China’s mistakes in its ‘war’ on Australia
China’s President Xi Jinping, in his “war” on Australia, appears to have applied many of the strategies set out by the master Chinese General and philosopher Sun Tzu some 2000 years ago. In his manifesto “The Art of War” Sun Tzu sets set out rules for winning a war without fighting and how to use the enemy to defeat the enemy.
But in applying the principles of Sun Tzu to their Australian campaign, President Xi and his advisers have made mistakes.
As a result, Xi’s plan to punish Australia is simply not working, and on some of the battle fronts it is China that is suffering more than Australia. Worse still, some Chinese actions have made it look foolish in the region.
But it can’t be easy for Xi’s advisers to tell the dictator what has really happened.
On the surface Xi’s original strategy was classic Sun Tzu. By banning Chinese imports and/or imposing high tariffs on Australian exports like barley, wine, timber and coal, he would show Australians that they could not win against the might of China. Moreover, given the turmoil in the US, Australia would develop doubts as to whether the US will come to Australia’s defence. Given Australia is economically dependent on China, Australia would either accept the Chinese view of the world or be an example to the region of what happens when you criticise China.
The principles set out in “The Art of War” apply to many fields outside the military and it describes how to outsmart an opponent without physical battle. Many global companies have used it in training guides.
The rule that China overlooked says something like this: “If you know the enemy and know yourself, you need not fear the result of a hundred battles.
“If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
Sadly for Xi and his advisers they did not know what was likely to happen in either the “enemy” (Australia ) or even “yourself” (China).
Most surprising was Xi’s failure grasp the implications to the Australian campaign of his plan to reinvigorate China post COVID. It would involve substantial infrastructure and capital spending which would boost the demand for steel. Accordingly, Australian iron ore and coking coal skyrocketed in price. It is likely that, but for China’s trade bans, Australia would have helped China by curbing the price impacts “in the spirit of COVID”.
Xi was also unlucky. China, along with many other northern hemisphere countries, has suffered a severe winter and this has boosted the demand for LNG. When Xi was planning the campaign, LNG prices were at token levels and substantially below the cost of many Australian producers. In view of the low prices, most US LNG exporters abandoned the China market and cancelled their shipping orders. When the Chinese winter demand surged there was limited LNG supply and the spot price rose almost tenfold. Australian exporters and the national coffers are now enjoying huge revenue.
Chinese demand for steaming coal also rose and here it was very easy for Australian producers to supply non-Chinese markets, allowing non-Australian coal destined for those markets to be sent to China. Australia did not suffer greatly.
The coking coal bans did hit Australia but China also suffered. Chinese steelmakers were forced to pay big prices for inferior coal and they were also forced to watch the large numbers of ships carrying their top quality coal marooned off the coast of China.
This made the Chinese look foolish in the eyes of the region, particularly as many of the crew were Indians, who became the real victims.
When it came to Australia, Xi and his advisers did not know “the enemy”.
China thought that if Chinese senior officials blasted Australia it would bring us to heel. They did not know that Australians rarely submit under duress. We toughened up and some even suggested we curb Chinese exports to Australia. That would be a very foolish action.
What we did do was block a couple of Chinese attempts to buy Australian assets, which almost certainly would have been approved had relations been friendly. But we did not link the investment bans to the trade dispute.
How do both sides get out of this sort of quagmire?
First, Australia needs to recognise that it is not all China’s fault. In past years we have behaved badly and contributed to the current situation. At the same time China is now a different country and is ruled by a strongarmed dictator plus the Communist Party. Not surprisingly “The Art of War” offers suggestions: “Build your opponent a golden bridge to retreat across” . . Both China and Australia can apply this advice.
On the Australian side, businessman Trevor Rowe says: “Australia needs to be more patient and cautious in its comments on China --- we have to learn quiet diplomacy”. Maybe we could work with China to make 6G mobile systems secure.
On the China side, China might really help the World Health Organisation get to the bottom of the origins of COVID-19. Maybe the coking coal ships can be let sail.
Such small steps will only work if the Australian trade war is simply about Australia. My fear is that it is the prelude to an invasion of Taiwan in the belief that Joe Biden will be a weak president.