to office, the Labor Government has advocated the need for a regional Leaders’ meeting which can consider both strategic and security matters, as well as economic matters, with all the relevant countries of our region in the same room at the same time.  

That is why we very much welcomed the entry of the United States and Russia into an expanded East Asia Summit (EAS) last year. The United States and Russia joined with ASEAN countries plus Australia, China, India, Japan, New Zealand and the Republic of Korea.   

Presidents and Prime Ministers, Foreign Ministers and Defence Ministers from all key countries in the region now meet to discuss the full gamut of issues, from the economy and trade and investment through to peace and security.

Australia strongly supported the inaugural meeting of the ASEAN Plus Defence Ministers Meeting (ADMM Plus) in Hanoi in October 2010 and looks forward to the second meeting in Brunei in 2013. 

China co-chairs the ADMM-Plus Expert Working Group on Humanitarian Assistance and Disaster Relief with Vietnam, while Australia co-chairs the ADMM-Plus Expert Working Group on Maritime Security with Malaysia.

As trading nations, Australia and China have a vested interest in the security of vital international sea lines of transport and communication and in the stability of world markets and in open international trade. 

The Indian Ocean already ranks among the busiest highways for global trade. It will become a crucial global trading thoroughfare in the future.  

It is vital for trade, investment and prosperity that these sea lanes are protected from threats such as piracy or maritime terrorism. 

I welcome China’s contribution to international counter-piracy efforts. 

Australia reiterates our national interest, along with the international community, in freedom of navigation, the maintenance of peace and stability, respect for international law, and unimpeded lawful commerce in international waters.  

We do not take a position on the competing territorial claims in the region, and we call on nations to clarify and pursue their territorial claims and accompanying maritime rights in accordance with international law, including the Law of the Sea Convention. Australia has also welcomed efforts at dialogue within the ASEAN framework. We welcome the agreement between China and ASEAN to use the ASEAN draft Code of Conduct as the reference point for such dialogue. 

In May this year the Prime Minister and I announced that an Australian Defence White Paper would be produced in the first half of 2013.        

The Australian Government is committed to making strategic, risk-based decisions about Australia’s long-term national security and defence needs.  

This means Australia needs to periodically and methodically review the future capability requirements of the Australian Defence Force to ensure that they are appropriate to changing circumstances.  

The White Paper will be informed by the findings of the Australian Defence Force Posture Review, which I also released in May. 

The Review concluded that the Australian Defence Force needs a force posture that can support operations in Australia’s northern and western approaches, as well as operations with our partners in the wider Asia Pacific region and the Indian Ocean Rim.   

There is nothing inconsistent with our strategic relationship with China and our longstanding Alliance with the United States.   

Last year, Australia and the United States marked the 60th year of our Alliance.   

Australia’s long-standing Alliance with the United States is a central and enduring feature of Australia’s strategic and security arrangements.  

The new force posture initiatives announced by Prime Minister Gillard and President Obama in November last year, built on existing practical defence cooperation between Australia and the United States.  

As part of the ongoing US consideration of its global force posture, this initiative will see US Marine Corps personnel deploying to Northern Australia on a rotational basis for around six months per year.   

In April his year, Australia welcomed the first rotational deployment of around 200 US Marines to Darwin and northern Australia. The intent in the coming years is to establish a rotational presence of up to a 2,500 personnel Marine Air Ground Task Force (MAGTF), rotating into Northern Australia in the northern dry season.   

There are no US military bases in Australia, and this will not change.  

Australia fully expects that our deepening cooperation with the United States will also reinforce existing relationships and provide opportunities to enhance cooperation with our security partners in the region. Australia is exploring these possibilities with the United States and our regional partners. The President of Indonesia, (SBY) Yudhoyono, has suggested, for example, that this could in future include China itself.

The shift in strategic weight to the Asia Pacific has implications for the Australia-China bilateral relationship, including the defence to defence and military to military relationship.

Our bilateral relationship is defined in part by our shared foreign policy and strategic interests – in supporting continued stability and prosperity in our own region and in addressing global challenges.  

Australia’s recognition of the People’s Republic of China in 1972 came with the adoption of Australia’s One China policy, an enduring, bipartisan policy adhered to by successive Australian Governments. 

While Australia and China are firmly committed to a productive and mutually beneficial relationship, we both recognise that we have different histories, different societies and different systems, as well as some differences of view. 

It is inevitable, as in any good partnership, that there will be tensions and difficulties from time to time. The challenge is in managing the relationship for the long term when our interests, values or concerns pull in contrary directions. 

We do so through frank exchange and dialogue and with mutual respect. 

Australia appreciates fully China’s concerns, including with regard to its territorial integrity. 

But we too have interests and core values that do not change over time. These too form part of our ongoing bilateral dialogue.

In the 21st century, security and economic challenges demand coordinated regional and global action.  

It is in Australia’s and China’s national interests to strengthen our practical cooperation in a wide range of areas.  

At a political level, our relationship is underpinned by regular high-level visits in both directions, by Leaders and Ministers.  

Prime Minister Gillard visited China in April 2011, and I am the 16th minister to visit since.

In February 2008 in Australia, as Australia’s then Foreign Minister, I hosted the inaugural ministerial-level Strategic Dialogue with my counterpart, Chinese Foreign Minister Yang Jiechi. I visited Beijing in 2009 to conduct the second Strategic Dialogue with Foreign Minister Yang. In recent weeks, Foreign Minister Carr visited China to conduct his first bilateral visit as Foreign Minister. 

Senior Chinese leaders visit Australia regularly as well. For example, Chinese President Hu Jintao visited Australia in September 2007 for the APEC Economic Leaders’ Meeting and for a bilateral visit. Vice President Xi Jinping visited in June 2010, and Executive Vice Premier Li Keqiang visited in October 2009. 

The bilateral Australia-China military to military relationship is, by any measure, comprehensive, and is growing in prominence and complexity. 

In November and December last year, the Australian Defence Force (ADF) undertook with the PLA a bilateral Humanitarian Assistance and Disaster Relief exercise in Sichuan Province. The exercise, titled COOPERATION SPIRIT, is a striking demonstration of deepening practical cooperation between the ADF and the PLA and helps to boost coordination and cooperation between our two countries in responding to unforeseen disasters that may occur in the Asia-Pacific.

Cooperation in maritime security and engagement between our navies continues to grow.

The Royal Australian Navy Frigate HMAS Warramunga conducted reciprocal visits in September 2010 to the Chinese ports of Qingdao and Zhanjiang. During her visit HMAS Warramunga successfully completed the first live firing exercise of its kind with the Chinese Navy off the coast of China. HMAS Warramunga also conducted joint helicopter operations, search and rescue drills and personnel exchanges.  

At the same time, two PLA-Navy ships, the training ship Zhenghe and frigate Mianyang, conducted reciprocal visits to Sydney and Darwin. In a historic first, the PLA Navy extended an invitation for two Australian Midshipmen from the Australian Defence Force Academy to join the training ship Zhenghe on her journey from Auckland to Sydney.  

Last month, Australian Navy vessel HMAS Ballarat completed a five-day ship visit to Shanghai. The spectacular images of the Ballarat docked at Shanghai’s historic Bund were broadcast across Australia, and were warmly welcomed.                                                                  

During the visit, HMAS Ballarat conducted a Passage Exercise with Chinese Navy frigate Anqing at the mouth of the Yangtze River. This involved a search and rescue scenario and joint manoeuvres. 

Tomorrow I will visit the PLA-Navy South Sea Fleet in Zhanjiang. This visit reflects the growing cooperation between Australia and China in the maritime domain, and the growing links between our two Navies. 

Growing practical military to military cooperation is supported with enhanced bilateral dialogue on strategic and defence issues. 

In December 2010, the Secretary of the Australian Department of Defence and our Chief of the Defence Force held the 13th Defence Strategic Dialogue with the Chief of the General Staff of the PLA, General Chen Bingde, in Nantong in China.  

In November last year, Deputy Chief of General Staff of the PLA General Ma Xiaotian co-chaired the 14th Defence Strategic Dialogue with the Vice Chief of Defence Force and Deputy Secretary Strategy at HMAS Watson in Sydney.  

The Dialogue agreed to a plan for enhancing Defence engagement over the next two years, including in the areas of: maritime security; humanitarian assistance and disaster relief cooperation; peacekeeping exchanges, senior-level dialogue and professional and working level exchanges.

Australia values these senior visits and exchanges and the opportunity to have frank and open conversations in issues of mutual concern and to exchange views on areas of common interest.

I am committed to developing even stronger military relations with China through practical activities and dialogue. I look forward to meeting General Liang Guanglie later today at the inaugural bilateral Defence Ministers’ Dialogue. 

The rise of China and the shift of economic and strategic weight to the Asia Pacific region have profound implications for the Australia-China relationship.  

Looking back at what has been accomplished since the establishment of diplomatic relations in 1972, it is remarkable how far Australia-China relations have come. 

Four decades ago few would have predicted that in 2012 China would be Australia’s largest trading partner. 

Looking ahead, Australia’s policies towards China will continue to be constructive and forward looking. Our defence relationship will continue to strengthen, built on practical cooperation and a strong framework of strategic dialogue. 

China and Australia have much to gain from continued cooperation in the Century of Asia Pacific, through trade and investment, people-to people links and importantly through a growing defence and strategic relationship.

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