Just when Treasurer Scott Morrison will have been hoping to put last week’s surprisingly tough move against two Chinese power industry investors behind him, a major new report has reopened the entire Chinese foreign investment debate.

The biggest ever independent study of the future of the Australian economic relationship with China will be handed to Prime Minister Malcolm Turnbull today with several controversial recommendations.

It says:

  • Australia should start planning a friendship and cooperation treaty with China modelled on the 1976 Nara Treaty with Japan which helped calm foreign investment tensions in a different era.
  • China and Australia should also create an independent body based on the Fulbright Commission with the US after World War 2 to build broader bilateral connections.
  • Australia should start top level cooperation with China on maritime economic matters based the premise the two countries actually share common interests in maritime security.
  • Foreign investment tensions should be managed under a new treaty which would have a clear list of what was allowed and what was not. This would be accompanied by less discretion for the Treasurer in favour of more devolved power for sectoral regulators and greater acceptance of investment by Chinese state owned companies which act commercially.

The report was written before last week’s power investment decision but pulls no punches about the point the nation has come to with its biggest trading partner: 'This is a vital opportunity for both countries to think about how to shape the future course of our relationship in a deliberate way, establishing some common reference points rather than simply muddling through.'

These recommendations come from a team of mostly economists and former senior officials from Australia and China organised by the Australian National University and China Centre for International Economic Exchanges, which is a think tank supported by the National Development and Reform Commission. But the group was initially funded by former Treasurer Joe Hockey and has had administrative assistance from the Federal Treasury, along with other business and bureaucratic policymakers.

Last week’s economic diplomacy brief noted the interim decision against State Grid Corporation and Hong Kong’s Cheung Kong Infrastructure buying a 99-year-lease to control Ausgrid was a watershed in China policy given that Australia has benefitted more than most countries from years of strong Chinese growth.

This new 300 page Australia-China Joint Economic Report forecasts more of those benefits ahead even if China’s economy slows down and suggests that Australia can play an independent global scale role in helping China adjust to being an internationalised economy.

This will almost certainly sharpen the differences between those Australian policymakers who see more economic integration with China as the best approach to national security and those who see the need to prepare more for conventional security challenges.

Photo courtesy of Flickr user Praveen Tomy