Beijing has blasted Canberra’s decision to scrap two contentious Belt and Road agreements with the Victoria state government, warning that the decision would harm Australia and aggravate strained relations.
Marise Payne, Australia’s foreign minister, invoked a law passed last year by the federal government to cancel the deals signed in 2018 and 2019 by the Victoria government and China’s National Development and Reform Commission.
She also revoked separate Victoria government agreements with Syria and Iran, saying the deals were inconsistent with Australia’s foreign policy.
The decision provoked a furious reaction from China, with its embassy in Canberra calling the act “another unreasonable provocation”.
“It again shows that Australia is not sincerely trying to improve China-Australia relations and will inevitably further harm ties,” a statement on the embassy’s website said.
On Thursday, China’s ministry of foreign affairs said that it reserved the right to take further action.
Beijing insists the Belt and Road Initiative, a centrepiece of President Xi Jinping’s foreign policy, is primarily concerned with boosting infrastructure and trade. But some western capitals fear it is also a vehicle for China to buy political influence in developing countries and expand its global military power.
Richard McGregor, an analyst at the Lowy Institute think-tank, said the cancellation of the BRI deal was inevitable after the federal government decided to formally review it.
“I don’t believe the deal should have been signed in the first place; Beijing would never allow a foreign government to make freelance agreements with a province,” said McGregor.
“But the way it has been unwound has been messy and caught up in domestic politics, whereas Canberra could have just allowed it to lie fallow and expire slowly.”
Beijing’s anger over the projects’ cancellations marked the latest in a series of disputes that have plunged Sino-Australian relations to their lowest level in a generation.
China is Australia’s largest trade partner, with two-way trade totalling A$252bn (US$195bn) in 2019. But over the past three years, relations have soured as Canberra has resisted Beijing’s more aggressive foreign policy.
In 2018, Australia was the first nation to formally ban Huawei from its 5G network, while last year Australia led calls for an inquiry into the origins of the Covid-19 pandemic in Wuhan.
Beijing has imposed tariffs on a range of Australian exports and stepped up public criticism of Canberra. Before the cancellation of the BRI deals, Wang Xining, the Chinese embassy's deputy head of mission, alleged Canberra had “connived with the United States in very illegal, unethical, immoral suppression of Chinese companies” by banning Huawei and persuading other countries to follow suit.
Payne told Australian radio on Thursday that the decision to cancel the four agreements was “not intended to harm Australia’s relationships with any countries”.
“I hope that if there are any concerns, they will be raised with the government.”
A day before Australia scrapped the BRI deals, China Shenhua Energy dropped a coal project that had been in the planning stages since 2008 on the back of “shifting economic and social circumstances”. The project had generated a wave of opposition from environmental groups.
Fitch this week said “co-dependencies” would restrain Chinese policymakers from targeting iron ore, Australia’s largest export to the country, but pointed to risks for Australian companies in other sectors targeted by tariffs.
“Some sectors hit by Chinese actions, such as barley, copper and coal, have been able to find alternative export markets, but others with more limited diversification prospects, such as wine, have been more affected,” the rating agency said.
Lending by China’s policy banks under the BRI has declined since a peak in 2016, but Beijing has shown no sign of abandoning one of Xi Jinping’s signature efforts, which was written into the Chinese Communist party’s constitution in 2017.