Li Keqiang's visit a good sign for the China-Australia relationship

Premier Li Keqiang nominally ranks number two in the Chinese hierarchy, behind President Xi Jinping, who holds the most powerful levers of the State and the Party.

His roles are General Secretary of the Central Committee of the Chinese Communist Party, Chairman of the Central Military Commission, and commander-in-chief of the Joint Battle Command of the People’s Liberation Army.

Xi is unequalled on the seven-member Standing Committee of the Politburo. This is the body that effectively rules China.

Li Keqiang stands in the shadow of a man who is clearly China’s most dominant leader since Deng Xiaoping. Deng’s nominal position in the end was President of the Chinese Bridge Federation.

But Li’s lesser status should not deflect from the importance his five days in Australia discussing regional security issues and trade with Australian counterparts, including Prime Minister Malcolm Turnbull.

A week-long visit by a senior Chinese official in a world that is in flux following the election of Donald Trump and all the accompanying uncertainties is an important event by any standards.

Such investment in China’s relationship with Australia is a signal of the importance Beijing attaches to these ties, and its expectations of a continuing return on that investment.

Li did not come to Canberra and Sydney to attend a football match or eat a beef pie, although one of the significant outcomes of his trade talks is a further unlocking of China’s market for Australian beef beyond existing $1billion trade.

The Chinese leader, who seems likely to retain his ranking in the Party hierarchy at a National Congress this year, was intent on reinforcing a message to Canberra that China values its relationship with Australia, and can see considerable scope for its further development.

Call it serendipity, but the two countries’ economies could hardly be more advantageously aligned. That is a given, but what is coming more clearly into focus is the importance China attaches to its relations with a country that is not simply resource-rich, but has the potential to be an ally in the development of regional institutions.

China’s ambitions to advance regional trade initiatives, including the Regional Comprehensive Economic Partnership (RCEP) and discussion of a Free Trade Agreement of Asia and the Pacific (FTAAP), would benefit from deeper Australian engagement after the disappointment of the rupturing of the Trans Pacific Partnership process.

These issues are all on the table, along with the further development of institutions like the Asian Infrastructure Development Bank (AIDB) in which China is the dominant player.

Whether those in Australia, who regard the US alliance as a static component of Australian security policy, like it or not, the terrain is shifting and no amount of wishful thinking can alter that reality.

The challenge for the Turnbull government and its successors is to avoid getting squeezed between Australia’s security imperatives and its economic interests.

In one important respect, an alignment between Australia and China on trade policy is propitious given the protectionist impulses of the Trump election.

In a commentary the official China Daily underscored this point.

In the new global reality that seems to be tilting towards protectionism and anti-globalisation, China and Australia offer a perfect example of how free trade does not lead to tit-for-tat combat, but generates gains for both.

Australia, a country abundant in natural resources, needs globalisation for international trade, while the world’s biggest trader China needs an open market.

It may be stating the obvious, but Li’s visit has provided an opportunity to get a measure of where China’s interests and those of Australia converge, and where they diverge.

Clearly, they diverge on Beijing’s ruthless exploitation of its disputed claims to virtually the entire South China Sea, and its actions in seeking to militarise outposts in these disputed waters.

Li’s insistence these facilities do not have a military purpose is disingenuous. Of course, they do.

The question is: how Australia and its allies in the region deal with this reality?

One way is to push back firmly against Chinese attempts to bully its neighbours. Another is to remind China that any disruption to regional security will have economic consequences.

Still another is to engage China on as many different fronts as possible, thereby raising the stakes for Beijing of it failing to live up to responsible stake-holder expectations.

Whether we like it or not, the power gravity in the region is shifting and no amount of wishful thinking will alter that reality. This is an inexorable process with all sorts of implications.

Li’s visit has not answered the central conundrum of Australian foreign and security policy – how to balance security and commercial interests – but it has provided an opportunity to get the measure of Chinese thinking at a senior level.

Chinese leaders set store by personal contact. The Li visit has advanced that process.