Huang Xiangmo in China
On his walls and websites, billionaire Huang Xiangmo proudly displays
photographs of himself smiling and talking to the most powerful politi¬
cians in Australia, including all recent prime ministers. There is only
one way to get that kind of access—buy it. In little more than four or
five years the new arrival to Australia had become a dominant figure in
the Chinese community, the largest donor to Australia’s political parties
and a significant player in New South Wales and national politics. As
early as December 2012 he was meeting with former and soon-to-be-
again prime minister Kevin Rudd, a chat perhaps arranged by another
Ltbor powerbroker present at the meeting, New South Wales branch
general secretary Sam Dasryari.
Huang sits at the centre of a web of influence that extends through¬
out politics, business and the media in Australia. Any doubt about his
importance to the CCP is dispelled by the fact that he was chosen to
give the speech at the farewell banquet for the Chinese ambassador
to Australia in 2016, and was one of the handful of representatives
of the Chinese-Australian community at the banquet when President
Xi Jinping made a state visit in 2014. These great honours sent an
unmistakable message to the Chinese community in Australia.
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Understanding how Huang Xiangmo became rich in China, what led
to his apparently hurried departure, and the way he set about building
influence in Australia powerfully illustrates how ill-prepared the nation
is to protect itself from the PRC.
Huang was born in 1969 in the village of Yuhu (meaning ‘Jade
Lake) in the Chaozhou region of Guangdong province. (Chaozhou is
also the ancestral home of Chau Chak Wing, whom we’ll meet later.)
He took Yuhu as the name of his company. In interviews he has said
that he came from a humble family and his father died when he was
very young.' According to a story in the Chinese press, he was too poor
to continue his schooling and dropped out to work.^ However, other
reports say that he studied economics at the Guangdong Academy of
Social Sciences, which is unlikely as it is an institute for research and
graduate study. At some stage he moved to the prefecture of Jieyang,
a large, nondescript city that underwent a remarkable real estate and
development boom in the 2000s. Jieyang is also in the Chaozhou region
and Huang has retained a network of business associates there, although
some have moved to Australia. In Jieyang he worked his way into senior
management positions in the China Railway Group.
One way or another Huang acquired some capital, business nous
and influential contacts through, it seems, real estate and develop¬
ment deals. Little is on the public record. The company website and a
government company database say he established his Yuhu company in
2006, but in an interview with journalist Primrose Riordan he said he
founded the company in 2001 (aged thirty-two). ‘Over the following
decade in Jieyang,’ wrote Riordan, ‘Huang’s business prospered. In 2009
he even gave 150 million yuan ($32 million) towards a monumental,
pagoda-style city gate that was the pet project of his friend. Communist
Party secretary Chen Hongping.’^
According to Hurun, a Chinese company that publishes lists
of wealth and philanthropy, Huang’s wealth in 2016 amounted to
RMB 6.2 billion yuan ($1.25 billion).'' While he was still in China
in 2011 he was reported to have donated a total of RMB 300 million
yuan ($60 million) to various causes.^ In 2011 Hurun ranked him
as China’s tenth most generous philanthropist and twenty-second in
2012.*^ Huang has spoken humbly of his giving, insisting that he has
56
DARK MONEY
never made donations in order to secure business transactions. His
only motive is compassion and ‘giving back to society’. His aim is ‘to
enrich the masses’,^ although in Jieyang, instead of giving to hospitals or
schools for the poor, he preferred to donate to a grand city gateway that
happened to be the passion of the city’s party secretary, the town’s most
powerful person, more powerful than the mayor.
The Jieyang tower corruption scandal is too complicated to set out
here, and much remains shrouded in mystery. For our purposes, a short
version runs like this. In 2008 Huang Xiangmo met with Jieyang party
secretary Chen Hongping. Chen was obsessed with giving Jieyang a
monumental city entrance. Huang agreed to give 150 million yuan,
a very large sum.® It’s not clear whether all of the funds were actually
spent on the gate or found their way into someone’s pocket, with public
funds used instead. Another prominent Jieyang businessman Huang
Hongming (no relation) was also persuaded to make a large donation to
the project (and perhaps to another, the Rongjiang Guanyin Pavilion).
Chen is a superstitious man with a strong belief in feng shui and
so spent tens of millions of yuan acquiring a rhyolite boulder from
Mount Tai, 1600 kilometres distant, and surrounding it with nine
spires. The People’s Daily would later criticise him for ‘believing in spirits
and ghosts’. Huang Xiangmo seems to share the superstition: in 2012 he
shelled out $12.8 million on a mansion on top of the hill at Beauty Point
in the Sydney harbourside suburb of Mosman; according to real estate
agents, the area is said to have excellent feng shiii.*^ After waiting for
Huang to settle on his house, several of his Chinese business associates
bought houses nearby, bur all lower down the hill and of lesser quality.
The Jieyang Tower was completed in mid-2009 (with the devoted
hard work of city deputy secretary Zheng Songbiao) and photos show
Secretary Chen smiling broadly as he stood beside Huang Xiangmo at
its opening. But soon everything would begin to unravel in a frighten¬
ing way. In July 2012 Secretary Chen Hongping was taken into the
shtmnggtii process, the CCP’s extra-legal anti-corruption interrogation
process often accused of using torture to extract confessions. It was
reported that the anti-corruption body had received dozens of letters
accusing Chen of soliciting bribes and other offences. Almost all of
those caught up in shnan^gui are subsequendy charged, convicted and
57
SILENT INVASION
punished for serious crimes. Under interrogation, Chen implicat
Jieyang senior deputy mayor, Liu Shengfa, who was also mixcd^^ *
the tower scandal. In February 2013 the city’s deputy mayor
Songbiao, also came under suspicion for taking bribes. Both Zhen
Liu were expelled from the party and Liu was charged with bribery
In November 2013 Huang Xiangmo’s business associate Hn
Hongming was arrested and charged with bribing Chen Hongping^
Chen had confessed to being bribed by Huang Hongming and tearfully
appealed to the court to show leniency towards him.
Huang Xiangmo was not publicly named as being under investiga-
tion and has not been charged with any offence. According to a report on
a Chinese news site, at least seven businesses were involved in Jieyangs
corruption.One senior official in Jieyang, speaking anonymously, was
quoted as saying that ‘2006 to 2011 was the period when collusion
between businessmen and the officials of Jieyang was at its peak’.'*
Huang Hongming was also close to the previous Jieyang party
secretary. Wan Qingliang, who held the post from 2004 to 2008 before
being promoted to the powerful and lucrative position of Guangzhou
party secretary. Wan too came under investigation for bribery, as did his
deputy in both Jieyang and Guangdong, Luo Ou. Wan Qingliang and
Chen Hongping are believed to have been partners in criminal activity
for years, heading a network of corruption in Jieyang that would
eventually lead to the fall of ‘a string of Guangdong officials who had
earlier worked together in Jieyang’.'^
In September 2016 the most powerful official. Wan Qingliang,
was sentenced to life imprisonment for soliciting bribes while mayor
of Jieyang. In June 2017 Chen Hongping received a suspended death
sentence and is expected to spend his life in prison.'^ The case was
heavily publicised in the local press, including colourful details of the
excesses of Wan and Chen, such as their sharing the same mistress.
Fairfax Media noted: ‘There is no suggestion Mr Huang’s contribution
toward the Jieyang Tower should be construed as a bribe.
In February 2017, Huang Hongming w^as convicted of bribing
Chen Hongping and sentenced to two years and eleven months’
imprisonment. Fairfax reporters Philip Wen and Lucy Macken wrote
that sources close to the corruption case say that Huang Xiangmo fled
58
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China after being tipped off that a ‘close political patron would be
investigated for graft’.'*
It’s important to put the Jieyang scandals in a broader context
because few Australians understand just how corrupt the Chinese system
is. The typical view is that China is such an authoritarian society that
corruption could not flourish except in the gaps within the system. In
fact, the opposite is the case: the entire system is rotten with corruption
and it is only in the gaps that honesty clings on.
China’s crony capitalism
The most systematic and thorough study of the emergence of endemic
corruption in China in the post-Tiananmen era is Chinas Crony
Capitalism by the highly regarded scholar Minxin Pei.'^ From late
2012 attempts to stamp out corruption intensified with new president
Xi Jinping’s elevation. Xi saw endemic corruption as undermining the
authority of the regime and jeopardising the stability of the economy.
Yet, writes Pei, ‘the lurid details of looting, debauchery, and utter
lawlessness that have emerged during the campaign only confirm ...
that ... modernization under one-party rule has produced a form of
rapacious crony capitalism’.'^
Just how deep-rooted corruption has become was revealed by Xj
himself when he launched his campaign with a remarkably candid
speech. Systemic corruption reaches from the lowest administrative
level in the counties right into the top leadership of the nation, that is,
the seven-member Standing Committee of the Politburo, equivalent to
an inner cabinet. When he was arrested the public learned that Zhou
Yongkang, the Standing Committee member responsible for China’s
internal security, had built a network of corrupt officials, businessmen
and at least one murderous mafia boss that he used to amass vast sums
for himself and his family members.'®
The system of endemic corruption emerged in the 1990s and, the
data show, gained special virulence in the 2000s with the rise of new
forms that involved several or even dozens of officials all engaged in
collusive corruption within and across agencies.'^ According to Pei, it
has been virtually impossible to do business in China and become rich
without encountering it. It was no longer the odd rotten apple in an
59
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Otherwise healthy barrel. In some large jurisdictions the networks of
corrupt senior officials, businessmen and, at times, crime bosses, often
all overseen by the local party secretary, have been so extensive that they
are referred to as ‘collapse-style corruption’.^® Minxin Pei describes the
case of the Guangdong prefecture of Maoming where in 2015 over 200
officials were punished, including three successive party chiefs, two
mayors, the police chief and the head of the party’s discipline inspection
committee, whose job it was to root out corruption.^'
One of the most pervasive forms of corruption is the selling of
positions within officialdom and the party hierarchy, known as maiguan
maiguan. Many provincial and county party secretaries have bought
their positions. For any position obtained through bribery, the price
depends on the extent to which the position can be monetised, either
through selling state assets cheaply, allocating contracts to preferred
businessmen, embezzlement, turning a blind eye to environmental
pollution or by using one’s seniority to sell appointments to more junior
officials. Mayors and party secretaries have been known to spill all jobs
in order to sell them again to the highest bidder. Those who bribe their
way into positions are henceforth the captive of their sponsor and have
a strong interest in covering up other corrupt activities. Often corrupt
networks are broken only with the arrest and torture of one official who
then implicates others. The first arrest is often made following tip-offs
from ‘the masses’,^^ who might include applicants outbid for promotion
or aggrieved mistresses.
When announcing his crackdown, President Xi noted that ''Guanxi
networks of all kinds have grown tighter and denser’, providing more
incentives and opportunities for officials and businessmen to collude.^^
Every businessman in China understands, in Pei’s words, that ‘private
wealth unconnected with political power is inherently insecure under
a predatory regime’.^'* The risk is that one’s political protection may
evaporate overnight if one’s patron comes under suspicion. Unless one
has an even more powerful protector, it may be time to get out before
the investigation spreads to them. As the saying goes, ‘Monkeys scatter
when the tree falls.’
Rather than go into business themselves, corrupt officials retain
their positions and use them to enrich their family members. Many
60
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officials have mistresses who serve the same function of looking after
ones business interests, although they have been known to dob in their
exes when jilted.^’ Businessmen typically build these lucrative guanxi
networks step by step, often setting out to befriend their targets by
inviting them to expensive restaurants, offering gifts and picking up the
tab for services like foot massages and access to brothels.^^ They might
then offer a smallish envelope of cash, preferably at Chinese New Year
when gift-giving is customary.
No institudon is free of corruptions corrosive influence. Networks of
bribery have been exposed in the judiciary, including the highest courts
in the country. One businessman. Ding Haiyu, had twenty-five judges
on his payroll. He sued on spurious grounds most of the companies he
did business with and had favourable judgements awarded by his crooked
judges. One senior judge helped him fabricate evidence.^^ Ding ‘turned
his company into a virtual slush fund’ for judges and court officers who
would come to him for reimbursements for various expenses.^®
All journalists in China are reminded of their patriotic duty to
serve the party, and are quickly brought into line should they deviate.
At times the media have been allowed to investigate and expose the
malfeasance of medium-sized and large companies, including cases of
deadly environmental pollution. But the staff at the Peoples Daily and
its online offshoot have for years been using the material they gather
through tlieir investigations for a different purpose blackmailing the
companies into paying to keep them quiet. Jun Mei Wu, a journalist
who defected to Australia, said she had engaged in these investigations
in the heavily polluted city of V/uhan; At the end of every month, each
reporter received an envelope stuffed with 10,000 to 20,000 yuan.
That was the norm.’**^ Dozens of complaints from local people about
poisons being dumped in the river would be used as evidence for the
blackmail. One of the worst-offending companies paid the news outlet
US$119,000 in hush money each year. It’s also rumoured that news¬
paper editors and journalists at the central newspapers—the ones read
by Xi Jinping, members of the Politburo and other powerful figures—
accept payments to publish articles praising them.
In the military, the buying and selling of promotions is wide¬
spread. Indeed, corruption in the PDA. is judged to be of ‘epidemic
61
IRIaVU]
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proportions’.-’® In March 2015 Xinhuanet reported that fourteen gen¬
erals had been convicted or were being investigated for corruption.’*
One of Chinas most powerful generals, Xu Caihou, was among the
generals arrested, now totalling some three dozen since the start of
Xi’s crackdown. A member of the Politburo, Xu enriched himself by
demanding huge payments from subordinates seeking promotion.’^
’^CTien he was arrested in 2014, several trucks were needed to carry away
the loot he had stockpiled in his house. In early 2015 Guo Boxiong,
who for ten years until 2012 was one of the two vice-chairmen of
the Central Military Commission and so second-in-command in the
military hierarchy, underwent the shuanggui process.” Linked to former
president Jiang Zemin, Guo was said to have sold promotions, with the
rank of major general priced at five million yuan (about $ 1 million) and
lieutenant general at ten million yuan.
Due to the spread of corrupt practices, rising through the ranks of
the PLA has penalised merit and honesty and favoured those willing
to pay bribes for promotions and to demand bribes from those below
them in their turn. As a result. Western military strategists judge that
Chinas armed forces would perform less well than might be expected
in a hot conflict. Perhaps recognising this, and in the context of China’s
expanding international military engagements, the PLA has recently
been attempting to improve its fighting capability by reforming its rank
and grade systems.”
Xi's corruption crackdown
Since his accession to China’s presidency in November 2012, Xi Jinping
has prosecuted a fierce campaign against corruption. The kind of grubby
conspiracies to defraud the public in Jieyang have been exposed in scores
of cities across the nation. At the same time, Xi has undertaken a ruth¬
less crackdown on all forms of dissent, including jailing many human
rights lawyers and arresting the family members of critics abroad.
Although the campaign has reached up to the most senior levels of
the party, with even a number of Politburo members purged, some
of the most powerful cadres and princelings have been protected, not
least the family of the president himself. Xi’s family, along with seven
other members or former members of the Politburo, were all exposed as
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owning secret offshore bank accounts in the Panama Papers, the trove
of financial documents leaked in 2015 from a Panamanian law firm.
His sister and her husband have amassed fortunes, although there is
no evidence that Xi used his positions to help them.^^ All mention of
Chinese officials in the Panama Papers was suppressed in the Chinese
media. When Bloomberg published a long expose of Xi s family wealth,
the company’s reporters were banned from China. Bloomberg later
agreed to play by Beijing’s rules.
The immunity of certain senior officials (mainly the political sup-
poners of Xi) also confers some protection on those businessmen and
officials closest to them, although all live in fear that the political winds
might change. Moreover, the campaign has had the additional objective
of weakening the influence of the former Chinese leader Jiang Zemin,
whose faction vies with Xi s hold on power. Senior cadres in Hong Kong,
a bulwark of the Jiang Zemin faction, are said to have been heavily
targeted.^ Targets include wealthy Hong Kongers who bribed their way
onto the Chinese People’s Political Consultative Conference (CPPCC),
membership ofwhich attracts VIP treatment and access to top officials.
Some are said to have gone into hiding. Chinese billionaires routinely
pay bribes to be appointed to the CPPCC.^® Membership provides an
unrivalled forum for extending ont s guanxi to the highest levels. W^hile
we think of guunxi as networking with Chinese characteristics, it is
better understood as cronyism.
Has President Xi’s crackdown succeeded.^ The official figures are
eye-popping. China Daily reported that in 2016 there were 734,000
corruption investigations with 410,000 officials punished for ‘dis¬
ciplinary infractions or illegal activity’, including seventy-six at the
ministerial level.^^ Some of the most serious offenders have been
executed. Some corruption investigators are themselves tied into cor¬
rupt networks. The campaign has garnered strong support among
the public (though not among the anxious elites). According to one
well-placed observer, low-level officials have become more circumspect
while higher-level officials have put up their prices as the risks of
detection increase, to the chagrin of the businesspeople who must pay
t em. more creative ways of paying bribes have been invented,
rect foreign currency payments into overseas bank accounts.
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One ingenious businessman hired an American card shark to lose big-
time to targeted party bosses. The tactic had the collateral benefit for
the bosses of added ‘face from beating a professional player.'*'
Minxin Pei argues that combining supreme Leninist party-state power
with a market economy inevitably generates corruption, which is why
periodic crackdowns have largely failed to quash the crony networks.'*^
‘If a market economy is to be combined with reasonably non-corrupt
government,’ writes Martin Wolf, ‘economic agents need legal rights
protected by independent courts. But that is precisely what a Leninist
party-state cannot provide, since it is, by definition, above the law.’''^ In
any town or city, the party secretary wields more power than the mayor,
the chief judge and the police chief The cause is not helped by the fact
that Xi is using the anti-corruption drive to target his political foes.
Fearful of being prosecuted for corruption or other crimes, many
Chinese businessmen who have acquired fortunes over the last two
decades have created boltholes abroad, shifting assets, buying property,
sending their children to be educated and seeking visas or passports.
The preferred destinations are the United States, Canada, New Zealand
and Australia, in part because those countries do not have extradition
treaties with China.
In Australia it is impolite to mention the systemic nature of cor¬
ruption in China; it can be construed as racist, even though it is the
system that is rotten and no one resents it more than the Chinese people
who live under it. For those who deal with China’s business or political
elites, acknowledging the dirty secret behind the polite facade causes
discomfort, even moral doubt, so it’s better to suppress the thought
while toasting the latest deal.
Huang in Australia
Huang Xiangmo seems to have begun setting himself up in Australia
around 2011."*^ His Yuhu Group was incorporated here in 2012. He
appears to have left China permanently in 2013.'*^ He immediately went
about using his wealth to build his status in the Chinese-Australian
community and to cultivate broader political influence.
The Yuhu Group website tracks how he quickly came to dominate
the Chinese-Australian community.'"^ By 2014 he was chairman of the
64
DARK MONEY
AustraJian Council for the Promotion of Peaceful Reunification of
China (ACPPRC), an unmistakable sign of his new influence. The
ACPPRC is the foremost Beijing-controlled Chinese organisation in
Australia. Only those endorsed by the embassy in Canberra or the
Sydney consulate can occupy its senior ranks. The ACPPRC is a member
of an international network of more than eighty councils around the
world controlled by the China Council for the Promotion of Peaceful
National Reunification, until recently headed by Yu Zhengsheng, a
member of the Politburo Standing Committee and so one of the most
powerful leaders in China.The Australian arm is therefore at the
centre of Chinas United Front work in this country.'*®
Huang occupies a string of other executive positions in influential
overseas Chinese organisations in the country. One is the presidency
of the Australian Fellowship of China Guangdong Associations. In a
speech at its launch in September 2013, Huang said it was supported
by the Guangdong Overseas Chinese Affairs Office, which (as we saw)
is the kind of province-level organisation prosecuting the CCPs qiaoiou
program.'*^ (The Labor Party operative and Sam Dastyari staffer Paul
Han has held positions in both organisations.)
Any Chinese-Australian appointed to a senior role at the ACPPRC
ipso facto has the trust of Beijing and can be relied upon to act in a
patriotic way (although the true motive may be pecuniary). The
relentlessly pro-Beijing stance of the council and its consistent criticism
of Australia’s bipartisan position on issues like the South China Sea
show that it serves as a reliable Beijing mouthpiece in the Australian
public debate.
According to the ACPPRC article introducing Huang as chairman,
he had to be implored to take on the role. It notes that he ‘has extensive
influence, appeal and high prestige in the Australian overseas commu¬
nity, political circles, business circles and academic circles’, reporting
that he had donated a total of RMB 378 million yuan ($75 million)
over the years. In his various meetings with luminaries from the prime
minister down, it says, ‘Huang Xiangmo always stressed ... that the
sons and daughters of China, both at home and overseas, are of one
and mind, united as one In fact, in Australia the diaspora is
deeply divided.
65
SILENT INVASION
In an important move to build his guanxi or network of relationshio,
in his new country, Huang recruited the former New South Wales Labor
treasurer Eric Roozendaal. From 1999 until he entered New South
Wales parliaments upper house in 2004, Roozendaal had been general
secretary of the New South Wales branch of the Labor Party (located
in Sussex Street, in Sydneys Chinatown, as it happens). In addition to
being the party’s chief fundraiser, he ran election campaigns for New
South Wales Labor and was in charge of the state’s federal election cam¬
paigns. His contact book among Labor heavyweights was unrivalled,
except by that of Sam Dastyari (on whom more soon). Huang was
not deterred by Roozendaal’s own brush with corruption allegations
involving jailbird Eddie Obeid and his son Moses, allegations he was
cleared of by the Independent Commission Against Corruption.
In November 2012 Huang donated $150,000 to the New South
Wales branch of the Australian Labor Party (ALP). Over the next four
years his generosity would see $1.78 million going into the New South
Wales ALP bank account, some from Huang’s companies, employees,
family members or close associates.^' Huang’s employees and associates
are recorded as making large political donations.^^ One came from
an otherwise unidentified Meijuan (Anna) Wu, who turned out to
be Yuhu’s company secretary.” (Before joining Yuhu and making her
$50,000 donation she worked as a barista at the Max Brenner chocolate
bar chain.”) In March 2014, the New South Wales ALP received
$60,000 from Su Zhaokai, whose contact is given as a Gmail address
and a flat in the Sydney suburb of Rhodes.” Mr Su was in fact an office
manager at Yuhu.” (The declaration form indicated the money was
earmarked for ‘Sam Dastyari’.)
In March 2013 Roozendaal, while still a member of the Legislative
Council, paid a visit to Yuhu’s Australian headquarters. The company’s
website announced that he was invited to visit by Huang Xiangmo in
order to improve relations between Yuhu and the Australian govern¬
ment.” In the same month, at Huang’s invitation, he toured Yuhu’s
projects in China.” The company website said that the parliamentar¬
ian had agreed to ‘promote ... cooperation between Yuhu Group and
Australian government’. Roozendaal had become a lobbyist for Yuhu
He quit parliament in May 2013 and in February 2014 began in his
66
DARK MONEY
new job as Yuhu Australia’s vice-chairman.’^ In 2016 he was promoted
to chief executive officer.
When Roozendaal resigned his plum seat in the New South Wales
Legislative Council with six years still to run, New South Wales Labor
gifted it to Ernest Wong. Wong, a former mayor of Burwood, appears
to be the most important link between Labor and Chinese money.
He is close to Huang Xiangmo.
Huang quickly built ties with Labor prime ministers Julia Gillard
and Kevin Rudd. His first reported meeting with an Australian federal
politician was with Rudd in December 2012 (Rudd was then plotting
his return to the prime ministership). In attendance was the general
secretary of the New South Wales ALP, Sam Dastyari, whose question¬
able connections with Chinese businessmen would four years later stall
his political career and in December 2017 end it.
Yuhu’s website would claim that the meeting was organised by Hong
Yongyu, president of the Hokkien Huay Kuan Association since 2002.'^*
Hong (also known as Eng Joo Ang) has been a senior figure in the
Chinese-Australian business community with strong connections to
the embassy since at least 2002.^^ Hong, as Eng Joo Ang, gave $ 1 10,000
to New South Wales Labor in 2014-15 (a donation he later said he
couldn’t recall making)^^ and was an executive vice-president of the
ACPPRC.^ Hong Yongyu assisted Huang Xiangmo to build his guanxi
in Australia.*^’ He was standing beside Huang when he shook hands
with Liu Yandong, a Politburo member visiting Australia, at a Chinese
community leaders event in December 2012.^
In March 2013, Huang was seated between Kevin Rudd and one
of his backers, Chris Bowen, at a lantern festival event hosted by the
Chaozhou and Fujian associations (Huang had acquired honorary
positions in both), in the Fujian Associations hall. Also present were
Bob Carr, Hong Yongyu, the founding chairman of the ACPPRC and
‘great China patriot’ William Chiu, and Zhou Guangming, the presi¬
dent of the Australian Chinese Teo Chew Association. Within months
of settling in Australia, Huang had succeeded in making himself a
prominent member of the Chinese community.*'^
In an opinion piece published in Chinese by the nationalistic G/o^a/
Times (and reported in The Australian by Rowan Callick), Huang wrote
67
SILENT INVASION
that ‘overseas Chinese should accumulate strength in politics’ and
wrote of the soft power of money. ‘Money is the milk for politics.’<^'
lamented that overseas Chinese have not pushed hard enough to ent«^
and influence politics in Australia. He clearly had an agenda to work on
In addition to the goals of status and business advancement common
to all kinds of political donors, Huang Xiangmo’s donations please
Beijing insofar as they help advance the policies and objectives of the
PRC. Research has shown that successful entrepreneurs in China ‘are
highly sympathetic’ to the political values of the Communist Party;
after all, it is the CCP system that enabled them to accumulate wealth
and influence.^^
Huang’s rapid trajectory is easy to measure. He began to be
mentioned often in articles on the Sydney consulate’s website, appear¬
ing in photos with the consul general on many occasions. Seven articles
from 2016 mention him compared to only two from 2014 and three
from 2015. As this suggests, in 2013 his relationship with the embassy
and the consulate seems to have been minimal. Except for the ceremony
for his donation to Westmead Hospital, which the then ambassador
Ma Zhaoxu attended, there are no reported links in 2013.^° In February
2014 he opened the ceremony for Chinese New Year in Sydney,
together with other community leaders (including Hong Yongyu),
consular officials and the usual bevy of Australian politicians.^' In 2016
he was selected by the embassy to represent the Chinese community by
welcoming the new ambassador Cheng Jingye.^^ Huang had made it.
In March 2014, he was interviewed by the CCP’s main organ, the
People's Daily, on the topics of the Chinese National People’s Congress
and the China-Australia Free Trade Agreement, then being negotiated.
Using President Xi’s catchphrase he declared that, ‘My “China Dream”
is that the motherland will continuously grow greater, that it can
reinforce the people’s self-confidence, and I hope that the motherland
can be peacefully reunited and prosperously grow.’^^
Bipartisan guanxi
Huang Xiangmo arrived in Australia to settle in 2012 or 2013 after
making what was reported to be a hasty departure from China, where
he had been caught up in a corruption scandal. Huang disputes this
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DARK MONEY
account of his exit, but whatever the truth he immediately went about
using his wealth to build his status in the Chinese-Australian com¬
munity and cultivate networlts among politicians. As we saw, in 2014
he became chairman of the Australian Council for the Promotion of
Peaceful Reunification of China (ACPPRC), the peak United Front
organisation in Australia. According to China scholar Anne-Marie
Brady, the ACPPRC s counterpart in New Zealand is controlled by the
Central Committee of the Chinese Communist Party and is organised,
supported and subsidised by the Chinese government.^"^
Despite Huang Xiangmos protestations that he and ACPPRC are
not connected with Beijing or the CCR four ACPPRC officer bearers
participated in the l4th Conference of Overseas Peaceful Reunification
Promotion Committees, convened in Beijing by the China Council
for the Promotion of Peaceful National Reunification (CCPPNR) in
September 2016, at which the Australian Councils Tian Fei (Victor
Tian), an Executive Vice President of the Council, gave a speech on
behalf of Mr Huang.^^ March 2017, Mr Huang hosted and feted
a CCPPNR delegation to Australia led by Sun Lingyan, the deputy
secretary of the organisation.^^’ In the same month, Mr Huang hosted
Qiu Yuanping, the Director of the PRC’s Overseas Chinese Affairs
Office.77 The ACPPRC also organised public displays of support during
the 2017 visit to Australia of PRC Premier Li Kcqiang.^®
The unification councils are the most influential ‘non-government’
agencies of the Chinese state abroad, and Australia is no exception.
Their role is to aid the Chinese stare in mobilising and controlling
ethnic Chinese people in their respective countries, a task shared with
the PRC’s Overseas Chinese Affairs Office of the State Council.
Some prominent Australians have been wholly misled by the public
lace of the ACPPRC. In particular, Bob Carr has written:
For Coalition and Libor politicians who have attended [ACPPRC]
annual dinners, [the Council] has functioned as a charitable organi¬
sation (raising funds to send Australian eye surgeons into Tibet, for
example) and an umbrella organisation for the Chinese community.
Wliether its links with China’s United Front Work Department are
vestigial or active, they are now a distraction.^
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This is a complete misunderstanding of the function anH «
of the ACPPRC; its charitable activities have always been a COT«'"fo'
KS political role. The ACPPRC is a creature of the United Front
Department and the involvement of senior Ausrralian poliricians har
always been a means of gaining influence for the PRC.
Huang Xiangmo has eclectic political tastes. Since arriving in
Australia he and his companies have donated $1.3 million to the Labor
and Liberal parties. Adding in donations by family, employees and his
close associates, the total comes to almost $2.9 million, $1.8 million to
Labor and $1.1 million to the Liberal Party.®'
Having secured the services of Labor powerbroker Eric Roozendaal,
in 2015 he employed the former New South Wales deputy premier
and National Party leader Andrew Stoner, a few months after he left
parliament.®^ Stoner would provide advice on investments in agri¬
business, including the $2 billion fund Huang had formed to invest in
Australian agriculture.
Huang had also developed a close relationship with federal trade
minister Andrew Robb. After Robb left parliament to work for various
Chinese firms, Huang hired his former press secretary Cameron Hill to
look after Yuhu’s media relations.®®
When foreign minister Julie Bishop gave a twenty-minute speech at
the opening ceremony of Huangs Australia-China Relations Institute
(ACRl) at the University of Technology Sydney (UTS), it was a sign of
the billionaires deep links in the government ranks. Huang boasted that
he personally chose Bob Carr to be ACRIs director.
UTS was so grateful that it gave Huang the right to call himself‘pro¬
fessor’ and the Peoples Daily was soon referring to him as an ‘Australian
scholar’.®'* He was, of course, photographed smiling with the foreign
minister. In August 2013 Yuhu donated $230,000 to her West Australian
branch of the Liberal Party, despite the fact Huang has no business or
any other apparent links with the western state.®®
Bishop said she was particularly delighted to see Mr Huang at the
event, going on to speak of China as a force for good, noting that in
addition to being our largest trading parrner, China is our largest source
of immigrants, out largest source of overseas students and our largest
source of international tourists’.®*® °
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Judging by her firm comments in 2016 calling on China to rec¬
ognise international law in the South China Sea, Julie Bishop seems
to have resisted becoming the captive of Chinese money. If Bishop
begins to change her tune it will signal a huge step forward in Beijing’s
plan to shift Australia away from the US alliance, but that now
seems unlikely.
Huang was photographed with Tony Abbott when he was prime
minister. When Malcolm Turnbull took over in September 2015 the
new top leader needed to be schmoozed. It didn t take long: in February
2016 Huang and Turnbull were snapped at the Chinese New Year
celebrations in Sydney.
However, it is the businessmans relationship with another senior
minister that raises more questions. In April 2014, Huang convened a
meeting in Hong Kong with trade minister Andrew Robb, along with
representatives from the Australian consulate in Hong Kong, to discuss
the China-Australia Free Trade Agreement.
In addition to Huang and his company staff, Yuhu had invited rep¬
resentatives from two Chinese companies. One was the China National
Agricultural Development Group, the other known as China Aidi
Group.®^ The five remaining members of the Chinese side of the table
were from Yuhu. A few months later, in a speech to the dairy industry,
Robb singled out Yuhu’s agricultural investment fund for praise.®®
Yuhu’s report on the meeting noted that ‘Robb ... looked forward
to the two countries being able to complete negotiations about the free
trade agreement by the end of the year and finally sign the agreement,
putting a satisfactory full stop on eight years of discussion’. Robb then
listened to and recorded Huang’s thoughts about problems Chinese
businesses have when investing in Australia, not least their difficulties
with working visas.®^
The last is particularly interesting because the main criticism of the
trade agreement had been the provisions it contained for importing
workers from China. Robb would attack calls by the unions to intro¬
duce market testing for labour shortages as ‘dishonest, vile and racist’
and the Labor Party as ‘xenophobic’.^®
The meeting wound up satisfactorily. Huang would soon organise
arge sums of money to be channelled into the Victorian Liberal Party
SILENT INVASION
(Robbs base) as well as his personal election fund in his Gold.r •
electorate. As Fairfax Media revealed in May 2016 ‘Yuhu G
executives donated $100,000 to then trade minister Andrew R^b^
hindraising entity [the Bayside Forum], including $50,000 on the da^
the China-Australia Free Trade Agreement was settled.’^' ^
It hasnt been all business. In 2013 Robb was Huangs guest at the
Melbourne Cup, including ticket and hospitality.Huang has made
himself an important figure in the racing industry, presenting the
winners cups at the Melbourne Cup Carnival.’^
In February 2015 Robb, among other smiling politicians, turned up
for Huangs publicity-intensive ‘giving day’ at which the tycoon and his
business friends wrote fat cheques for charities like children’s medical
research. Along with Labor Party leader Bill Shorten, Andrew Robb
is thought to have been an honoured guest at the wedding of Huang’s
daughter, Carina, in January 2016.
By 2016 Huang was certainly being looked on favourably by
Beijing. Only the most reliable are allowed to write opinion pieces for
the party mouthpiece the Peoples Daily, as he did in July. Communist
Party culture, he wrote, ‘is a common gene that enables over 60 million
overseas Chinese compatriots “to breathe together, to share in a
common fortune”.’^'*
A month earlier the chairman of ACRI gained access to the opinion
pages 0^Australian Financial Review, where Huang echoed Beijing’s
threat that Australian support for US freedom of navigation exercises in
the South China Sea ‘would have been very harshly viewed by China’.
It would have been folly’ that ‘Australia may end up regretting’.
He went on to hold up the ‘pragmatic’ approach to China of the
new Philippines president, Rodrigo Duterte, as an example Australia
hardly believe its luck when in May 2016
t e 1 ippines elected the gun-toting vigilante.^^^ Beijing had been
urging Australia to take the '
same pragmatic approach’ and it found a
I. . appiudClJ
hTa!
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DARK MONEY
2016. After 2016 his name stopped appearing so often on the Sydney
consulates website. Embroiled in the second Dastyari affair in
November 2017—leading Prime Minister Turnbull to describe him as a
foreign national Very very close indeed’ to the Chinese governments^—
Huang Xiangmo resigned as president of the ACPPRC.s*
At the February 2017 Chinese New Year celebrations in Sydney,
now effectively controlled by the consulate, Huang looked on from the
sidelines while the task of hosting the prime minister was assigned to
Xue Shuihe. A Chinese national with extensive property developments
in Australia, Xue Shuihe seems to have made his money in construction,
textile and food businesses in Fujian and Sichuan. As well as a long list
of other honorary positions in Chinese associations (including senior
honorary president of Huang’s ACPPRC), Xue chairs the Australia
China Economics, Trade and Culture Association (ACETCA), a United
Front body with the standard list of noble objectives involving culture,
youth, harmony and peace.Xue Shuihe’s brothers, Xue Shuihua
and Xue Yeguang, are also honorary chairmen of ACETCA. On his
profile Xue Shuihua declares: ‘We need to grow the seeds of Chinese
values and spread them overseas
Chau Chak Wing
Wealthy Chinese businessmen are not the only or the most powerful
network of businesspeople with influence in state and federal parlia¬
ments. Taken together, they come nowhere near rivalling the power
of the mining companies or the media conglomerates, for example.
But greater profits are all that mining and media companies seek.
As the influence of the Chinese party-state in the most important
Australian institutions expands, those concerned about the growth
of money politics ought to be alert to the possibility of networks of
Chinese businesspeople and their amenable politicians becoming
embedded in the Australian political and economic systems. If
traditional business lobbies only aim to protect their profits and
promote corporate growth, some wealthy Chinese businessmen use
ffeir political connections to promote the objectives of the Chinese
'-ommunist Party.
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Although a consummate networker, Chau Chak Wing is publicity
shy (in China keeping a low profile is known as di diao) but his
$20 million donation to the University of Technology Sydney to build
the Frank Gehry-designed business school edifice was always going to
attract attention. (Gehry said it looked like a ‘brown paper bag’.) To per¬
suade Chau to open his wallet so widely, the university’s vice-chancellor,
Ross Milbourne, had a cunning plan. Realising that Chau’s son Eric was
studying architecture at UTS, Milbourne asked the undergraduate if he
would like to fly to Los Angeles for a private meeting with the world’s
most famous architect, Frank Gehry.
In 2009 Chau’s impressive donations to the Liberal, Labor and
National parties had drawn media attention. As far as we know, since
2007 he has given $4.6 million to the main political parties ($2.9 million
to the Liberals and $1.7 million to Labor).His generosity coincides
with federal election years. The money has kept flowing. In 2007-08
he donated almost $1.4 million and the same amount in 2013-14.“^
In 2015-16 he donated $860,000, mainly to the Liberal Party, includ¬
ing $200,000 to Julie Bishops West Australian branch.No Chinese
businessman, and perhaps no businessman, has been more generous
with our political parties."^ If money talks, in Australia it increasingly
does so in Mandarin.
Chau is an Australian citizen but lives in his vast luxury estate in
Guangzhou. In 2015 he paid an Australian record of $70 million for
gambling mogul James Packer’s Vaucluse mansion La Mer, and then
knocked it down. The story of how the billionaire, a self-described
‘small businessman’, acquired his wealth in the Chaozhou real estate
and development game remains opaque and he is reluctant to speak
of it, despite the best efforts over some years of Fairfax journalist John
Garnaut.*®^ Garnaut reports an acquaintance of Chau’s observing that
his ‘star began to rise when Xie Fei, a Chaozhou neighbour, rose to the
Guangdong Communist Party secretaryship in 1991’, where he stayed
for eight years. Chau’s star rose higher when Lin Shusen, a protege
of former premier Zhu Rongji, was appointed mayor of Guangzhou
in 1998 and promoted to party secretary in 2003.'°® After his friend
Lin was shifted to Guizhou, Chau ‘had uncharacteristic difficulties
acquiring a huge land parcel’.^
74
mn
DARK MONEY
He certainly has not had any difficulties gaining access to Australian
politicians, from prime ministers down. He even manages to befriend
those on the fast track to becoming famous. As three Age journalists
noted in 2009: In 2004 and 2005 he partially funded trips to China
for the future prime minister, Kevin Rudd, the future treasurer, Wayne
Swan, the future foreign affairs minister, Stephen Smith, and the future
agriculture minister, Tony Burke.’"® He’s described byjuwai.com (the
top real estate website for wealthy Chinese) as ‘an A-grade schmoozer
[who] has made a practice of entertaining some of Australia’s top politi¬
cians at his luxurious home in Conghua, just north of Guangzhou’.'"
When Chau agreed to a rare interview with Garnaut, the journalist
found he was met on the airbridge, escorted through a tunnel beneath
Guangzhou’s Baiyun airport, and ushered into a Bentley that was wait¬
ing to take him to Chau’s estate (which his staff call ‘the Castle’). At
the end of the interview, Chau offered Garnaut a family holiday, some
fine French wine, and a job."^ Garnaut declined it all, explaining to his
colleagues at the time that he thought Chau was setting a reciprocity
trap and that if he accepted the gifts Chau would believe he ‘owned’
him. (After another of Garnaiit’s articles was published in 2016, Chau
sued Fairfax Media for defamation, a case still before the courts at the
time of publication.)
Curiously, Chau seems to have little to do with Huang Xiangmo’s
forces. Although he was an honorary chairman of ACPPRC in the
early 2000s, Chau held no formal position when Huang ran it (until
November 2017).
Chau became especially close to senior figures in the New South
Wales branch of the ALP. In 2006 Bob Carr became the sole honorary
president of Chau’s Association of Australia China Friendship and
Exchange."^ The organisation is a close partner of the Chinese People’s
Association for Friendship with Foreign Countries, a well-known
United Front group headed by Li Xiaolin, daughter of Li Xiannian,
former PRC president and chairman of the Chinese People’s Political
Consultative Conference.
In 2004 Carr was so impressed with Chau’s daughter, Winky,
that he took her on as an intern in his office. She stayed on in the
premiers office when Morris lemma succeeded Carr, and later set up
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SILENT INVASION
a consulting business with lemma after he left politics. Winky Ch
job nowadays is running the Chinese-language newspaper Chau
in Sydney. The Australian New Express Daily is the Australian version
oi the Guangzhou newspaper he bought in 2001 in a partnershi^
with the Yangcheng Evening News Group.'"* Of the parent pape^r
Chau has said: ‘The Government has found this newspaper very com¬
mendable, because we never have had any negative reporting.’"^
preparation for the 2008 mass rally of patriotic Chinese students in
Canberra to defend the Olympic torch and ‘dye Australia red’, Chau’s
Australian New Express Daily did a rush order to import a thousand
Chinese flags."*’
The Australian version of the paper, launched by Bob Carr in 2004,
also keeps faithfully to the Beijing line. John Garnaut wonders how it
is that a foreign citizen can run a newspaper in China, but of course
he knows the answer. Chau holds prominent positions in a number
of party-sponsored associations in China, such as the Guangzhou
Chamber of Commerce for Overseas Chinese Enterprises. He was
appointed to theTianhe District Chinese People’s Political Consultative
Conference, ‘a patriotic united front organisation of the Chinese
people’,"^ and has been praised as a ‘representative individual’ by the
Shantou United Front Work Department.As we saw, under President
Xi the activities of the United Front Work Department have taken on a
renewed importance. United Front cadres are expected to promote the
party’s views in their circles of influence and report back, in exchange
for enhanced status and material reward."^
A joint Fairfax Media and Four Corners investigation into PRC influ¬
ence culminated in June 2017 with a program on the ABC and feature
articles in Fairfax newspapers. These claimed that Chau is associated
with United Front organisations and explored his links to a US bribery
scandal. Chau hired bull-terrier defamation lawyer Mark O’Brien and
launched defamation actions against the ABC, Fairfax Media and the
journalist Nick McKenzie, claiming that he ‘has been greatly injured
and his business, personal and professional reputation has been and
will be brought into public disrepute, odium, ridicule and contempt’.
t the time of publication the case was still before the courts.
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DARK MONEY
The program and the news stories, according to Chaus state¬
ment of claim, imputed that Chau ‘betrayed his country, Australia,
and its interests in order to serve the interests of a foreign power,
China, and the Chinese Communist Party’. Chau appears to have
taken exception to the imputation that he is a member of the CCP
and of the Chinese People’s Political Consultative Conference and
‘as such, carries out the work of a secret lobbying arm of the Chinese
Communist Party, the United Front Work Department’. Chau went
to Simon Benson at the The Australian, who wrote a soft story pub¬
licising the aggrieved billionaire’s side of the story. He rejected the
ASIO assessment of him on which he believes the Fairfax//b«r Corners
allegations are based.
In immediate response to Chaus claim that I have no idea what
the United Front Work Department (UFWD) is, Fairfax published a
demolition of this claim by Nick McKenzie and Richard Baker. They
referred to many instances of Chau’s meetings with UFWD cadres,
UFWD publications featuring him and Chinese government docu¬
ments naming him as a member of UFWD-aligned organisations.'^^
And they had come across, via WikiLealcs, a sensitive report written by
a United States diplomat in 2007 stating that Zhou Zerong, as Chau
is known in Mandarin, had said he is the leader of a new organisation
called the Guangdong Overseas Chinese Businessmens Association.
The diplomat judged that the new organisation led by Chau is ‘part of
the party’s United Front strategy’.
In suing the ABC and Fairfax, Chau was keen to repudiate the sug¬
gestion that he employed ‘a corrupt espionage agent of the Chinese
government’ and paid a $200,000 bribe to the president of the
General Assembly of the United Nations. In 2015 Chau Chak Wing
was mixed up in a nasty bribery scandal. Prominent Sydney socialite
Sheri Yan, an American citizen, was arrested in New York by the FBI
for allegedly paying $200,000 to the president of the UN General
Assembly, John Ashe, for Ashe to make an official appearance at Chau’s
lavish Guangzhou resort.'*^ Sheri Yan is married to Roger Uren, a
former senior Australian intelligence analyst and diplomat in Beijing
and Washington, and later at the Office of National Assessments.
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SILENT INVASION
At one stage Uren was tipped to become Australia’s ambassador to
China. He is now vice-president at Phoenix Satellite Television, a pro-
Beijing broadcaster in Hong Kong, and a collector of Chinese erotica.
The United Nations is reported to have launched an investigation
into Chau’s involvement in bribing Ashe.'^s Chau insisted he knew
nothing of the transactions between Van and Ashe. In July 2016 Sheri
Van pleaded guilty to paying Ashe a total of US$800,000 in bribes,
including US$200,000 to attend a private conference in China
‘hosted by a Chinese real estate developer identified as “CC-3’’ in the
Complaint’.She was sentenced to twenty months in prison. When
asked about Chau’s links to the scandal, his daughter Winky said: ‘The
whole thing is a misunderstanding.’’^^
John Ashe was charged with tax fraud associated with the bribes.
He was reported to be still engaged in a plea bargain a few days before
he was to appear in court in June 2016, at which he would presumably
spill the beans. But he had an unfortunate accident and died. Initially
his lawyer said he’d suffered a heart attack, but a coroner later concluded
that while he was working out at home a barbell had accidentally fallen
onto his neck, crushing his windpipe.'^®
In their defence against Chau Chak Wing’s statement of claim, the
ABC and Fairfax Media told the court there are reasonable grounds
to believe that Chau Chak Wing ‘betrayed his country, Australia, in
order to serve the interests of a foreign power, China, and the Chinese
Communist Party by engaging in espionage on their behalf.’’^^ The
news organisations further pleaded that there are reasonable grounds to
believe Chau is a member of a body that ‘carries out the work of a secret
lobbying arm of the Chinese Communist Party, the United Front Work
Department... [and] donated enormous sums of money to Australian
political parties as bribes intended to influence politicians to make deci¬
sions to advance the interests of the People’s Republic of China, the
Chinese government and the Chinese Communist Party.’
The defence case went on to argue that there are reasonable grounds
to believe that Chau is CC-3 and paid a ‘$200,000 bribe to the
President of the United Nations, John Ashe’ and was therefore ‘know¬
ingly involved in a corrupt scheme to bribe the President of the General
Assembly of the United Nations.’
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DARK MONEY
Finally, the ABC and Fairfax Media pleaded that ‘there are reason¬
able grounds to believe that the Applicant broke the pledge of loyalty
he took to Australia on becoming an Australian citizen by secretly
advancing the interests of a foreign power at the expense of the interests
of Australia.’
Zhu Minshen
Few people noticed, but the fishy smell around Zhu Minshens Top
Education Institute was noticeable a few years before it began wafting
from the front pages of the newspapers. In 2013 Primrose Riordan
reported in the Australian Financial Review that China had given the
private for-profit Sydney college official endorsement, a status very hard
to obtain for private colleges.'^® Zhu said he was not sure why others
were not included; one thing is certain, though: he is very well con¬
nected in China, with pictures adorning his website showing him with
various top government officials, from Premier Li Kecjiang down.
His photos with leading Australian politicians are easier to explain.
He gave them money. Zhu had donated over $230,000 to the major
parties up to 2014-15, and an extra $72,000 in 2015-16, mostly
to the New South Wales Liberals.'^' These are the contributions as
far as we know them.'^^ The obligatory photos show him meeting
Malcolm Turnbull, Tony Abbott, Kevin Rudd, Julia Gillard, Julie
Bishop, Bob Carr, Kim Carr and his successor as education minister,
Christopher Pyne.
Unlike Huang and Chau, who have spent large sums and been
rewarded with honorary degrees, Zhu is a genuine scholar, specialis¬
ing in ancient Chinese characters. His father and grandfather, both
intellectuals, were branded reactionary and counter-revolutionary and
persecuted during the Cultural Revolution. The experience does not
seem to have alienated him from Communist Party rule.'^^ He arrived
in Australia in 1984 to study for a PhD in calligraphy at the Australian
National University (ANU), duly awarded in 1989.'^“ After being
knocked back for various academic jobs he moved to Sydney and set
up a garment factory, drawing, he says, on the ten years he worked in
a Sharighai cotton factory during the Cultural Revolution. He is an
Australian citizen.
79
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DARK MONEY
In Ills 2001 speech in Nanjing, Zhu made much of the difference
between the new and old generations of Chinese migrants to Australia.
It was the old generation that found his pro-Communist views
unpalatable, while the new immigrants have ‘deep feelings for their
ancestnil home’. He spoke of the ‘struggle’ the Australian Chinese Times
had to endure in its early years, but he was convinced that the power of
new Chinese migrants will grow stronger and stronger He found a
home as an adviser to the ACPPRC in the early 2000s.
Zhu always saw himself as a scholar and so in 2001 he combined his
intellectual interests with his business acumen to found Top Education
Institute (‘Top’ is a translation of the Chinese word meaning elite). It
has flourished into a lucrative business. Of the college’s 1000 students,
98.5 per cent are from overseas, mostly China. The private provider
received a big boost in 2016 when Christopher Pyne awarded it access
to the streamlined visa program, one of only a handful granted to
private colleges. Labor’s Kim Carr said that when he was minister for
higher education in 2013 he had rejected Top Education’s application
because the immigration department had advised him there was a very
high level of risk’, presumably of Chinese coming over to ‘study but
actually just intending to work.'^'^ Zhu Minshen’s entities had donated
$44,275 to the Liberal Party in 2014—15.
Zhu and the Olympic torch
Zhu Minshen is on the board of the Confucius Institute at the Univer¬
sity of Sydney and he is well connected with the prestigious Fudan
University in Shanghai, He is also an overseas delegate to the Chinese
People’s Political Consultative Conference (Cl^PCC), which, as we
saw, is ‘a patriotic united front organisation’, in the words of one of its
leaders. Membership is prized by Chinese billionaires and those looking
to spread their giianxi networks into the highest reaches of the CCP.
Members are ushered to the front of airport queues and find limousines
waiting for them at flight’s end.
Although an Austndian citizen, Zhu appears to have played a sig¬
nificant role in organising the Chinese student protest at the Olympic
torch relay in Canberra in 2008. WTien approached by some Chinese
students from Canberra, Zhu readily proyided financial help. It would
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SILENT INVASION
be a day, he wrote, he’d ‘not forget for the rest of his life’.*'*^ Zhu esti¬
mated that 30,000 students turned up and mentioned the organising
role of the Chinese embassy and of how, at a get-together after the
event, Ambassador Zhang Junsai ‘spoke emotively’ of the patriotic
actions of the students. Zhu singled out for praise the overseas Chinese
students from the University of New England. He was the dean of its
International Institute in the 2000s.According to his account, the
university had fewer than a hundred Chinese students but forty-two of
them drove for twelve hours to attend the torch relay.
Zhu was also proud of the ninety students from his own Top
Education Institute who turned up at the demonstration. In fact, he
chartered buses and made it a school activity ‘that counts towards
assessment’ (making it perhaps the only accredited degree program in
Australia that counts agitating for a foreign power towards its qualifica¬
tions). He personally took along a hundred small Chinese flags, twenty
large ones, and a specially made thirty-square-metre flag. Arriving in
Canberra with his students, he saw that they were ‘full of vigour as they
waved their red flags’.
After standing with the students at the torch relay, he later waxed
lyrical about the chants of ‘One China forever’ and ‘Go China’ that
‘resounded across the sky’.''^^ The voices of the troublemakers ‘were
drowned out as if in a great sea’. It was, he gushed, ‘my unforgettable
April 24,2008!’.
After the welcoming event finished, the students said to me,
‘Principal Zhu, this event has such significance. Why don’t you give
the national flags to us so we can keep them as a memento?’ And just
like that, the international students, fully treasuring them, took with
them all the flags.
Zhu Minshen’s role in organising a menacing and at times violent
mass demonstration by foreign students in the heart of Australia’s
democracy had no repercussions for him. According to a well-
connected journalist I spoke to, ASIO ‘shat themselves’; but Australias
supine political leaders looked on benignly, none wondering how their
counterparts in Beijing would react if the Australian ambassador took
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DARK MONEY
it into her head to organise a rowdy protest by thousands of angry
Hag-waving Australians in Tiananmen Square. Quite the reverse. In
2012 Australia’s newly minted foreign minister, Bob Carr, appointed
Zhu to the federal Chinese Ministerial Consultative Committee. The
photo shows him flanked by Carr and Prime Minister Julia Gillard.'^®
It does not seem to have struck anyone as odd that Zhu should serve
simultaneously on high-level advisory panels for both the Chinese and
Australian governments.
Zhu’s role In Dastyarl’s downfall
In April 2015 the federal Department of Finance sent the rising Labor
star Senator Sam Dastyari a bill for $1670.82 to cover an overspend on
his annual travel budget of $95,279.63. Instead of paying it, Dastyari
forwarded the invoice to Zhu’s Top Education Institute, which settled
the account. When the facts were reported by Latika Bourke in The
Sydney Morning Herald on 30 August 2016, all hell broke loose.'^* What
was most galling to the public, and most revealing about the relation¬
ship between the NSW Labor Party and wealthy Chinese donors, was
the casual way Dastyari asked a rich mate to bail him out. Dastyari
seems to have regarded Top Education as a convenient fund he could
dip into when needed. Huang Xiangmo’s Yuhu Group was another.
When in 2014 he was presented with a legal bill for $5000, Dastyari
asked Huang to pay it for him, and Huang was happy to oblige.
Handing out money to politicians is standard practice in China.
Before he was placed by the Labor Party on the Senate ticket, Sam
Dastyari was the party’s chief organiser and fundraiser in New South
Wales at party headquarters, which he moved from its notorious Sussex
Street HQ to Parramatta. In early 2014 he was flown to China by the
Chinese People’s Institute of Foreign Affairs, and took the time to visit
Huang’s Yuhu headquarters as well as Hiiawei, the telecommunica¬
tions behemoth that (as we’ll see) has worked assiduously to spread
its influence in Australia. In January 2016 he was flown to China by
the Australian Guangdong Chamber of Commerce (run by Huang
Xiangmo). The trip was also supported by the International Depart¬
ment of the CCP. Huang plied him with expensive bottles of wine.
It seems like a long time ago that influential figures from the Labor
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Right were flown to the United States by the CIA to attend workshops
on how to resist communist influence.'” In a wonderful irony, in 2016
the outgoing US ambassador, whose predecessors had meddled in
Australian politics for decades, issued a public warning about the dangers
of foreign interference in our political process.'” Even so, compared to
the PRC’s ‘full court press’, American meddling has been child’s play.
Dastyari attempted to make up for his sins by paying the $1670.82
Zhu had given him to an Indigenous foundation. Why he thought
that would make the perception that he is in bed with rich donors go
away is a mystery. He just didn’t get it. The foundation did though,
and returned the money to him. And his sins were compounding.
Primrose Riordan reported that in the parallel world of wooing
Chinese-Australian voters, Dastyari, standing next to benefactor Huang
Xiangmo, had directly contradicted ALP policy on the South China
Sea dispute. He soothed his Chinese-speaking listeners with words
his speechwriter might have lifted from the Peoples Daily. ‘The South
China Sea is China’s own affair. On this issue, Australia should remain
neutral and respect China’s decision.’’” It seemed like a propaganda
coup for Beijing and Dastyari’s intervention was reported triumphantly
in the official Chinese press. The People's Daily elevated him to the status
of a key international supporter of China.'” Journalists in Canberra
dug up Hansard records showing Dastyari grilling defence and foreign
affairs officials about the advice they were providing to the government
on Australia’s stance on the South China Sea.'” (In 2010, as a reformist
NSW Labor Party secretary general, Dastyari told a branch meeting;
‘We need to end the practice where seven people meeting in a Chinese
restaurant decide everything’.'^®)
Dastyari had used his position at other times to advance the inter¬
ests of Beijing over those of his country of citizenship. In 2014 he
argued that Australia should not oppose Chinas aggressive and illegal
imposition of an ‘Air Defense Identification Zone’ over islands in the
East China Sea claimed by Japan. These are the pro-Beijing efforts of
Dastyari that have come to light.
When Prime Minister Turnbull accused Dastyari of taking ‘cash for
comment’ the senator was offended.'^'' How it must have pained him
84
dark money
when his billionaire donor Huang Xiangmo withdrew an enormous
promised donation of $400,000 before the 2016 election because Ubor
would not change its policy on the South China Sea, an astonish¬
ing attempt at cash-for-policy uncovered by Nick McKenzie for h.s
/v«rC<>rwm/Fairfaxinvestigation.'^°
The Dastyari affair exposed the rot at the heart of Australian
democracy. As Rory Medcalf, head of the National Security College at
the ANU, observed: ‘Imagine how Beijing would react if entities linked
to a powerful foreign government were paying travel and legal bills
for rising stars in the Chinese polity’.'^' Labor leader Bill Shorten did
not ask for Dastyaris resignation. Instead, defending the hyperactive
senator as an asset to the Opposition, he gave him a slap on the wrist.
With the government piling on the pressure, and the media targeting
the senator for his hypocrisy in calling for financial malfeasance to be
rooted out of the banking sector, Dastyari was eventually forced to step
down. Yet within months he was being rehabilitated. In February 2017
he was appointed a deputy whip and in June Melbourne University
Press helped out by publishing a memoir, which the ABC promoted
with a soft-focus profile on Australian Story. Medcalf wrote that the
affair is ‘a priceless lesson in the vulnerability of Australian democracy
to foreign influence in a contested Asia.
In the end, it was Dastyaris relationship with Huang Xiangmo
that killed off his political career. In late November 2017, Fairfax
journalists Nick McKenzie, James Massola and Richard Baker reported
that some weeks after the Dastyari affair broke, the senator travelled
to his benefactors Mosman mansion to warn him that his phone was
probably being tapped by intelligence agencies.On the same day
a tape recording was aired of Dastyari s infamous press conference at
which he contradicted the Labor Party’s policy on the South China Sea.
His comments were carefully scripted, and not off the cuff as he would
claim. Prime Minister Turnbull pointedly asked why a parliamentarian
would be giving counter-surveillance advice to a foreign national who
is close to a foreign government. ‘Whose side is Sam on? Not Australia’s
it would seem.’’^^ The pressure was too much for Labor leader Bill
Shorten and he sacked Dastyari.
85
SILENT INVASION
It was left to Nick O’Malley, Philip Wen and Michael Koziol to
make die larger point. Dastyari, they wrote, ‘is just a minor cog in a
hir-larger machine of political gift-giving and influence-peddling that
China has built’ to advance its influence in Australia and across the
globe.Medcalf suggested that the affair ‘could be the moment when
the expensive tapestry of China’s “soft power” influence in Australia ...
begins to unravel Perhaps, but there is a long way to go.
When the Australian media were full of stories about wealthy
Chinese influencing Australian politics and apparently winning over
politicians to a pro-Beijing view, the Global Times editorialised about
anti-Chinese paranoia and ‘hyping up the alarm toward China, a line
adopted by some commentators in Australia. Taking its usual bullying
tone, it warned us that talk is one thing but if Australia ‘resorts to real
actions to hurt China’s security such as sending warships to the South
China Sea, it is bound to pay a heavy price’.
In July 2016 the jingoistic tabloid that often gives vent to the more
uninhibited feelings of the leadership had scolded Australia when our
government called for the international arbitration ruling on the South
China Sea to be respected, reminding us of our ‘inglorious history’ as
an offshore prison, charging us with hypocrisy over our claims to the
Antarctic, accusing us of sucking up to China when our economic
interests call for it, saying, ‘China must take revenge’ on Australia, and
finishing with a flourish by dismissing us as ‘not even a “paper tiger’”.
Australia is only a ‘paper cat at best’, a paper cat that will not last.'^^ This
kind of nationalist hyperventilation from the CCP’s id is amusing, until
one understands the expansionist aggression at the highest levels of the
state that is behind such hyperbole.
Political plants’®®
Donations to political parties are the most obvious potential channel
of influence for the CCP in Australian politics. However, a small but
growing number of Chinese-Australians with close links to the CCP
now occupy influential roles in this country’s political structures. It’s
a trend that goes to the heart of concerns about the undisclosed sway
of Beijing’s agents of influence in Australian politics. The New South
Wales Labor Party is the epicentre of PRC influence in Australian
86
dark money
pK^litics. Mapping the Byzantine links would take a book in itself but
it s worth noting here that the state party’s current leader, Luke Foley,
seems to have been won over to a point of view pleasing to Beijing.
In September 2017, standing next to Ernest Wong (the upper house
MP close to Huang Xiangmo), Foley denounced Australia s reluctance
to sign up to One Belt, One Road (OBOR), Xi Jinping’s grand strategic
vision to use China’s surplus capital to hind infrastructure development
around the world.Borrowing CCP language, which he may have
picked up on a trip to China organised by Wong, he said a ‘Cold War
mentality’ was harming our friendship with China. Australia should
follow New Zealand’s lead and sign up to OBOR without delay.
Foley’s colleague Chris Minns, a rising Labor star and potential party
leader, employs James Zhou on his staff. Zhou is an executive vice-
president of the ACPPRC and close to Huang Xiangmo.'"® (Zhou also
operates an export business to China with the wife of Chris Minns.)
Minns Las paid tribute to Ernest Wong and travelled to China in 2015
as a guest of the CCP and another of Huang’s United Front organisa¬
tions. He was accompanied by federal Labor’s shadow treasurer Chris
Bowen, who in September 2017 gave a landmark speech indicating that
a Labor government would link the northern Australia infrastructure
fund to OBOR.
If the Labor Party in New South Wales is the epicentre of Commu¬
nist Party influence, the Liberal Party is not far behind. On the night of
the 2016 federal election, a beaming Craig Laundy was photographed
surrounded by two dozen campaign supporters who had helped him
retain the seat of Reid for the Liberal Party. Laundy had snatched
the inner-western Sydney seat from Labor three years earlier. In the
photograph the MP has his arm draped around the shoulders of a man
in the middle of the group. His name is Yang Dongdong and he claims
to be a ‘community adviser’ to Laundy. He is also a conduit to the large
Chinese-Australian community in his electorate.
In response to inquiries, the Liberal MP disavowed Yang’s claims
about the pair’s closeness and dismissed the assertion that Yang has
worked as an adviser, despite one of Laundy’s own staffers, when
asked about the connection, saying that Yang is a ‘consultant’ and is
‘quite close’ to him.'"' Whatever the precise nature of the relationship
87
SILENT INVASION
between the pair, it is clear that Yang has sought to stay close to Laundy
throughout the Liberal MP’s political ascension. All the while, Yang
Dongdong has nurtured his intimate and long-standing links to the
Chinese consulate in Sydney and, according to Yang himself, sought to
advance the objectives of the CCP.
Before coming to Australia at the end of 1989, Yang was deputy
secretary of a branch of the Chinese Communist Youth League in
Shanghai Yang proudly reminisces on social media about his time in
the party hierarchy, sharing old photos of himself at party meetings.
In 1988 his name was inscribed on the Chinese Communist Youth
League honour roll. He was named ‘Shanghai New Long March Shock
Trooper’ for his work as a cadre devoted to the Youth League’s mission
of promoting the party.
Arriving in Sydney not long after the Tiananmen Square massacre,
Yang appeared ‘desperate’ to establish his eligibility for the visas being
offered to Chinese students, according to Qin Jin, a prominent member
of the Sydney anti-CCP group Federation for a Democratic China.'^^
Yang joined the federation and attended protests. He also claimed to
have been an underground Christian in Shanghai, a ruse used by some
migrants from countries like China that ban religious freedoms to
bolster their case for protection or residency. Eventually, he was granted
permanent residency and then citizenship.
There are few traces of Yang’s early Australian pro-democracy activi¬
ties in his more recent dealings. Yang now promotes himself as one of
the strongest supporters of the CCP in Australia. His old friend Qin Jin
believes Yang’s first loyalty is to Beijing. He is a member of the Overseas
Committee of the Ail-China Federation of Returned Overseas Chinese
as well as its subsidiary, the Shanghai Federation of Returned Overseas
Chinese. In one of Yang’s company profiles, the groups are described as
part of the CCP’s United Front Work Department.
Yang’s 2014 application letter to be admitted to the Overseas Com¬
mittee of the Shanghai Federation of Returned Overseas Chinese
which he posted temporarily online—details his activities on behalf of
the Chinese government. At the end of the document he refers officials
who wish to make further inquiries about him to the Chinese consulate
in Sydney or the embassy in Canberra.
88
DARK MONEY
Yang, whose business activities have included a Sydney telecom¬
munications shop, also claims in the application that he has supplied
phone services to visiting Chinese presidents, the Chinese Olympic
Committee, Chinese diplomats and even the Chinese navy when in
Australia.Former diplomat Chen Yonglin confirms these claims,
which suggest Yang had somehow acquired a high level of trust from
Chinese officials at the consulate and the embassy, and within Chinas
intelligence services. rr r u
Yang was trusted to provide phones to consulate staff from his
Ashfield phone shop. Chen says Yang once reported to the consulate
that ASIO had approached him to provide information about these
phones. ASIOs policy of not commenting on operational matters
means that this cannot be verified.
At the 2008 Olympic torch relay in Canberra, Yang was the leader
of two order maintenance corps’.He had earlier told a Chinese state
media oudet that he would protect the torch from Tibetan independ¬
ence activists.Inspired by what he saw, he penned an article titled
This evening by the lake we did not sleep—a record of Australia pro¬
tecting the Olympic flame.
Yang organised a number of anti-Dalai Lama protests to disrupt
the Tibetan leader’s visits, including one in 2015.'®° And he is also
an honorary president of the Sydney Council for the Promotion
of Peaceful Reunification of China, aligned with the United Front
Work Department and easily confused with the Australian Council
for the Promotion of the Peaceful Reunification of China, headed by
Huang Xiangmo.
Via several Australian organisations with an ostensible focus on
business development, including the Australia China Business Summit,
Yang has gathered contacts in the Liberal Party. In 2015, then prime
minister Tony Abbott wrote to him (‘Dear Dong Dong’), thanking him
for his hospitality. In 2016 he was snapped joining a toast with Prime
Minister Malcolm Turnbull and China’s ambassador, Ma Zhaoxu. He has
been photographed with a range of Liberal Party heavyweights includ¬
ing Andrew Robb and New South Wales premier Gladys Berejiklian
(who with Liberal powerbroker John Sidoti handed him a community
service award).'®' His closest contact, though, is the Member for Reid.
89
SILENT INVASION
When Craig Laundy, who is heir to one of the largest pub empires in
Australia and lives in an $8 million mansion in Hunters Hill, won the
federal seat of Reid for the Liberal Party in 2013, it was the first time
the Liberals had held it since its creation in 1922. The seat of Reid is
centred on Burwood, Drummoyne and parts of Strathfield in Sydneys
inner west. Around ten per cent of its voters were born in China.'*^
After his election, Laundy was promoted to the front bench as assistant
minister for multicultural aflPairs. Now serving as assistant minister for
industry and science, the Turnbull ally has been earmarked as a future
cabinet minister.
Laundy s election campaign in 2016 received energetic support from
Yang, who is also a founder of the Liberal Party’s Chinese Council.*®^
The Labor Party was blindsided by a highly effective Chinese-language
media campaign,with Yang writing an article praising Laundy and
rallying dozens of Chinese-Australians to take to the streets to campaign
for the Liberal Party candidate.’®^ Laundy has become one of federal
politics’ most vigorous promoters of the China-Australia friendship.
He’s candid about his desire to work with the Chinese consulate
in Sydney. In 2016, Yang’s business group arranged for him to meet
China’s consul general, Gu Xiaojie. The consulate later reported that
during this meeting, the MP expressed his willingness to closely
cooperate with the Consulate ... and to deepen practical cooperation
[between the two countries]
When Laundy met the billionaire donor Huang Xiangmo in
December 2015, the ACPPRC reported that the Liberal MP ‘highly
praised how the ACPPRC under Huang Xiangmo’s leadership had done
much work for Australia and China’. He ‘expressed his admiration for
Huang’s penetrating opinions on Australia’s culture, economy, history,
and so on, and expressed appreciation for the contributions of Huang’s
compassionate philanthropic services’.
When Yang organised a protest against the visit by Japan’s prime
minister, Shinzo Abe, to the Yasukuni Shrine in March 2014, Laundy
appeared alongside Yang waving Chinese and Korean flags. Laundy also
promised to deliver a petition from the protesters to the foreign minis¬
ter, the prime minister and parliament, and to call on them to support
DARK MONEY
the protest.'*^ He wasn’t going against the government’s position, but his
spear-carrying on an issue cranked up by Beijing’s propaganda machine
raised eyebrows among China watchers.
Yang claims in his application to the Overseas Committee of the
Shanghai Federation of Returned Overseas Chinese that he ‘had a
federal parliamentarian make a speech in parliament opposing Abe’s
veneration of spirits’. It must have been Laundy because a People’s Daily
article_headlined ‘Voices of opposition to Abe’s visiting Yasukuni Shrine
appear in the Australian parliament for the first time’—triumphantly
reported on Laundy’s and fellow Liberal backbencher David Coleman’s
criticism of Abe.'®® In July 2015, when Tibetans staged a protest out¬
side China’s Sydney consulate in Camperdown, Yang’s business group
claimed on social media that Craig Laundy had issued a statement
‘strongly condemning the conduct of the thugs who attacked the Chinese
Consdate in Sydney’.'®^ In his media release, Laundy wrote that after
talking to ‘Reid’s local Chinese-Australian community’ he condemned
the ‘violence’ of the protesters. They had, in fact, done no more than
take down the Chinese flag. He made no mention of the cause of the
protest, the death in a Chinese prison of a prominent Tibetan monk.
After mining magnate Clive Palmer made insulting remarks about
Chinese people, Yang Dongdong led the anti-Palmer protests. Laundy
turned up too, along with Sam Dastyari. In his application Yang claims
to have lobbied parliamentarians and the government to put pressure
on Palmer, finally leading to Palmer offering a ‘most genuine and
sincere apology’.'^
Noting his consistently pro-Beijing stances, China’s state-run media
treat Laundy as a go-to man for comment. The MP has been quoted
in several CCP-controlled newspapers praising China’s contribution
to Australia, and has featured on the cover of BQ^ Weekly, the inflight
magazine of China Southern Airlines and Air China, under the head¬
line ‘Chinese migrants represent the Australian dream: In an exclusive
interview federal MP Laundy says no to anti-Chinese people’.
Laundy is confident his pro-Beijing comments and relationship with
Yang don’t raise any serious questions about whether he has been the
target of a campaign of influence. Yet he applied a different judgement
91
SILENT INVASION
to Senator Sam Dastyari’s Chinese connections. In September 2016
Liiundy described Dastyari as ‘at best wilfully reckless
Two days after the story broke about Yang Dongdong’s extensive
CCP connections, it was reported that, after a meeting with Liberal
Party powerbrokers, Yang had withdrawn his name from the party’s
list of candidates for the Burwood Council elections. Placed second
on the ticket, he was a certainty to be elected. Liberal Party sources
had seen Yang as a godsend: well connected, a proven fundraiser and a
vote-winner among some Chinese-heritage residents. They must have
calculated that the ninety per cent of non-Chinese constituents would
have no sympathy for putting a man so close to the CCP on their
local council.
There are numerous other people close to the CCP actively involved
in Australian politics, including elected representatives, more often from
the Labor Party. A couple of dozen Chinese-Australians stood for elec¬
tion to local councils in New South Wales in September 2017. Around
half a dozen of those elected are linked to United Front organisations.
92
T1
5 ‘Beijing Bob’
The ‘China-Whatever’ research Institute
By 2015 Huang Xiangmo had graduated to semi-official commentator
on China’s political affairs, acting as a representative of the Chinese-
Australian business community in his comments on free trade. Perhaps
inspired by Chau Chak ^JC^ing’s links to the university world, in May
2014 Huang donated $1.8 million to the University of Technology
Sydney (UTS) to establish the Australia-China Relations Institute
(ACRI). He now moved in the big league. And he would have won
plaudits in Beijing, which had recently announced it would be making
a large investment in think tanks at home and abroad.
To run the new centre he recruited the previous Labor Party foreign
minister and former New South Wales premier Bob Carr, whose
inexperience in the academic world was more than made up for by
his friendships with powerful people in Australia and abroad.' The
incumbent foreign minister, Julie Bishop, accepted the invitation to
launch the centre. At the opening ceremony, Huang sat next to the
Chinese ambassador, Ma Zhaoxu, and perhaps reflected on how much
he had achieved in such a short time.^ If Huang retained any doubts,
they would be swept away six months later when he was invited by
the ambassador to be his guest at a grand dinner at Parliament House
93
SILENT INVASION
in Canberra for the visiting president, Xi Jinping.^ Whatever dark
thoughts Beijing may once have harboured for the Jieyang developer')
was now smiling on him. ’
Measured by the greater prominence of Beijing’s worldview in
Australian public debate, Huang’s $1.8 million investment in ACRl
has paid off in spades. In 2016 the vigilant Primrose Riordan reported
that ACRI’s reports had been quoted in federal parliament as authori¬
tative sources for defending the benefits of the China-Australia Free
Trade Agreement.'^ They were used especially to ridicule the anxieties
of Labor and the trade unions about the migrant worker provisions of
the agreement. Bob Carr may have been a stalwart of the Labor Party
but a range of conservative MPs gleefully used the China-funded think
tank’s work to excoriate the Labor Party for its scepticism about the
terms of the deal. In parliament, Andrew Robb cited ACRI’s work in
praising Australia’s decision to join the Asian Infrastructure Investment
Bank, Beijing’s challenger to the World Bank. The institute’s economist
and deputy director James Laurenceson had been singing the praises
of deeper trade links with China. Now, even Beijing’s friends in the
Pakistani media go to Laurenceson to ‘hail China’s commitment to an
open, global economy’.^
Ensconced at ACRI, Bob Carr declared that ‘we take an unabashedly
positive and optimistic view of the Australia-China relationship’It
was a long way from the stance he took in 1989 when, as New South
Wales Opposition leader, he addressed a rally in Sydney Square two
days after the Tiananmen Square massacre on 4 June. Denouncing the
single Marxist-Leninist party as a ‘ludicrously outdated notion’, he told
the 10,000 mourning protesters that only a multi-party democracy in
China could guarantee there would be no more bloodshed.^ As late as
2012 the foreign minister was criticising Australia’s ‘pro-China lobby’.®
How things change.
At ACRI, Carr would soon be talking up the role of his new insti¬
tute in pushing the China-Australia Free Trade Agreement through
parliament in the face of union criticism of its labour provisions.^ He
attacked those who believe Australia is being supine towards China as
governed by Cold War instincts’. His approach is ‘pragmatic’ while
theirs is heavily ideological’. Senior Labor sources say that Carr has
94
'BEIJING BOB'
been pushing an aggressive pro-China position in Labor caucuses, and
especially within the New South Wales Right faction.'"
blTS abuts Chinatown and hosts large numbers of PRC students
(5500 in 2015, or over forty per cent of all international students").
As we’ll see, it has also cultivated extensive links with Chinese universi¬
ties.'^ Although it was a modest donation compared to the $20 million
Chau Chak Wing had given the university for its landmark Frank Gehry
building, the university readily agreed to take Huang’s $1.8 million.'^
It made Huang an adjunct professor and appointed him chairman of
its board. The billionaire boasted that he personally appointed’ Bob
Carr as ACRI’s executive director.''' When I asked UTS deputy vice-
chancellors Glenn Wightwick and Bill Purcell in person about this, it
was an awkward moment, but they confirmed that Huang had asked for
Carr. In their written reply they dodged my question. Professor Huang,
as he is now referred to in China, confided to a journalist that he had
someone else in mind, ‘an even more influential figure from politics’
(which, if true, could only have been Kevin Rudd), but settled on Carr
because I consider him to be a very good academic .
In response to written questions from me, UTS said it had carried
out rigorous due diligence on Huang Xiangmo, does not see its associa¬
tion with him as a liability and made him an adjunct professor because
of his ‘outstanding achievements as a business leader and contributor
to international relations’. In November 2017, when it was revealed
that Senator Sam Dastyari had visited Huang at his home and warned
him about his phone being tapped. Prime Minister Turnbull said that
Dastyari was assisting a foreign government and that Huang Xiangmo is
‘a foreign national with close links to a foreign government’.""
ACRi under pressure
For anyone who comprehends academic freedom and intellectual inde¬
pendence, ACRI was stained from the outset. The Chinese Communist
Party condemns academic freedom as a ‘polluting’ Western idea,'^ but
any university worth its salt would have insisted that a donor have no
influence on the appointment of university staff. But, like so many
Australian universities today with their sights on a pile of cash, UTS
seems not to have cared too much about the niceties of tradition.
95
SILENT INVASION
The institute insists that it ‘has a fully independent, academ'
cally rigorous and transparent research agenda.'® Beyond'the initial
$ 1.8 million donation, its funding situation has been opaque, altho
the university said in 2017 that it would be publishing a full state
ment of its finances.'^ Some UTS academics, who have watched the
whole afl^ir with dismay, have their doubts, with one characterisi
the institutes seminars and publications as resembling ‘party propa
ganda of the Chinese Government’.^” Another Australian China expert
James Leibold of La Trobe University, put it more bluntly, saying UTS
had made a mistake by allowing Huang to chair the ACRI board: ‘It
becomes a backdoor propaganda vehicle for the Chinese Communist
Party among the Chinese Australian community.’^' Bob Carr and the
university reject this characterisation.
The launch ceremony in May 2014 was a grand affair. Chinas
ambassador, Ma Zhaoxu, welcomed the institute as ‘a big step forward
in the China-Australia relations studies’, going so far as to hail it as ‘a
historic event in our bilateral relationship’. Stepping up to the podium,
our foreign minister agreed with the ambassador that no two countries
enjoyed the same degree of‘interdependence and complementary ties’.
The ambassador could be confident that he would not be later
embarrassed by any of ACRI’s work. Any kind of sharp criticism of
China—for its human rights abuses, for example, or its persecution
of dissidents or its bullying of neighbours—would be verboten. The
institute’s research is expressly based on ‘a positive and optimistic view
of Australia-China relations’.An optimistic view is, according to the
dictionaries, one disposed to hope for the best or tending to look on
the bright side of things. Carr has claimed that the institute would ‘not
shy away from thorny dimensions of the relationship such as human
rights’. To date ACRI has not got around to publishing anything on
China’s human rights record, even though it has become more oppres¬
sive and brutal. Questioned by me about this. Bob Carr listed a number
of statements and publications he said were ‘critical’ of China.^ To me,
they read more like advice to Beijing about how to avoid mis-steps in
spreading its influence.
For his advocacy of pro-Beijing positions within the New South
Wales and federal Labor Party, Carr has been nicknamed ‘Beijing Bob’.
96
9oe
5: SK3WC SB 2015 a pfMxo .apjxared in the Pt*p>ics
CiiT botKias: j. Sy^dacr taKtiag with Zhu Vciqun,
srenisr , 3 ;rocT bsai of d« Unirec Froct ^odt EXqxirtroeiit and chair
oc Z2i; Fz^oir srni Rd!^?acs A^iis CocamitKie. one of whose tasks is
3^ cerxxTDce ie larra aad the 'Tibet septsradst dique'.^ Next
X' v~-tr~- dressed xn a isxdsa robe, stood the 'livii^ Buddha' Tudeng
\>4i- ^ Z'arrT r rr-V r who gees tx> Bejing to ‘r^resend me Tibetan
~v»Tt> Cers rctrse roc (Tt-^s's: hisrodctl ciaim to Tibet (invaded by
haj ?LA a^alrsc ;—e d resrscince in 1950) and his hostility to the
~ vr;tr ~ _i~:t resdire r?'T'Tg^r: r as roreign minis ter. In a 2011
bio£ rose — 'Doer rreet this ■r-r:nrf-n> monk’, Carr urged Prime
4 - ~ •; Tj0 v;^ T~ ^ rne SwmtuaL lea^i-er tvrdi a mh^-hxevou^
££>srdi h: rtrrstdr or rhccerLzc rower', whose aim is to create ill reeling
'erseer --rszalii md Cr The post was deleted b^re he took
^ ^ ^ zhreipn Wh^ I asked him about his hostility
-- ^ "'-'r- de reclicC his 'approach to Tibet is that Oi the
£rr^
r,:- izd LTd now dowaphy Huangs role and highl i gh t the 'mix
cr sunrces' Gchiniinp;. Carr has said he does not see the Huang fund-
.r ^ £ hahi-irr ann wenid wecome anotner donation from him .~~)
52^5 —iZion donanon to LTS for ACRI was soon augmented
hvinii*hcr SI ndZicn non: Zhou Chulong.- XCno is Zhou Chulongr
her icnjecnc thie to ^ nuliion-dollar donations its extraordinarily
ro ~-~r our an'.nhina about him, and it s curious that the uni-
TerspT and ACRI usuahy omit any mention or himA .Ail that we know
zne: accesrihle puhlic records is that he is the CEO ot a propeny’ com-
riany in Shenzhen named Zhiiwei Group, and an honorary president of
me .ACrPRC.''’* ZhrAci and Huangs Yuhu Group are both members
cc me pcesizhen Chaoshan Cha.mbcr of Com.merce. In Oaober 2013
Zhexi oongni a S5.6 mi ll i on nousc in the same I^Iosman street that
muang Xtangmo Ir/cs in (but lower doNsm).'*
dTS ha> clrtiiii eQ mat it earned out due Qiligence’ on Huang
Phangmo and could not find 'any improprieriA-'- The deput>- vice-
-^^ncciiors told me that L 1S pav3 an external company to conduct
asesments against various 'risk parameters’. (I wondered
wremer the
company m question is able to access Chinese-language
S7
SILENT INVASION
documents.) They were not sure whether a due diligence had b
carried out on Zhou Chulong.
There is a worrying backstory to the establishment of the insti
tute.^^ In 2005 the university had come under direct pressure fromlhe
Chinese government over a student union art exhibition that referenced
Falun Gong. Consular officials expressed their displeasure and insisted
that the material be taken down. The university did not comply and
soon after found that its website in China had been blocked, depriving
it of its prime means of recruiting Chinese students. Enrolments
from China collapsed causing Very major damage’, according to vice-
chancellor Ross Milbourne. Other universities were reported as having
been targeted and the sector had ‘gone to ground’. UTS’s website was
blocked again after it was reported that Milbourne said UTS would
have to suffer losses in order to take a principled stand. The Chinese
government never admitted any connection. John Fitzgerald said the
incident sent a clear message: ‘free and open critical inquiry is not
necessary, perhaps even not wise, for a university planning to deepen its
engagements with China’.^
By bankrolling ACRI Huang gained the opportunity to rub
shoulders with Julie Bishop, Labor frontbencher Tanya Plibersek, the
Chinese ambassador, Ma Zhaoxu, and various other luminaries. An
unanticipated bonus arrived in February 2016 when Brian Wilson took
over as the university’s interim chancellor. Wilson was then chair of
the Foreign Investment Review Board, which had been ordered by the
treasurer to crack down on illegal purchases of prestige properties by
wealthy Chinese.
The Sydney Morning Herald argued that Carr had used his position
at ACRI to become ‘one of Australia’s most strident pro-China com¬
mentators’.^^ In perhaps the most withering put-down, John Fitzgerald
wrote of‘the monotony of Carr’s China-Whatever comments’.^ Never
one to take criticism lying down, Carr hit back, describing his critics—
including Australia’s first ambassador to Beijing, Stephen FitzGerald,
who said he would not have taken Huang’s money—as ‘people on the
cold warrior fringe of Australian politics’ who harbour resentments.^^
In September 2016, under intense media scrutiny, UTS deputy
vice-chancellor Glenn Wightwick was bravely defending the institute’s
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‘higli quality and extremely important research’.’" If the board of a
research institute oversees the quality and direction of its research, what
were the qualihcations of chairman Huang for that role? Three weeks
after the Dastyari affair broke Huang stepped down, citing too much
public attention on ‘supposed Chinese influence’. Liberal Party grandee
Philip Ruddock, who headed the Australia—China Parliamentary
Friendship Group, was asked to chair the board. (Ruddock’s daughter
Caitlin works as the head of corporate relations at UTS.’^) But the uni¬
versity knew it was on a hiding to nothing and announced a review of
its governance.'*® It decided to abolish ACRI s board. Primrose Riordan
wrote: ‘ACRI was subjected to a major governance review, which
will now result in the board Mr Huang chaired being dissolved and
the institute coming under a new management committee headed by
deputy vice-chancellor Professor Bill Purcell, UTS confirmed.’'*'
Joining the deputy vice-chancellor on ACRI’s new management
committee was the university’s Director of International, Leo Mian
Liu'*^ Liu oversees the university s international matters^ hes also its
Vice-President, Global Partnerships.'*^ In Chinese media he’s consist¬
ently referred to as the ‘executive director of ACRI’. The ACPPRC
describes him as ACRI’s ‘executive dean’.'*'* In the early 2000s Leo Mian
Liu was a diplomat at the Chinese consulate in Sydney. The defector
Chen Yonglin knew him, and has said Liu was responsible for managing
the consul general’s itinerary.'*^ Liu has maintained deep links with the
PRC and United Front organisations in Australia, not least as an adviser
to the ACPPRC.'*® He encouraged members of the council’s Youth
Committee to become actively involved in politics and demonstrate
their strength in Australian political circles. A May 2015 meeting of
the Youth Committee, attended by Huang Xiangmo and his deputy
Simon Zhou, was addressed by NSW Liberal member of the Legislative
Council Mark Coure, who offered the young members some tips on
how to enter politics.'*^ Federal Liberal MP David Coleman helped by
explaining the structure of Australian politics and the personal qualities
needed by future parliamentarians.
Leo Mian Liu is also the president of the recently established Beijing
Foreign Studies University (BFSU) Alumni Association of Australia.'*®
The BFSU is one of the main Ministry of Foreign Affairs universities.
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The vice-minister for foreign affairs (and former ambassador '
Canberra) Fu Ying sent him a congratulatory message for the occasion
According to the Peoples Daily, Leo Mian Liu was standing on the
Tiananmen Square viewing stage during the 2015 military parade com-
memorating the defeat of Japan seventy years earlier.'*^ The platforms
which flank the Gate of Heavenly Peace, are only accessible by official
invitation. Liu told the People's Daily. ‘As an overseas Chinese person I
vividly experienced the might of the Ancestral Nation’.
In place of a board ACRI now has a Chairman’s Council consisting
entirely of corporate sponsors. When I asked about the chairman I was
told there isn’t one.^° When I asked who chairs the Chairman’s Council
I was told no one chairs it. Bob Carr says it does not hold meetings,
although he does discuss ACRI’s research plans with its members.^' In
2016 Huang told Australian Financial Review that ‘Yuhu would also
withdraw from ACRI’s Chairman’s Council’, and in July 2017 Bob Carr
said that ACRI no longer receives funds from Huang Xiangmo. In July
2017 Yuhu was still listed as a paid-up member, as was Zhou Chulong’s
company, Zhiwei Group.
A true friend of China
On its opening, deputy director James Laurenceson expressed his hope
that ‘ACRI will become the main go-to source for comment’ on China.’^
Some journalists are helping him out. On the other hand, Carrs star in
China has never shone brighter (although he says he has no influence
there).” In the official Communist Parry media he has become the go-to
man for the real story on Australia—China affairs. In late 2014, China
DailywsLS quoting the director of ACRI praising the benefits of the free
trade agreement, and reassuring the masses that Australia respects core
Chinese interests’.” Throughout 2015 readers would see the former
FM’ arguing that ‘the United States had to accept China’s new status,
praising the ‘brilliantly successful’ reforms of Deng Xiaoping, admiring
China’s ‘strength as a civilization’, urging Australians to work harder
at understanding China’s ‘different political values’, and attacking the
‘racist lie’ spread in Australia about the free trade agreement’s generous
labour import provisions.
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'BEIJING BOB’
In 2016 Carr was reported in the stridently nationalistic Global
Ttmes (part of the Peoples Daily stable of newspapers) as proclaiming
that our relationship with China is ‘the best thing Australia has going
for it over the next 15 years’, declaring that critics of China were
guilty of a ‘McCarthyist indictment’ driven by a Cold War rage, and
dismissing concerns about Chinese investment in strategic assets as an
anti-China panic’ and ‘hysteria’.” He warned his compatriots not to see
China ‘through US eyes’.
When in August 2016 treasurer Scott Morrison decided on the
basis of security advice to prevent a Chinese state-owned enterprise
buying the New South Wales electricity distributor Ausgrid, the Peoples
Daily went to Bob Carr to explain it. In the article, titled ‘UTS ACRI;
Australian government’s blind xenophobia’, Carr said the decision
would damage our economic relationship with China. He reassured
his Chinese readers that Morrison’s decision ‘does not represent the
Australian people’s views’.” Carr, it seems, keeps his finger on the pulse
of the Australian people.
In yet another exclusive interview with the Peoples Daily soon
after the launch of ACRI, Carr revealed that his greatest achievement
as foreign minister was to deepen Australia-China bilateral relations.
‘I believe that Australia and China should cooperate more in drawing
up foreign policy—the cooperation of our nvo countries on national
security will be strengthened—and this is also [ACRI’s] current research
direction.’^^ In words that could have been penned by the Chinese
newspaper’s editorial writers, he added: ‘Australia and China have
common interests. We both seek peace, we both hope to avoid territo¬
rial disputes, and to carefully deal with disputes.’”
In 2017, at the same time that the PRC was building military
facilities in their traditional waters, Bob Carr was arguing that China
would not attempt to bully its Southeast Asian neighbours.” Asian
leaders have recognised the new strategic situation and have got on
board, he wrote. This represents China’s ‘regional success’—a ‘positive
and optimistic view’ if ever there was one.
In an earlier interview, Carr had stressed that Australia should
always remain neutral: ‘From the beginning I’ve thought it extremely
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important that Australia should in any situation express and reiterate
its neutral position, especially regarding the China-Japan dispute^in
the East China Sea.’^° He then demanded foreign minister Julie Bisho
‘explain her comments’ after she said ‘China doesn’t respect weaknes^^
Carr had fallen into the trap of telling the leadership in Beijing what it
wanted to hear.
When Donald Trump, famous for his criticisms of China’s preda¬
tory economic policies, was elected to the White House, Carr took the
opportunity to drive home his vision for an Australian pivot to China
Trump, he wrote, talks with ‘sneering contempt about democracy
itself—prosecuting his opponent, not accepting the election outcome’.
Who would want to align with a nation where that kind of thing
happens? Unaware of the hole he’d dug for himself, Carr argued that
Australia must leave behind our ‘sentimentality’ for the US alliance,
reduce our ties with an America in decline and focus on the enormous
importance of China to the Australian economy.^*
Carr’s deputy, James Laurenceson, soon followed him into print,
warning against anti-Chinese populism in Australia.^^ If any country is
a drag on Australia’s economy, it’s the United States rather than China,
he argued. China promises a kind of golden future, with much more
scope for further trade, investment and flows of workers from our
northern neighbour.
Perhaps inspired by Carr and Laurenceson, Huang Xiangmo too
picked up his pen. On a Chinese-language website he wrote that with
the election of Donald Trump Australians will be ‘slaughtered’ like
sheep unless we strengthen our ties with China. The patriotic property
developer informed us that it is now in our interest to cooperate with
China more than ever.^’^ In a 2015 article following the seventieth
anniversary parade to mark the defeat of Japanese aggression, the
Peoples Daily published an article under the heading ‘Australian political
figures: China is a core force in safeguarding world peace’. The jour¬
nalist had interviewed three politicians, all of whom expressed their
appreciation for China’s role in the resistance to fascism. They were Bob
Carr and his two amigos, Sam Dastyari and Ernest Wong.*^
The guanxi among them has been tight. It was Sam who hatched
the plan to parachute Bob into the Senate vacancy, and persuaded
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'BEIJING BOB’
Julia Gillard to make him foreign minister.^’ Bob had backed Sam to
succeed Eric Roozendaal as New South Wales party boss. Ernest linked
Sam to the Chinese donors.^ Sam backed Ernest to be elevated to the
Legislative Council. Huang Xiangmo boasted of appointing Bob to run
ACRI. Huang paid Sams bills. Eric now works for Huang. Ernest works
with Huang at the ACPPRC. Huang helps fund the Labor Party.
Media deals
In May 2016, without any fanfare, a high-ranking Communist Party
leader arrived in Australia. Liu Qibao heads the Chinese Communist
Party Central Committee Propaganda Department, and as a member
of the Politburo is among the nations top twenty-five leaders.'^^ The
Propaganda Department is responsible for the Patriotic Education
Campaign in China that has deeply transformed the country over
the last twenty-five years. It is also responsible for media censorship,
including instructing editors at compulsory weekly meetings on what
can and can’t be said. Abroad, it prosecutes China’s program of political
warfare’; its methods include influencing foreign business, university
and media elites, who are courted through visits, exchanges and joint
research projects.^
In a development that seasoned journalists still find hard to fathom,
Liu was in Australia to sign six agreements with the major Australian
media outlets, under which, in exchange for money from the PRC, they
would publish Chinese propaganda supplied by outlets like Xinhua
News Agency, the People’s Daily and China Daily. Fairfiix and Sky News
(part-owned by Murdoch) agreed to publish or broadcast Chinese
news stories.^^ The Sydney Morning Herald, The Age and the Australian
Financial Review agreed to carry monthly eight-page lift-outs supplied
by China Daily.
The visit was approvingly overseen by the acting secretary of the
Department of Foreign Affairs and Trade, Gary Quinlan. The media
agreements represented a coup for China’s external propaganda
campaign, which is believed to be backed by a $10 billion budget.
Although it went largely unremarked in Australia (after all, each of the
major media oudets took the money), John Fitzgerald noticed that in
China ‘the party would trumpet the deal as a victory for its overseas
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propaganda to change world opinion’/' Fairfax carried a news
about the deal by its Beijing correspondent Philip Wen/^ After z\\^-
could not fail to report it.
Fitzgerald and Wanning Sun, two of Australia’s best-informed China
media analysts commented: ‘Leninist propaganda systems work not
by persuading people through what they say but by intimidating or
embarrassing others into not reporting things that matter.The deals
were a striking instance of China exploiting the openness of a Western
system—and the parlous financial state of the mainstream media. The
fact that there was no outcry about the deal—in which a powerful
nation, ranking 176 out of 180 on the press freedom index, is given
leverage over our media—is a sign of the fragility of the institutions on
which we rely.
In November 2015 in Beijing, Bob Carr met with Sun Zhijun,
assistant minister of the Central Propaganda Department.^'' A Chinese
report on the meeting noted that ‘[bjoth parties consolidated the
friendly relationship between Chinese and Australian media, deepen¬
ing bilateral cooperation and exchange’. They also exchanged ideas
on promoting relations between the two countries and other topics.
In addition to ‘relevant comrades’ from the Propaganda Department,
senior executives from the All-China Journalists Association were
also present.
Credulous journos
One of the deals signed in May 2016 was a memorandum of under¬
standing (MOU) between Bob Carr’s ACIU and Xinhua News Agency,
the PRC’s official news agency. ACRI was soon organising Australian
journalists to undertake study tours to China. It is impossible for
foreign journalists to visit China as journalists, unless they go through
the process of official accreditation with an approved media outlet. So for
Australia-domiciled journalists Bob Carr could offer something unique:
a one-off, officially approved trip to China to write some news stories.
Carr emailed a number of senior Australian journalists inviting
them on a five-day, all-expenses-paid ‘fact-finding tour’ of China. The
itinerary showed that the components of the tour would be organised
either by ACRI or Xinhua. Chaperones would be provided by the
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BEIJING BOB’
All-China Journalists Association, a party organisation whose guide¬
lines stipulate that all journalists ‘must learn to master Marxist news
values’.” A number of Australia’s most respected journalists took up
the invitation, and in July 2016 Ross Gittins of The Sydney Morning
Herald, Brian Toohey and Andrew Clark from the Australian Financial
Review, Glenda Korporaal from The Australian and Shane Wright from
The West Australian flew out for China.
The Central Propaganda Departments strategy seems to have paid
oflF. In a series of articles, Ross Gittins gushed about Chinas amazing
economic performance, its decisive decision-making, and its determina¬
tion to become rich.” ‘Sorry if I sound wide-eyed’, he began, ‘but I
mightily impressed when I visited China ... Those guys are going
places.’ China is bold and impatient to build a better fliture, while we
in Australia are fearflil, riding our luck and hoping China will remain
our gold mine. We are too timid to sign up to Beijing’s grand One Belt,
One Road strategy, Gittins told us, but the Japanese and South Koreans
‘will be happy to eat the Chinese lunch we don’t fancy’.
Andrew Clark was dazzled by the scale of Chinas breathtaking
transformation.^^ ‘China is amazing,’ he wrote. In the New China
‘people seem taller, more animated, healthier, louder and happier’.
(In fact, the evidence shows they are less happy.”) He did not pick up
‘any sense of an Orwellian 1984 ... emerging’. Besides, as there are so
many new freedoms to enjoy with a decent standard of living, some
political repression, he implies, is justified. The tour visited only the
most exciting cities and the most gleaming corporate headquarters.
Clark was impressed by Chengdu with its massive buildings and
the world’s busiest Louis Vuitton store. China is following its own
path ‘powered by the unique, ever-adaptable Chinese mind, with its
unmatched ability to focus on the task at hand’. Yet, he warned his
readers darkly, if Australians don’t go along with its demands we might
be scapegoated by China. Refusing to accept China’s claims to the
South China Sea, for instance, could see China ‘giving the Australian
kangaroo a proverbial clip over the ears’. China’s rise is a fact of life and
our prosperity depends on it.
Brian Toohey began filing stories before he got back from China.
Perhaps spooked by the sabre-rattling of the Global Times, Toohey laid
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out one of the most bizarre pieces of strategic analysis 1 have seen '’Tv
gist of it is that, because John Howard joined the Iraq invasion wi k
out good justification and so got us into a mess, Australia shouir'^
accept Chinas conquest of the South China Sea. If we, with the UniM
States and other allies, were to challenge Chinas annexation we tJuld
certainly defeat China militarily (while crashing the global economy)
but we could keep China down only by invading and occupying the
Chinese mainland and then waging ‘a protracted guerrilla war against
millions of patriotic Chinese’. And so we should do whatever we have
to do to avoid war. The choice is; acquiesce or mobilise the armed forces
and end up in another Iraq.
This is the kind of appeasement advocacy Beijing is hoping for. But
what really impressed Toohey on his tour was the massive investment in
futuristic technology, which he witnessed in Shenzhen. He reproduced
amazing statistics for Huawei, BYD and BGl (as it happens, the very
same companies the other journalists were impressed by). Toohey too
sees Australia as a ‘frightened country’, increasingly xenophobic about
China’s intentions. Banning Chinese ownership of Ausgrid’s electric¬
ity network made no sense because there is no way China would risk
damaging itself economically by engaging in spying. Besides, if they
did, our spies would detect it and we would take the asset back.
The gleaming glass towers and new superhighways of Shenzhen
seem to have had less impact on Clenda Korporaal than a scary
briefing from a Chinese foreign affairs official. The official stressed
how ‘very disappointed’ the Chinese government was when Australia
supported the ruling of the arbitral tribunal in The Hague backing
the Philippines against his country’s claim to the South China Sea.
Korporaal amplified the routine threats by talking up the prospect of
war unless Australia changes its tune.**^* China, she reported, only wants
peace and stability. Bob Carr was also at the briefing and urged China
not to take Australia’s talk about the importance of international law
too seriously. The official, perhaps mollified, then urged Australia to
accept more Chinese investment.
Some days later, Korporaal followed up with an article explaining
how resisting China would damage our economic interests, which could
be avoided if we stopped speaking out. She highlighted the official’s
106
'BEIJING BOB'
threat; ‘China hopes Australia does nothing to harm regional peace
and stability.’
Shane Wright’s report for The West Australian also operated as a
megaphone for Beijings bullying, repeating the officials threat that,
should Australia back any US freedom-of-navigation exercises near
the disputed islands, China will take Very serious countermeasures’
against us.®'
What marks out the stories by these journalists, published in
Australia’s leading serious newspapers, is their lack of scepticism about
what they saw and heard on this carefully planned and supervised
exercise in influence. Two weeks after they left China an article from
the AU-China Journalists Association was published through Xinhua.
Titled ‘Impressions from visiting China: Why Australian journalists
were moved to say their “expectations were exceeded’”, it included
short interviews with each of the journalists, who all talk about how
impressed they were by Chinas economic and technological develop¬
ment.®- The journalists had gone back to Australia, readers were told,
and ‘related to Australian society the historical opportunity that Chinas
economic development gives to Australia, and impartially conveyed
“China’s voice”.’
It’s worth noting here that the All-China Journalists Association
has other means of reaching into Australia. It is one of the funding
partners of the Asia Pacific Journalism Centre (APJC), a not-for-profit
organisation in Melbourne that aims to promote quality journalism in
Asia. The APJC teams up with the All-China Journalists Association to
arrange study tours to China for Australian journalists, with the help of
China’s official media. The centre’s director, John Wallace, tells me no
money changes hands. The exchange programs focus on the economic
relationship, he says, suggesting that human rights and press freedom
are off limits.
After the June 2016 Fairfax-ABC Four Corners investigation of
Chinese money in Australian politics, John Wallace took to the keyboard
to defend Chau Chak Wing.®^ The stories were motivated by racism,
he suggested, and lacking hard evidence of Chau’s links to the CCP.
He presented the billionaire as an innocent victim of poor journalism.
Wallace claimed that, compared with the treatment given to Chau,
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SILENT INVASION
Rupert Murdochs political activities are accepted as normal. In truth
the powerful American media tycoon has been subject to frequent and
harsh criticism for his political interventions by authors and commenta
tors in the United States and Australia. Wallace makes no comment on
the state of Chinas media landscape, where a program like that aired by
Four Comers is impossible. Wallace told me he wrote the article for the
‘Chinese in our communities who were voicing concerns over aspects of
the coverage. Of course, there are other Chinese voices in Australia who
cheered the program; for them it was a sign that we are at last waking up
to what is happening here.
Perhaps surprised by how well the study tour had worked. Bob Carr
took another delegation of the nations journalists to China in March
and April 2017. The visit coincided with the detention and interrogation
of UTS academic Feng Chongyi by the Tianjin State Security Bureau.
Judging by the stories filed by Malcolm Farr and Troy Bramston (each
in China ‘as a guest of ACRI’), Carr freed Feng single-handedly.®^ While
some back in Australia may have puzzled over Carr’s public silence,
wrote Farr, the ACRI boss was pulling strings behind the scenes. Carr
had been told by ‘a Chinese official’ that China does not appreciate
megaphone diplomacy (of course it doesn’t). ‘China likes to settle issues
in a quiet way’ (which is true when they screw up as badly as this). The
only source mentioned for the story was the hero of it. The headline
on Farr’s piece read: ‘Bob Carr’s backroom manouevering ends Chinese
nightmare for Sydney academic’.
For his part, Troy Bramston wrote that he could ‘reveal’ that Carr
‘made private representations to senior Chinese officials’. He too echoed
Beijing’s message—‘we don’t like megaphone diplomacy’. It’s true
that Beijing is unhappy when the rest of the world criticises it for its
violation of human rights, like detaining academics who dare to inter¬
view human rights lawyers.
Others involved in the saga saw it differently. After his return, Feng
Chongyi was asked about Carr’s role in having him released. He denied
that backroom negotiations played any role. He said that Malcolm
Farrs claim that a softly, softly approach is best is ‘absolute rubbish’.®^
If you do anything under the table’ and keep it secret, then it gives the
authorities absolute control, and they can do anything.®*’
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‘BEIJING BOB’
Lets call the Australia-China Relations Institute for what it is: a
Beijing-backed propaganda outfit disguised as a legitimate research
institute, whose ultimate objective is to advance the CCP s influence
in Australian policy and political circles; an organisation hosted by a
university whose commitment to academic freedom and proper practice
is clouded by money hunger, and directed by an ex-politician suffering
from relevance deprivation syndrome who cannot see what a valuable
asset he has become for Beijing.
At least, he was a valuable asset until his pro-Beijing stance attracted
so much criticism and ridicule that he lost much of his credibility as a
public voice. His more recent actions indicate a bunker mentality. In
January 2018 he was tweeting from Berlin that an exhibition he’d seen
of Ming and Qing dynasty portraits could not be staged in Australia
because we are ‘locked in [a] McCarthyist anti-China panic’ and
museums would be too nervous.
109
6 Trade, invest, control
‘Economic ties serve political goals.’’
In Australia, exports of goods and services account for nineteen per cent
of our GDP.^ The share is the same for China. In Germany it is forty-six
per cent, in Korea forty-two per cent and in the Philippines twenty-
eight per cent. In the United States it is twelve per cent.^ Around a third
of our exports go to China. They have risen quickly in the last several
years, increasing our exposure, but as a share they may well have reached
their peak.'* While our export exposure to China is high, the overall risk
is lowered because the share of exports in our GDP is modest.^
Yet according to some business commentators, if China were to
sneeze, Australia would contract pleural pneumonia, so we must do
nothing to upset the northern giant. Yet, if we are as vulnerable as they
tell us, isn’t the answer to look for ways of reducing our exposure, rather
than accepting it as a fact of life?
How dependent are we?
ANU strategic studies professor Rory Medcalf points out that China
is unlikely to use our biggest export, iron ore, to put pressure on us
because the PRC relies on Australia for sixty per cent of its iron ore
imports. For other Australian exports, like coal, tourism and education,
China has alternatives and would suffer less if it decided to punish us by
uying elsewhere. We examine economic coercion in the next chapter.
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TRADE, INVEST, CONTROL
but I suggest here that the Australian government and export producers
should be analysing our vulnerabilities and taking measures to eliminate
them. Instead we have trade ministers and state governments who seem
willing to do anything China wants in order to increase our exposure.
The 2015 China-Australia Free Trade Agreement will make a small
difference to our exports to China. But it was not really about trade;
it was about investment. It explicitly agreed to treat Chinese invest¬
ments no differently to investments by Australians in Australia.^ (This
provision in article 9.3 was ostensibly reciprocated but only an innocent
would believe that reciprocity will prevail. While the agreement will
be enforced in this country by the courts, Australian investors in
China have no guarantees at all.) The threshold at which the Foreign
Investment Review Board (FIRB) must screen investments was lifted
to a much higher level (from $252 million to $1094 million, although
lower for certain sensitive sectors).® And its the flood of Chinese capital
into Australia that is the real threat to our sovereignty.
To assuage public anxiety. Chinas friends like to compare the total
amount of Chinese ownership of Australian assets with the substantially
larger amount owned by American and Japanese companies. But the
Americans have been buying for a century and the Japanese for five
decades. The last decade has seen a huge surge in Chinese investment,
one that is expected to continue at ever-higher rates for many years
to come.
The figure that should have Australians sitting up and taking notice
is this. Globally, Australia ranks second behind the United States as
a destination for the massive capital outflow from China, but only
just. According to a KPMG analysis, since 2007 the United States has
received US$100 billion of accumulated new Chinese investment while
Australia has accepted US$90 billion.Given that our economy is only
one thirteenth the size of the USA’s, this means that proportionately
twelve times more Chinese capital has poured into Australia than into
the United States.
Chinas friends in the business community keep telling us that there
is no reason to worry about these capital flows because we need all the
foreign investment we can get. Happily for them, 2016 was a record year
for Chinese investment in Australia—a record number of deals, record
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SILENT INVASION
;
investment in Australian infrastructure, record investment in
and a record year for investment in Tasmania (on which morTlarl"!."’
In the financial year 2016/17, Chinese ownership of aeric'l
land suiged, increasing ten-fold to place China just behind the
Kingdom as the largest owner, each holding around a quarter of forr"*
otvned land in Australia.'' With China’s planners focused on overTOmf
the nations growing ‘animal protein deficit’ this surge in PRC
in Australian agriculture is set to continue. Chinas annual averaa^
consumpuon is on a trajectory to equal that of Taiwan (from 60 up to
76 kg per person per year), which ‘will require an additional 15 million
hectares of agricultural land—an area the size of England and Wales—
which China simply does not have’.'^ While a number of countries (such
as Brazil and Argentina) have taken measures to stop Chinese firms
buying up their arable land, Australia’s free trade agreement with China is
removing barriers and global banks are lining up to facilitate the buy-up.*3
Measured by bids for Australian assets emanating from greater
China, investment proposals leapt from $9 billion in 2015-16 to
$20.5 billion in 2016-17, accounting for fifty-four per cent of the value
of all foreign investment proposals.*'* Over eighty per cent by value were
targeted at energy, mining and utilities.
Reflecting the profound misunderstanding of China that pervades
Australian elite thinking, former prime minister John Howard said: ‘We
can’t apply a different standard to Chinese investment to investment
from Japan or America.’*^ After spending pages trying to make out
that state-owned enterprises (SOEs) are not controlled by the Chinese
government, the Drysdale report—a report written jointly by ANU
economists and a party think tank in Beijing, considered in the next
chapter—makes the same mistake: ‘There is no logical basis for treating
the vast bulk of Chinese SOEs ... any differently from other potential
investors in Australia’.'^ Claims that the new owner of the Port of Darwin,
Landbridge, has close links to Beijing have no foundation, we are told,
because 1.63 million private companies in China have party committees;
its just a natural result of China’s political system’ and nothing to be
alarmed about. Even those claiming China expertise, like Linda Jakobson
and Andrew Parker of the China Matters consultancy, make this naive
claim. Saying you don’t want Chinese investment if it’s connected to the
112
TRADE. INVEST, CONTROL
Communist Party is the same as saying you don’t want Chinese invest¬
ment at all.’*^ The major sponsors of China Matters are corporations
with strong commercial interests in China, including Rio Tinto, PwC,
Aurizon, Westpac and James Packer’s Star casino group.'®
But Chinese investment is different. Whatever their faults, American
companies are not prone to act in ways dictated by ^OC^ashington to suit
America’s strategic interests. And if they are tempted to do so, they must
contend with a vigorous American civil society and an inquisitive media
holding them to account. And of course US corporations have been
prosecuted and fined heavily for engaging in bribery overseas. Howard’s
historical equivalence between anxiety over Japanese investment in the
1970s and Chinese investment today does not stack up. Discomfort
with foreign influence is indeed part of the Australian character. But
suspicion of Chinese investment is grounded in a political truth: it is
subject to manipulation by a totalitarian regime bent on dominating
Australia. That is entirely new.
The fact is we can and should apply a different standard to Chinese
investment, one appropriate to the non-commercial goals often at stake.
Responding to Jakobson and Parker’s apologia for the CCP, a less inno¬
cent analyst, Geoff Wade, pointed out that China is ‘openly utilising its
financial clout globally to facilitate expanded strategic leverage. Chinese
capital is, without doubt, being employed as a strategic tool.’*^ British,
American and Japanese investors do not hail from one-party states that
habitually use overseas trade and investment to pressure and coerce other
countries into policy positions sympathetic to their strategic interests.
For them the guiding principle is not ‘economic ties serve political goals’.
Nor do they bring modes of operating that are secretive, deceptive and
frequently corrupt, and whose important decisions are often made by
political cadres embedded in companies and answerable to a totalitarian
party at home. Only when the Chinese state no longer operates in these
wa)'S should we treat Chinese investment like any other.
The party-corporate conglomerate
In December 2016, the industrialised nations of the world refused to
grant China the status of ‘market economy, something that Beijing
badly wanted both for its practical benefits and its political value. The
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list of China’s infractions of the standards of free market behaviour «
long, from manipulating the currency to killing off competitors by
dumping subsidised goods like steel on the world market, from misusing
health rules to punish imports for political reasons to imposing a range
of obstacles to foreign companies that Chinese investors do not face in
the United States or Australia.
The problem is not that the government in Beijing interferes in
the operation of the market. It goes far beyond that. The state and the
market cannot be separated. The Chinese Communist Party is present in
all major enterprises in China and manipulates or directly controls their
decisions to achieve political and strategic aims. Australian businesspeople
know that the Chinese companies they deal with have party committees
but they dismiss these as relics of the past that have no bearing on their
operation. Nothing could be further from the truth—and yet for Beijing,
nothing could be more convenient to have foreigners believe.
Writing in the current affairs magazine The Diplomat, China analyst
Greg Levesque notes that the CCP’s policies of civil-military integration
and One Belt, One Road set out to deploy commercial actors to advance
the party-state’s global objectives,^® SOEs are being strengthened and
the CCP is exercising greater control over them. President Xi declared
in 2016 that they should ‘become important forces to implement’ the
party’s decisions. Company boards are now expected to take guidance
from the party committee before making major decisions."'
Party control is not confined to the SOEs which produce thirty per
cent of China’s industrial output.^^ In the words of one close observer,
Yi-Zheng Lian, the CCP ‘has systematically infiltrated China’s expand¬
ing private sector and now operates inside more than half of all non-state
firms; it can manipulate or even control these companies, especially
bigger ones, and some foreign ones, too. The modern Chinese economy
is a party-corporate conglomerate [emphasis added] P
It’s a mistake to think of party committees as political bodies that
at times meddle in company management. They are in fact closely
integrated into the management structure. The party secretary can often
appoint and dismiss senior managers and nominate board members. He
or she may chair the board or hold an executive position. In late 2016
the respected Caixin finance news group reported the ‘growing number
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of Chinese state-owned enterprises that are merging the two roles’ of
chairman and party secretary.^"* A detailed study of the role of party sec¬
retaries in listed firms found that in ninety per cent of firms surveyed,
the party ‘heavily influenced strategy and policy because the senior
managers were also CPC members ... the role of party secretaries in the
private sector is strong and influential’.^^ Larger firms (both private and
state-owned) are more likely to have powerful party secretaries.
This mostly reflects the desire of the CCP to maintain control, but
it is also true that having a powerful party secretary can be instrumental
to the success of the firm because a secretary with strong political ties
can bring business and clear paths through corrupt bureaucracies. (The
same is true of China’s universities, where the party head sits above the
academic head of the university to ensure that the institutions serve
party-state needs.)
Even so, in some SOEs tensions have emerged between the busi¬
ness direction preferred by the company board and the priorities of the
party. And so in December 2016 it was announced that henceforth
the secretary of the party committee and the chairman of the board
must be the same person.*^’The reforms mean ‘SOEs should strengthen
the Party’s leadership and at the same time improve the corporate
governance structure’.
From the early 2000s the Communist Party adopted a policy of
drawing capitalists and corporate executives into the party apparatus,
such as through appointment to the Chinese People’s Political Con¬
sultative Conference, and subjecting them to the party’s chain of
command in exchange for party favours. Billionaires, bankers and chief
executives were encouraged to join the party. The methods available
to persuade them to abide by the wishes of Beijing were hard to resist.
Even a superstar entrepreneur like Jack Ma has been forced to succumb
to Beijing’s wishes when the state has a political or strategic favour to
ask, saying, for example, that sending the tanks in against the students
in Tiananmen Square was the ‘correct decision’.
Beijing’s Australia strategy
China plans to dominate the world, and has been using Australia and
New Zealand as a testing ground for its tactics to assert its ascendancy
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in the West. Two years ago I would have regarded such a claim as
fantastic. But now, despite Beijing’s determined attempts to conceal
its ambitions and plans, so much evidence has accumulated that the
conclusion seems irresistible.
According to historians, the ambition has lain dormant in the
Chinese consciousness for a long time. It’s been rekindled by the Patri¬
otic Education Campaign described in Chapter 2. The campaign has
embellished and given substance to the old idea of China as the Middle
Kingdom, the centre of the world that rules the entire tianxia (All Under
Heaven) in a harmonious universe of order. Whatever the historical
accuracy of this idea, the old dream quickly became a believable
ambition from the early 2000s as China’s economic power expanded,
and especially after the financial crisis of 2008, which seemed to expose
the inherent weakness of the West and the superiority of China’s unique
development path. As one former Australian leader now very close to
Beijing explained it, the panic on Wall Street shocked China’s leaders.
‘It demonstrated to China the days of their belief in the US running the
financial system were coming to an end. And it was the financial crisis
with Lehman Brothers and Wall Street which tipped the Chinese to
moving away from a policy of “caution, understatement and reservation”
to a policy of “clarity, assertion and ambition”.’-^
We saw in Chapter 1 that in 2004 president Hu Jintao and the
Politburo decided to designate Australia as part of China’s ‘overall
periphery’ and asked the embassy in Canberra to formulate a strategy
to subdue us. As we become aware of the regional and global strategies
covering economic control, diplomatic pressure and military expansion
actually being prosecuted by the Chinese party-state, we begin to see
that, left unchecked, the internal subversion of our institutions and the
relentless external pressures from Beijing, coupled with our own weak¬
ening commitment to democratic values, would see Australia become a
tribute state of the resurgent Middle Kingdom.
Trade politics
When Andrew Robb was appointed Australian trade minister in
September 2013, he made it clear to his officials that Australia would
sign the free trade agreement with China without further delay. The
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officials had been in tough negotiations for ten years, resisting Chinese
bluffs and pressures and slowly working towards a document that, they
hoped, would reflect some kind of parity. After all, China is notorious
for its use of sneaky ploys to damage competitors. And so the officials
despaired when Robb swept in and said we’re signing no matter what.
While experienced Australian public servants have worked out how
to manage the system of flattery, courtship, pressure, manipulation
and subtle threats of Chinese negotiators, Chinese officials have been
running rings around our politicians for years. The ‘can do’ types are
the easiest to hoodwink, especially those who believe they know it all
because they have been ‘doing business in China for years’. As journal¬
ist John Garnaut pointed out, the Chinese have a whole section, the
PLA’s Liaison Department, devoted to ‘planning and executing external
influence’.^’ Its effective motto is ‘make the foreign serve China.
One technique is to win over ‘caring friends’ who then serve your
interests. The uncomplicated mining billionaire Andrew Forrest became
such a friend, and then began attacking Australian politicians for not
appreciating what the Chinese were offering us. Australia’s hesitation to
sign up immediately to China’s Asian Infrastructure Investment Bank
(AIIB) attracted a tongue-lashing from Forrest, whose words echoed
Beijing’s more or less precisely: ‘Australia needs to be independent in
this part of the world. We don’t need to treat China as the enemy.’^^ It
was left to John Garnaut to point out to this innocent abroad that his
good friend and regular host in China, Xing Yunming, had all along
Len a lieutenant-general in the PLAs Liaison Department.^*
Having decided to give the Chinese what they wanted, Andrew
Robb had to get the free trade deal through the Senate. He took to
the airv'aves with a blunt warning: it’s ‘five minutes to midnight’, he
thundered. And if there was any more delay ‘China will walk away and
the biggest deal we have ever had with any country’ will fall over. (More
seasoned hands know that the second last move in any bargaining game
is to Stan to walk away.)
The Australian Council of Trade Unions (ACTU) was worried about
jobs; after all, the draft agreement would give Chinese companies special
migration arrangements for large projects. The ACTU wanted stronger
tests to make sure there were no Australian workers left unemployed by
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cheap imported labour. Unlike other trade agreements, this one would
permit importation of semi- and low-skilled workers, probably under
457 visas. Although the immigration department was giving mixed
messages, Chinese companies would not have to show that there were
no Australians who could do the job.^^
The Labor Party expressed reservations but in the end was not willing
to make a fight of it. Its views were influenced by Bob Carrs ACRI, and
by the commitment by the New South Wales Right faction—^which
had been ‘bought and paid for by Chinese money—to see the deal
go through.^^
The protections for local workers were weak, labour market
experts concluded. But taking ‘a positive and optimistic view’, James
Laurenceson at Bob Carr’s China-funded think tank insisted that the
protections were perfecdy adequate.^'* The agreement would be ‘a coup
for Australia’. It was only a year earlier, before he joined ACRI, that in
an article titled ‘Why an Australian FTA with China has never stacked
up’ Laurenceson set out all the reasons why the free trade agreement
with China is a bad idea.^^ Meanwhile in Beijing, the president of the
Export-Import Bank of China, Li Ruogu, had been saying Australian
labour costs were too high and we could solve our problem by opening
up to larger flows of Chinese workers.
The agreement was pushed through parliament. Article 10.4.3 of the
binding treaty explicitly commits parties (read Australia) to ruling out
any limit on the number of workers who could arrive from China and
bans any ‘labour market testing’.We lost. Soon after his FTA triumph
Andrew Robb left politics to work for Chinese companies, including
Landbridge, the lessee of Darwin Port, which paid him $880,000 a year
(including GST).^®
Business analyst Ian Verrender would later observe that Minister
Robb ‘launched into a tirade whenever there was even a hint of scepti¬
cism about his FTA frenzy’.^^ In parliament Robb had gone low, accusing
the Opposition of‘xenophobic racist activities’, to which Labor spokes¬
woman Senator Penny Wong responded by saying local jobs should
be safeguarded. Accusing China critics of racism and xenophobia is an
effective tactic because it builds on white Australia’s deplorable history,
including anti-Chinese sentiment going back to the goldfields. Official
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TRADE, INVEST, CONTROL
media In China and pro-Beijing Chinese-Australians resort to the tactic
often. Serious critics, of course, are motivated not by fear of foreigners
but by fear of a ruthless dictatorship.
Independent analysis concluded that the benefits of the trade deal,
touted as the greatest thing since the invention of the harbourside
mansion, would flow almost entirely to China, and that Australia
would lose from it. It was opposed, for example, by the hard-nosed,
free-market economists at the Productivity Commission, which is
especially critical of the legal rights that bilateral agreements grant to
foreign investors.'*®
The Australian debate over our agreement with China reflected the
usual blinkered, short-term perspective. We missed completely how it
was understood in Beijing. As Geoff Wade put it, the agreement ‘con¬
stitutes a key plank in Chinas global strategic aspirations’.'*' The latest
stage in Xi Jinping’s China Dream is the export of hundreds of billions
of Chinese dollars around the world, targeting infrastructure as well as
resources, energy and food industries. Opening economies up to these
investment flows, and thereby gradually obtaining political leverage
over them, is essential to the strategy. The agreement with China was
not so much a trade agreement as an investment agreement, one heavily
fiivouring China, and which reinforces the other elements of this grand
plan: One Belt, One Road and the AIIB.
Most of China’s recent trade agreements, Wade points out, are with
allies of the United States: ASEAN, New Zealand, Singapore, Korea
and Australia, with an EU agreement on the cards. The aim is to prise
these nations or blocs away from the United States by making them
more dependent on decisions in Beijing. Breaking up the US alliances is
Beijing’s foremost strategic aim.
In February 2017 state media in China was filled with the news
that President Xi Jinping had vowed that China would lead a ‘new
world order’ and ‘guide’ the international community to this end."*^
It was interpreted broadly as a response to the apparent withdrawal
from global leadership of the United States under Donald Trump and
the approaching end of the world order shaped by the West since the
eighteenth cenmry. Xi’s speech followed one month after his appearance
at the World Economic Forum in Davos where he claimed for China
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the mantle of world leader in ‘economic globalisation’ (the ‘economic’
ruling out leadership in human rights).
The reactions of netizens to a Global Times story about the passing
of the China-Australia Free Trade Agreement were revealing:'*^ ‘While
China continues to work with and trade with people of all nations
for mutual benefits and a more peaceful earth, by contrast, the war
mongering USA Government focuses all its energy and resources on
instigating wars ... [and] supporting and arming ISIS terrorists’; ‘China
will do all that it can to show Australia its peaceful rise and not a threat
to any country. China must wean Australia off Uncle Sam’s tit’; ‘no need
to wean as this kangaroo will hop to where there’s plenty’.
Assets for sale
For some years Australia has innocently welcomed all kinds of invest¬
ment from China. Public anxieties have been scorned as xenophobia.
Warnings from intelligence agencies have been dismissed as Cold War
thinking. Presenting ourselves as the most open economy had become
holy writ among the economic, business and political elites. The United
States government has learned to be more guarded. It has noticed, for
example, Chinese companies attempting to buy land, ports and indus¬
trial facilities in close proximity to military installations. One wanted
to build a wind farm next to a US naval weapons system training
base.'^ We, on the other hand, are relaxed about a PLA-linked company
buying the port that is vital to protecting Australia from any aggression
from the north.
However, in 2016 the Turnbull government seems to have realised
that Australia has a problem. The warnings of a handful of well-informed
sources that the Chinese acquisition of certain assets was endangering
the national interest seemed to be getting through. Turnbull had been
persuaded by intelligence briefings. One of the government’s first
acts was to beef up the somnolent Foreign Investment Review Board
(FIRB), which for years had been failing to effectively fulfil its mandate.
American objections to the sale of the Port of Darwin to a Chinese
company had rung an alarm bell.
The government appointed former ASIO chief and Beijing
ambassador David Irvine to the board, with instructions that security
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TRADE. INVEST, CONTROL
considerations must be given a greater priority. To reinforce the point,
in April 2017 Irvine replaced Brian Wilson as chair of the board. Wilson
had been criticised for accepting, while FIRB chair, a position with a
private equity firm specialising in Asian buyouts.**’
In January 2017 the government also created a new body known as
the Critical Infrastructure Centre, drawn from various agencies includ¬
ing ASIO and Treasury, to create a register of sensitive assets like power,
ports and water facilities that may be in the sights of overseas buyers.
It will provide a quick reference point for the FIRB.
Whether these new or beefed-up institutions have the resources and
the resolve to tackle the problem is yet to be seen. And the same can
be said of the federal government itself. After all, the two main politi¬
cal parties have been severely compromised by their links to Chinese
benefectors and their infiltration by people whose loyalties lie in Beijing.
Several horses have already bolted. The penetration of Australia by
Chinas ‘party-corporate conglomerate’ through ownership of impor¬
tant assets is deeper than most people recognise. A thorough review is
impossible here—not least because no agency has kept track of it but
a few examples will give a flavour of it.***^
Energy assets
The Chinese government-owned State Grid Corporation owns large
chunks of our energy network, including part-ownership of three of
Victoria’s five electricity distributors and the transmitting network
in South Australia. The giant Hong Kong-based Cheung Kong
Infrastructure (owned by tycoon Li Ka Shing) owns other segments.
Energ>'Australia, one of the big three electricity retailers with nearly
three million customers in the eastern states, is wholly owned by China
Light and Power, based in Hong Kong and close to Beijing.**^ Alinta
Energy, one of Australia’s largest energy infrastructure companies, was
sold for $4 billion to ChowTai Look Enterprises, a Hong Kong jewellery
retailer that had been ‘scouring Australia for assets’.**”
Electricity distribution is now combining telecommunications
services, so ownership gives access to Australian internet and telephone
messaging. In the case of TransGrid, for example, strategic policy expert
Peter Jennings has pointed out that it ‘supplies Australia’s defence and
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intelligence facilities in NSW and the ACT and operates the thi,j
largest telecoms network in the country’.'^’
When in August 2016 the federal government blocked New South
Wales from selling a 99-year lease on its power utility Ausgrid to
either State Grid or Cheung Kong Infrastructure, pro-Beijing lobby-
ists complained that it was inconsistent. For them, Australia should
continue making the same mistake in order to be consistent. Following
its practice of waving through Chinese purchases of energy assets, the
FIRB had given it a tick. When the treasurer said there were security
concerns with Chinese corporations owning so much of our essential
infrastructure. Bob Carr rushed into print declaring that Scott Morrison
had succumbed to ‘the witches’ Sabbath of xenophobia and economic
nationalism ’.Xinhua reproduced his words in an article criticising
Australia’s new concerns about Chinese investment.^'
Strangely, in April 2017 the new security-conscious FIRB approved
a $7.48 billion takeover of the big energy utility operator DUET by a
consortium led by Cheung Kong Infrastructure. DUET owns a number
of major energy assets including the strategically important gas pipe¬
line from Bunbury to Dampier and a substantial portion of Victorias
electricity distribution infrastructure, giving it the dominant position
in that state.^^The same consortium already owned the gas distribution
network in Victoria. This makes no sense.
Why should we be worried? One reason is the enhanced risk of
spying, confirmed by the Australian Cyber Security Centre 2017 threat
report: ‘Foreign investment in the Australian private sector is creating
new motivations and opportunities for adversaries to conduct cyber
espionage against Australian interests.’^^ Another is simply that it gives
Chinese companies a great deal of political leverage, and the ability to
turn off the lights in a conflict situation. David Irvine has warned that
Chinese hackers could already shut down our power grid.^"* So why are
we making it easier rather than building protections?
If Australia became involved in a hot conflict between the United
States and China, Beijing’s capacity to shut down its enemy’s power
network would be a formidable weapon, one it would not hesitate to
use if the stakes wete high enough. We have now handed Beijing this
P In the United States, the electricity networks’ control systems
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TRADE, INVEST. CONTROL
Are already the target of serious cyber intrusion, perhaps by hostile
poNwrs looking for ways to shut them down should conflict break out.”
Chinese owners of Australia’s energy networks will not need to hack
into the systems—they’ll own them. The first hours of a modern war
would be all cyber.
The penetration of China-linked corporations into Australia’s
energy infrastructure has a further worrying consequence. Energy
Networks Australia is the peak body representing the companies that
own this country’s electricity and gas distribution networks. Half of
those who sit on the board of Energy Networks Australia represent
nvo Beijing-controlled or -linked corporations, State Grid and Cheung
Kong Infrastructure.” In 2016 the peak body teamed up with the Com¬
monwealth Scientific and Industrial Research Organisation (CSIRO)
to publish a detailed roadmap for the transformation of Australia’s
electricity networks over the next decade.There is nothing about
Australia’s energy networks and how they will evolve in the future that
is not known in Beijing.
Ports and airports
A 99-year lease of Darwin Port was sold to a Chinese company with
close links to the CCP in 2015. In 2014 China Merchants, a state-
controlled conglomerate,” paid $1.75 billion to buy the Port of
Newcasde, the world’s biggest coal export port and close to the air force
base at Williamtown. When the Port of Melbourne was sold to a con¬
sortium of investors in 2016, the Chinese state-owned sovereign wealth
fiind CIC Capital grabbed a twenty per cent share.
Chinese interests have had their eye on regional port facilities in
Australia for some time. Townsville is the kind of area in which Chinese
groups are trying to gain a foothold—poorer regions that see themselves
as ignored by the metropolitan centre and are thirsting for funds (like
Greece in Europe). Tasmania has been another target. Townsville is
far-north Queensland’s export hub, mainly for minerals and agricul¬
tural produce. Development sites in north Queensland, especially for
tourism, have attracted a great deal of Chinese interest.
In March 2015 a delegation arrived in Townsville from government
agencies in the southern Chinese cities of Guangzhou and Huizhou to
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explore investment opportunities as part of Chinas ‘Maritime Silk Road
initiative’.''^ According to the Queensland government, Townsville ‘has
been highlighted as a key possible partner in this project due to its pon
and the live cattle market in the region’.<^" The delegation signed an
MOU with the Port of Townsville to cooperate on a plan to develop
shipping between Townsville and Huizhou.
In 2013 Townsville mayor Jenny Hill warned that the port could be
taken over by Chinese interests if it were privatised.^' She was accused
of ‘dog whistling’. Perhaps she was aware that Townsville also hosts
two of Australia’s most important military bases, the air force base and
the army’s Lavarack Barracks, which houses, among other units, the
Combat Signals Regiment. And Singapore, which the PRC has not been
able to subdue, has signed an agreement with Australia for a very large
program of military exercises in the Townsville Field Training Area.
In May 2017 it emerged that China is interested in building the
new international airport at Badgerys Creek to the west of Sydney.'^^
Alarm bells should be ringing. The airport will become the foremost
departure and arrival point for travel to Australia and therefore a high-
value target for close monitoring and tracking of the movements of all
kinds of people of interest to the Chinese government—businesspeople,
political leaders, dissidents, spies. With a comprehensive system of video
surveillance combined with sophisticated face-recognition technology
(now being rolled out across China), or simply access to airline booking
systems, the entire traffic could be covertly monitored from Beijing.
This is not speculation. If a Chinese company built the airport I
believe all of this is virtually certain to be attempted, no matter who
then operated it. Would it, for example, be equipped with dozens of
security cameras made by Hikvision, the world’s largest CCTV manu¬
facturer with links to the Chinese military? A 24-hour video surveillance
system is being planned by Beijing for cities in Pakistan from Peshawar
to Karachi as part of the massive China—Pakistan Economic Corridor
project.^^ In China itself, the CCP is in the process of transforming the
entire country into a kind of modern panopticon with every street, road
and building under constant CCTV surveillance, and with masses of
data, including facial images, being collected and analysed in a highly
sophisticated computer system using cutting-edge artificial intelligence
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technology. Already there are 179 million CCTV cameras in operation,
one for every seven citizens, and that figure is growing rapidly.
One Belt, One Road
One Belt, One Road (OBOR)—also known as the Belt & Road
Initiative (BRI)—is a grand strategic agenda designed to link China
more closely with larger Eurasia as well as Africa and Oceania.^^
Inspired by the ancient Silk Road, and first mentioned by President
Xi Jinping in 2013, it now has two routes, one over land and one
across the seas. The driving force behind the strategic initiative is the
vast sums of cash China has in reserve for investment and foreign aid.
One powerful motive is to sustain Chinas economic expansion by
sending Chinese money, businesses and labour overseas, with a view
to diversifying energy supplies, stimulating underperforming home
provinces, and cultivating outlets to fill Chinas huge industrial over¬
capacity for steel and other building materials. Yet its ambitions go well
beyond economic ones.
Most of OBORs emphasis is on building or acquiring infrastructure:
ports, railways, roads, energy networks and telecommunications, all to
promote ^connectivity. To date there has been a particular emphasis
on the construction or acquisition of port facilities—five dozen foreign
ports, according to a 2017 Chinese state television report.^^ And while
most emphasis has been on the westward land bridges to Pakistan,
and through Central Asia to Western Europe and Russia, the sea route
down through Indochina and Southeast Asia to Australia is of growing
importance. It aims at ‘building smooth, secure and efficient transport
routes connecting major sea ports along the belt and road’.^^ Chinese
companies, both private and state-owned, will be at the front line of
the OBOR offensive.
The vital role of state corporations in OBOR was confirmed by the
boss of the SOE supervisory commission, Xiao Yaqing, who wrote that
SOEs contributed sbcty per cent of Chinas outbound investment in
2016. The ten million CCP members who work at SOEs form ‘the
most solid and reliable class foundation’ for CCP rule.^®
OBOR was the brainchild of new president Xj Jinping and has
acquired enormous political momentum in China. While sold as a new
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phase of globalis;uion, beneath the lure of cheap money for develop¬
ment, OBOR is the practical manifestation of Xi s ‘China Dream’ of
restoring China to its rightful place, not through military conquest but
through economic domination. Xi’s idea is a crystallisation of trends
that had been underway for some time, and feeds into other planning
efforts emerging from the new economic superpower keen to create a
world in which China can assume its rightful place, captured in the
phrase repeated ad nauseam ‘the great rejuvenation of the Chinese
nation, the endpoint of the Hundred-Year Marathon. It therefore has
geostrategic as well as economic objectives. In the summary words of
one close observer:
There is little doubt that President Xi views OBOR as the signature
foreign policy theme of his leadership tenure and the practical
embodiment of his ‘China Dream’ for promoting national rejuvena¬
tion and cementing the country’s place as a leading world power.'^^
Some foreign observers seem mesmerised by the rise of China, charac¬
terising OBOR as the defining trend of the twenty-first century and
echoing Beijing’s benign story of ‘win-win’ cooperation. (‘After colo¬
nialism, imperialism and hegemonism’, one Chinese academic has
now dubbed China’s new theory of global governance ‘win-winism’.^°
The CCP has turned a vapid American business slogan into its
state ideology.)
The funding of OBOR projects from China’s vast reserves is taking
place through China’s state-owned banks. China is also directing the
Asian Infrastructure Investment Bank—Beijing’s multilateral bank,
endorsed and funded by Australia and many other countries, designed to
push out the World Bank—to fund OBOR projects.^* In fact, as Wade
notes, the AIIB was created in order to fund projects under OBOR.
One Belt, One Road is a grand strategy to multiply China’s economic
clout, including making the renminbi the main trading and investment
currency of those countries drawn into it.^^ Many nations have wel¬
comed the promises of financial flows into development projects. But
some projects have run into trouble. When the Sri Lankan govern¬
ment announced it would sell the port of Hambantota to the China
TRADE, INVEST, CONTROL
Merchants shipping company (which owns the Port of Newcastle), the
community rioted; the huge new industrial park promised as part of the
Silk Road development would have dispossessed local farmers/^ LxDcal
politicians said they did not want to become a ‘Chinese colony. At the
industrial zones opening the Chinese ambassador promised $5 billion
and 100,000 jobs while local citizens including Buddhist monks fought
police nearby/'* The ambassador did not mention that the Hambantota
port is strategically important to Chinas projection of naval power in
the Indian Ocean. In July 2017, Sri Lanka found it necessary to sell
a seventy per cent stake in the port to China in a bid to recover from
the heavy burden of repaying a Chinese loan obtained to build the
fecility. The creation of crippling indebtedness is a powerful Chinese
tool under OBOR.^^
Other nations, particularly those with a history of conflict with
China, like Vietnam and India, are far more sceptical, seeing the New
Silk Road as a formidable means for China to advance its strategic as
well as its economic dominance. An Indian scholar has argued that
China is using OBOR as ‘the silk glove for Chinas iron fist’.^*^
China already dominates some small and poor nations in Southeast
Asia (such as Cambodia and Myanmar) and Africa (Namibia, Angola).
Its growing influence in Latin America prompted the head of Mexico’s
trade agency to say, ‘We do not want to be China’s next Africa’.^^ The
PRC exercises great leverage through its provision of credit, control of
infrastructure and ownership of natural resources. OBOR will intensify
that process. Already, state-owned and state-linked operators are invest¬
ing in infrastructure all over Southeast Asia, including ports, airports,
railways, energy networks and dams. Ports are particularly valued
because of China’s dependence on sea trade and for their strategic
functions in times of peace and conflict.
It would be naive to try to separate the flow of OBOR investment
funds to countries like Malaysia and Indonesia from China’s com¬
mitment to controlling the South China Sea. Resistance to its efforts
to compel all nations to accept its de facto annexation of this vital
economic and strategic zone will weaken as its economic influence
expands, not least through the explicit plan to connect up the infra-
stmeture of ports, roads and railways across the region.
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More alarmingly, the role of the PLA in protecting Chinese assets
and citizens along the OBOR chain is under active discussion among
military strategists/® There appears to be an emerging consensus that
the PLA should be deployed to protect Chinese interests along the
Belt and Road, but varying opinions about whether the PLA has the
capability. One expert reviewing the debates concludes that the PLA
‘pays great attention to the One Belt One Road’ and that ‘the relation¬
ship between the protection of Chinese overseas interests and the use of
the PLA in time of peace is growing stronger’.^^
A 2017 Pentagon report anticipated a growing global PLA footprint
to match the spread of China’s economic assets, noting that China’s naval
base in Djibouti on the Gulf of Aden will see the PLA Navy stationed
permanently abroad for the first time. And it mentions the Chinese
maritime militia, avast reserve army of military-trained civilians working
in the fishing industry and ports. Its tasks include intelligence gathering
and ‘rights protection’, including intimidation of rival fishers in places
like the South China Sea.®® Andrew Erickson, a professor of strategy at
the US Naval War College, wrote that under PLA direction ‘China’s
maritime militia plays a central role in maritime activities designed to
overwhelm or coerce an opponent through activities that cannot be
easily countered without escalating to war’,®' The militia has received
renewed support under President Xi. Based on the company’s own docu¬
ments, GeoffWade pointed out that the new Chinese owner of the Port
of Darwin, Landbridge, operates a unit of the maritime militia.®^
We need to project ourselves forward ten or fifteen years, when
Chinese investment in infrastructure abroad approaches the expected
scale so that China’s continued economic health and global influence
are dependent on highly valuable but far-off assets. If control over those
assets is jeopardised by a local revolt, a blockade or nationalisation,
then it would be only a matter of time before China sent its armed
forces abroad to protect Chinese-owned facilities and Chinese citizens.
Military strategists are already discussing how the PLA could be used to
protect assets built under OBOR schemes.®^
Isn’t that precisely what the United States did for decades in Central
and South America? Is it far-fetched to envisage circumstances in which
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the PIJV or its maritime militia is mobilised to protect Chinese assets in
Australia from any attempt to take them back?
The defence and intelligence establishment in Canberra, who see
OBOR as another means to buttress Chinas global ambitions, is now
divided against the economic departments and DFAT, for whom the
economy rules.®^ Yet when investments are mostly led by state-owned
enterprises and are responding to a strategic plan worked out in Beijing,
thinking only about the economic returns to Australia becomes a form
of wilful blindness.
The Australian OBOR connection
Beijing has its eye on Australia’s north. As early as November 2014
AustrJia was being linked to OBOR by none other than Xi Jinping in
his address to the Parliament of Australia. ‘Oceania is a natural extension
of the ancient maritime silk road , he said, and China holds an open
attitude towards Australian participation in the 21st century maritime
silk road.’®^ He explicitly focused on Australia’s north, saying that ‘China
supports Australia’s implementation of the northern development plan’.
(The northern development plan’s greatest advocate has been Gina
Rinehart, who funded a major lobbying campaign through the Institute
of Public Affairs resulting in the Liberal Party adopting it before the
2013 election.) A year later at the G20 summit the Chinese president
returned to the theme: ‘China is willing to align its Belt and Road
initiative with Australia’s northern development plan, and encourage
Chinese companies to participate in infrastructure construction in
northern Australia.’®^
Between the two speeches, in August 2015 treasurer Joe Hockey and
the trade minister, Andrew Robb, talked up OBOR when they met
with the head of China’s powerful National Development and Reform
Commission, Xu Shaoshi. The Peoples Daily enthused:
Both sides recognised that China’s OBOR initiative and interna¬
tional production capacity cooperation have a lot of points in
common with Australia’s northern development initiative and the
national infrastructure development plan. Both sides were willing to
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increase the breadth and level of cooperation between their countries
by linking up their development strategies.”^
The Chinese embassy in Canberra was fully briefed to begin promoting
the integration. The day after, 14 August 2015, ambassador Ma Zhaoxu
gave a speech at the ANU in which he spoke of:
how China and Australia could jointly build the ‘21 [sic] Century
Maritime Silk Road’. Australia is highly relevant to the initiative.
The Maritime Silk Road will connect Chinas eastern coastal cities,
across the South China Sea into the South Pacific. Australia is a
major country at the end of this route.””
China’s anxiety about its long-term food security has led it to designate
agricultural developments in northern Australia as eligible for state-
backed investments.®^ By the middle of 2016 some 900 potential
OBOR projects in Australia had already been identified.^® In November
2016 Beijing dispatched former foreign minister Li Zhaoxing to
Canberra to give a public speech talking up OBOR,®' and in February
2017 the foreign minister, Wang Yi, arrived to reiterate China’s willing¬
ness to align the belt and road initiative with our northern development
plan. (He also said that China wanted to link OBOR to Australia’s
National Innovation and Science Agenda.)®^
Since then it has been all systems go for the Australian government.
In February 2017 new trade minister Steve Ciobo was boosting OBOR,
with the head of the National Development and Reform Commission,
Xu Shaoshi, noting how the new Critical Infrastructure Centre, which
will list sectors that require automatic scrutiny, would remove obstacles
for Chinese investors.®^
Needless to say, Australia’s business and political elites have fallen
over themselves to embrace OBOR and encourage its spread across
Australia. Andrew Robb is perhaps its most enthusiastic spruiker.®'*
BHP director and chairman of Orica Malcolm Broomhead is also a fan.
Both have been enticed onto the board of the Australia-China Belt &
Road Initiative (ACBRI), an outfit fronted by three little-known people
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with no obvious connection to OBOR but set up by the National
Development and Reform Commission in Beijing.*^’ ACBRI describes
itself as an engagement platform that enables Australian and Chinese
industry leaders to articulate clear business opportunities’ available
through OBOR.
Among other objectives, ACBRI aims to ‘facilitate the intercon¬
nectivity of China’s infrastructure construction plans with the rest of
Asia. Despite its likely Chinese government provenance, DFAT sup¬
ported it with a grant of $20,000. Under its auspices Andrew Robb led
a delegation of twenty senior Australian business executives to China to
explore business opportunities in the Belt and Road project pipeline.
OBOR has found more immediate acceptance in New Zealand,
with the National Party government willingly signing up to it. The New
Zealand OBOR Council has brought together pro-China elements
including Johanna Coughlan, who is the sister-in-law of former prime
minister Bill English and chairs both the Council and the so-called
OBOR Think Tank. The OBOR lobby has generated a stream of
opinion pieces aimed at stimulating public support, even though there
appears to be little political resistance, other than from Winston Peters,
who opposed New Zealand joining OBOR and often warned of the
dangers of PRC domination.'’^’ Since becoming New Zealand’s foreign
minister at the end of 2017 Peters has performed a volte face, praising
the PRC, suggesting it has much to teach us and chiding those who
harp on about ‘the romance of freedom’.*”' What happened?
Consistent with its strategy of spending money to win over aca¬
demics and opinion makers, the Chinese state is funding seminars
and conferences to explain and promote OBOR in Australia, with the
University of Queensland and the University of Sydney at the forefront.
The support of some Australian academics can be bought quite cheaply.
In 2015 Premier Li Keqiang made it clear that overseas Chinese are
expected to help advance the OBOR agenda by using their ‘advantages
in capital, technology, management, and business networks’.
In December 2016 the official Xinhua News Agency reported that a
meeting of Confucius Institutes around the world agreed to advocate for
OBOR As well as offering language training for all of the local workers
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employed by Chinese companies, the Confucius Institutes could act ai
think tanks’, so authorising them to expand their operations in nations
Hke Australia.'^^
China’s northern Australia strategy is not mere talk. In January
2016, a Peoples Daily report on the joining up of OBOR and northern
Australia noted that Australias northern gateway’, Darwin, is only a
five-hour flight from China’s southern coast.'“o The vexed issue of the
sale of the Port of Darwin lease is a perfect case study of the extent
to which the misunderstanding of China reaches to the very top of
Australia’s political and military establishment.
China’s propagandists have launched an online campaign using
cartoons showing adorable Western children singing the praises of Xi’s
One Belt, One Road—everyone can make friends’, they trill—and a
loving father reads a bedtime story to his little girl extolling the wonders
of this great opportunity to move globalisation forward’.'®' The videos
are probably made by the secretive Fuxing Road Studio, responsible for
a bizarre 2015 video in which American-accented cartoon characters
sing ditties praising the Thirteenth Five-Year Plan.'®^ The cute Anglo
kids present China as the new bastion of free trade and international
cooperation. One expert familiar with Chinas continued restrictions
on trade and investment describes the campaign as ‘beyond ironic’.
None of this raises any suspicions of Chinese intentions for Australian
strategic thinker Hugh White, who advises that it is in Australia’s interest
to sign up.'®^
However, by March 2017 others in Canberra were pouring cold
water on the hype. During the visit of Premier Li Keqiang, it was
made clear that Australia would not be signing a memorandum linking
OBOR to the Northern Australia Infrastructure Facility. DFAT was
keen on signing, while Defence was nervous. At the top, the feeling
was that we ought not to sign up to something we don’t understand.
From Beijing, Australian business consultant and former ambassador
to China Geoff Raby lamented the influence of the defence/security
establishment which, he said, was placing too much emphasis on
values rather than economics. Yes, those old softies at ASIO and the
Department of Defence were at it again. Down the road from Raby’s
Beijing office, Renmin University professor of international relations
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TRADE. INVEST, CONTROL
Shi Yinhong was closer to the mark: ‘[0]n the Maritime Silk Road pro¬
ject, Australia has been hesitant because of a fundamental disagreement
over the South China Sea.’'°^ Yet in September 2017 Labors shadow
treasurer Mark Butler announced that a Labor government would link
the $5 billion Northern Australia Infrastructure Facility to OBOR.
133
7 Seduction and coercion
In August 2002 the media jubilantly reported that an Australia-based
consortium had just won, against fierce competition, a contract to
supply natural gas to Guangdong province. Then prime minister John
Howard declared that winning the bidding for the $25 billion gas
supply was ‘a gold medal performance’ and the fruit of close engagement
with China.* To press the Australian case, Howard had met President
Jiang Zemin more times than any other world leader. It was a close-run
thing, with Australia’s chances of beating Qatar, Malaysia, Russia and
Indonesia looking poor only two weeks before the contract was agreed.
Yet Australia pulled it off, and in business circles Howard has been
surrounded by the aura of a commercial winner ever since.
The Peoples Daily reported, perhaps with a suppressed smile, that
the Australian side expressed its excitement over its largest single export
order’.^ While Australians congratulated themselves, in fact we had
been played by Beijing, and in a way that has been paying off for China
ever since. Chen Yonglin, who at the time was a political officer in the
Chinese consulate in Sydney and had been following events closely from
the inside, later revealed that the Guangdong government was about
to award the contract to Indonesia, which tendered the lowest price,
until the CCP’s Central Committee in Beijing ordered it be given to
Australia. ‘They thought that Australia was really important,’ said Chen,
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and that at the time Australia had totally turned towards America, so
they thought we should use economic means to bring Australia back.’^
Aware of how quickly Australia jumps when an economic string is
pulled, from then on Beijing would ‘use economic measures to guide
Australia’. After all. Prime Minister Howard had refused to meet the
Dalai Lama while Beijing dangled the carrot of the $25 billion deal.'*
A month after the deal was struck, the chairman of the National People’s
Congress, Li Peng, made a visit to Australia to congratulate Howard on
winning the contract and to ‘enhance mutual trust, broaden common
ground and deepen cooperation’ between the two countries.^ The 2002
gas deal was the starting gun for the ‘China is our future’ craze that now
dominates elite thinking in this country, exactly as Beijing planned it.
Chau Chak Wing is said to have played a pivotal role in the negotia¬
tions and made enduring friendships, not least with John Howard, who
has been a guest at Chau’s ‘imperial palace’ a number of times.*^
China’s fifth column in Australia
One of China’s most effective instruments of economic statecraft is
the making of dire but vague threats of economic harm to a country
that displeases it. It works because governments believe the threats.
As we will see, China is willing to make countries suffer. In Australia,
China’s threats are amplified by a corporate fifth column that has grown
around the bilateral economic relationship, a business elite unwittingly
beholden to a foreign master and undermining Australian sovereignty
from within. This cohort of business leaders and their advisers shuttle
between the two countries doing deals and making ‘friends’ (with people
whose backgrounds and motives they only think they know).
The fifth columnists include many of the most powerful corporate
figures in the land, those whose phone calls the prime minister and
the treasurer answer. They are convinced they ‘know China’ and take
it as given that Australia’s future depends above all on deepening the
economic relationship and not allowing politics and differences of
‘values’ to get in the way. They present themselves as operating in the
national interest’, but it is no coincidence that our ‘national interest’
always happens to coincide with China’s. Their understanding of the
options available has been narrowed by their enthrallment to Beijing.
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Apart from the sway of Chinas powerful friends, there is a more
diffuse reason for our sensitivity to economic pressures the enormous
influence of free-market thinking whose unspoken assumption is that
the economy must come before everything else, including our freedom.
China apologists repeatedly downplay or evade the importance of
freedom and the direats to it. Or they insist that economic growth Is
the best way to guarantee freedom, as if money can buy the rule of law
rather than corrupt it. In their globalist commercial worldview, national
sovereignty is increasingly a relic of the past. As one senior Australian
official sardonically put it to me, ‘Who cares about the blood?’
‘China Is our destiny’
China is vital to Australia’s future because of our economic dependence
on it. Or so it is said. It’s truer to say that the perception of our economic
dependence gives China immense influence over Australia. It’s widely
believed, for example, that only our close economic relationship with
China saved us from the 2008 global crash. Even though China did
nothing for Australia other than continue to buy from us the iron ore
and other resources it needed to fuel its growth, there is a widespread
view that Australia should be grateful to China for saving us, that we
owe China. Many Chinese believe this too. When a difference of view
emerges, over the South China Sea, for instance, it is not uncommon
for China’s netizens to berate Australia for our ingratitude (often coupled
with comments on how uncivilised we are). Instead of pushing back
and turning the argument around—you should thank us for agreeing to
fuel your boom with our resources—our commentators and politicians
echo the view that we are somehow indebted to China.
Perceptions of our vulnerability to China’s whims weaken our resolve
to resist the growing penetration of the CCP’s influence in Australia.
Sensing this, Beijing repeatedly reminds us that a continued healthy
economic relationship depends on a harmonious political relationship,
with harmony guaranteed when Australia conforms to Beijing’s wishes.
As the head of ANU’s National Security College, Rory Medcalf, writes:
Essentially, Beijing wants from its commercial partners the same deal it
has with its own people—economic benefits in return for acquiescence
on politics and security.’^
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SEDUCTION AND COERCION
In Chapter 12 we will consider the positions of some of Chinas
cliief apologists in Australia, but its worth commenting here on how
the 'China is our destiny’ argument has played out in the public debate.
Linda Jakobson of China Matters—a non-profit company founded
to ‘stimulate a realistic and nuanced discussion of China—bemoans
the ‘emotional outcry’ over certain Chinese investments. It’s true, she
admits, that ‘every senior business person in China is closely connected
to the party’, but, hey, that’s how it is in China, so what are people
worried about? If we could have a ‘grown-up debate’, Jakobson asserts,
we’d realise that without Chinese investment we would spend less on
hospitals and schools, so let’s not have any more ‘public spats’ and just
get on with it.®
A more sceptical commentator, Geoff Wade, shreds this kind of
apologetics, showing the contradiction between party influence in
Chinese corporations and the belief that those companies are only
interested in profits. ‘Capital ... goes where the Chinese state wants
it to go.’’ So if state-directed Chinese capital is buying up Australian
energy infrastructure, telecommunications and ports, having a ‘public
spat’ over it is more grown-up than burying one’s head in the sand.
In her 2017 book with Bates Gill, Jakobson argues that China and
Australia-China relations are complex and subtle, so much so that it
is hard for the authors to give a clear answer to any question.They
confess that when they migrated to Australia they were surprised at
the level of ignorance about China in this country. Misconceptions,
missteps and blunders are frequent in Australia’s deiilings. The public,
and even many of the so-called experts, cannot grasp the complexity
and subtlety, and so commentary and advice are best left to those, like
them, who know China and truly understand.
The belief that ‘China is our destiny’ is in fact an exaggeration
created by business interests and people who make their living from
China, amplified by the media. Like former ambassador and China buff
Stephen FitzGerald, they believe ‘we are living in a Chinese world’."
Our only sensible response is to gain a deeper understanding of China
and learn how to engage it with more sensitivity and skill. The latter is
undoubtedly true; a greater understanding of China is the objective of
this book. But it is a trap to believe that we now live in a Chinese world.
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We don’t. We live in a complex, multipolar world. We will live in a
Chinese world only if we choose to.
Stephen FitzGerald argues that Chinese influence in Australia is
mostly benign and welcome. He then sets out the various ways the
CCP is interfering in Australian society and politics, and comments on
how it is undermining our values.'^ How should we respond? He argues
we must become so close to China that we can be a frequent, sought
and heeded voice in Beijing’. Good luck with that. In effect, FitzGerald
tells us that the only way for Australia to survive is to disentangle our¬
selves from the United States and make ourselves a ‘friend at court’ in
Beijing—in other words, a client state. China has no strategic partners,
but FitzGerald, spooked by Donald Trump, says we should become its
first. Some of us are not yet willing to give up our national sovereignty,
but FitzGerald wants big business in Australia to mobilise to support
his vision and praises the Drysdale report (considered below), which
neady laid out and argued for Beijing’s entire economic agenda as if it
were our own.
We are inclined to see China’s official propaganda as crude, sometimes
laughable, and yet the extent to which Beijing has shaped the way we
in the West view it is extraordinary. Even those who regard themselves
as having a sophisticated understanding of China can be dupes. While
wide-eyed businessmen like Andrew Forrest see nothing beneath the
veneer created by Chinese officials, we expect more from our academics
and economic advisers. For an example of this intellectual naivety we
can’t go past a report on the future of the Australia—China economic
relationship published with great fanfare in August 2016. Touted as
‘the first major independent study’ of the relationship. Partnership
for Change was prepared jointly by the ANU’s East Asian Bureau of
Economic Research and the China Centre for International Economic
Exchanges (CCIEE). Prime Minister Turnbull turned up to launch it
(but pointedly did not endorse it).'^
The report’s ‘co-editor’ was Professor Peter Drysdale—an expert
on Japan and for decades one of Australia’s most enthusiastic free
traders—who called for the economic and political relationship to be
‘turbocharged’ through larger flows of Chinese ‘tourists, students, inves¬
tors and migrants’.He believes we could benefit from more Chinese
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SEDUCTION AND COERCION
a>mpctltion in our ‘sheltered industries’ (even though Australia’s import
barriers are virtually non-existent while China’s remain formidable).
The first premise of the report is that Australia must do nothing
to jeopardise the bilateral relationship, a deeply entrenched belief
that represents the most powerful lever wielded by Beijing in this
country. The report reinforces the widespread, but exaggerated,
belief that Australia’s future prosperity depends above all on China’s
economic success.” To the extent that it is true, you would think we
would want to diversify away from China rather than become more
dependent on it, but no matter—Drysdale’s report laments that the
broader Australian community ‘does not grasp the benefits of foreign
investment’ from China and calls for an end to unequal treatment of
Chinese investors.” The claim that Chinese investment is just like any
other investment, and should be just as free to enter, ignores the fact
that, unlike Britain, the United States and Japan, China is a dictator¬
ship that controls much of the economy and uses this control to pursue
political influence and regional strategic dominance. The problem,
the report implies, is not that in China important business decisions
are often intimately tied to the interests and strategic aspirations of
the party-state but that the Australian public is ignorant and often
motivated by xenophobia.
As we will see in Chapter 9, the report’s recommendation that
Australia should give priority to unfettered Chinese investment in our
most advanced scientific and technological research should be particu¬
larly worrying. The United States, Canada and the European Union are
now recognising how dangerous this kind of Chinese investment can
be, and in 2017 the United States launched an investigation into how to
protect itself from predatory Chinese investment in high-tech sectors.
Echoing Beijing’s displeasure at Australian rejections of a handful
of strategic investments, the report bemoans the disincentive effect on
Chinese investors, as if Australia has no national interests above and
beyond maximising foreign trade and investment. While the report
expresses vague hopes that China might open up its economy to foreign
investment a bit more (many Western companies refuse to operate there
because the government makes it too difficult to do business), it calls for
the abolition of Australian restrictions on Chinese investment.
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2014 Drysdale had noted that during the mining boom more
Chinese investment came to Australia than anywhere else in the world,
but the flow had slipped in part because of‘populist reactions’, code for
any concern about state-owned enterprises (SOEs) buying up assets like
energy infrastructure and agriculi^ural holdings.He reassured us that
SOEs are just like any other companies because they too have to obey
Australian laws and regulations. Well, yes, but that doesn’t change the
fact that their CEOs are senior party members, appointed by the party
and subject to the party’s dictates.
So unashamedly does the report champion Beijing’s economic
ambitions and disdain any kind of Australian reservations about
them that we could be forgiven for suspecting that the think tankers
at the CCIEE in Beijing were messing with the heads of their ANU
counterparts. The report notes: Australia’s geopolitical and geo-
economic position and its multicultural society are thus unique assets in
shaping Chinas links with the West.’ Indeed they are, but these are in
fact the weaknesses of Australia that have been identified by the CCP’s
strategists for exploitation.
The true objectives are exposed by one who understands intimately
how Beijing has targeted Australia, because for many years his job was
to implement its strategy here. Chen Yonglin, the Chinese diplomat
who defected to Australia, wrote in 2016 that, as the CCP sees it,
Australia has three advantages as a testing ground for its expansion into
the Western world. The first is our geopolitical position, which actually
make us ‘the weak link in the western camp’. The second is our very
large community of ethnic Chinese, ‘people who have intimate and
diverse links with the PRC, have often been ideologically trained, and a
majority of whom have a strong sense of Chinese chauvinism’. And the
third is our multicultural policies, which permit Chinese loyal to Beijing
to promote ‘Chinese values and customs’ as excuses for advancing the
positions of the CCP.‘^
If the ANU economists were hoodwinked by their partners in
Beijing, then that was always going to be the case. Beijing knew who
they were partnering with. In 2009 Peter Drysdale berated Australia’s
political leaders who had ‘performed like a bunch of clowns’ in stopping
Chinese conglomerate Chinalco from buying a large stake in Rio Tinto.
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If only they, like him, ‘had just had a round of intensive interaction
top players in the Chinese policy world’, they’d get it.” It’s painful
to watch senior Australians come away from talks with ‘top players’
believing they have been taken into their confidence. Instead of grasping
that there is a story told to Westerners and a real story, they are con¬
vinced that they have joined the select few who know how China ticks.
Deploying a range of cheap rhetorical devices, Drysdale has ridiculed
claims that the CCP is attempting to influence Australian politics.^®
The political masters in Beijing could be certain the Chinese
experts writing the ‘independent’ joint report would toe the party line.
The CCIEE was established in 2009 ‘following the instructions of
Premier Wen Jiabao ... [to be] the highest level think tank established
in China’.^* Its first chair was former vice-premier Zeng Peiyan. The
party had decided it needed some reliable think tanks. In 2016 President
Xi explicidy called for the strengthening of think tanks as avenues for
recruiting the leadership of the Communist Party.^^ National guide¬
lines stipulate that think tanks ‘should carry out activities for the
purpose of serving the Party and government decision-making’.A
Brookings paper on China’s think tanks tells us that they are never
‘independent’, and that the CCIEE ‘operates under the guidance of
the National Development and Reform Commission’. Its experts
are de facto government officials with little latitude to think outside
the party’s parameters.
The ‘joint report’ concludes that if its recommendations were
adopted ‘the Australia-China relationship will be taken to a wholly
new level’.^^ That is undoubtedly true: the influence of the CCP over
economic life in Australia would be complete and irreversible. Back in
Beijing the cadres at the CCIEE must have been toasting their success.
A joint report with a US think tank would never call for the abolition
of all restrictions on Chinese investment or unfettered access of Chinese
companies, state-owned or private, to America’s advanced technology.
The US is moving firmly the other way.
The ANU s media release announcing the new report carried a photo
ot a group of people waving large Australian and Chinese flags. No one
to have noticed the symbolism of the image in which all of the
flag-wavets are of Chinese heritage
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Norway and the Dalai Lama effect
When the dissident writer Liu Xiaobo was awarded the Nobel Peace
Prize in 2010, the Chinese Communist Party was embarrassed and
angry.^^ Although the Norwegian government played no role in the
decision. Beijing retaliated by sharply cutting Norway’s share of the
Chinese salmon market. Free trade talks were abandoned and diplo¬
matic relations went into deep freeze. Other countries looking on got
the message and began sidelining Liu Xiaobo.
Oslo was chastened. When the Dalai Lama visited Norway four
years later the prime minister refused to meet him. Norway’s foreign
minister told reporters: The Dalai Lama has visited Norway roughly a
dozen times since receiving the [Peace] prize in 1989—but things are
different now. ... We need to focus on our relationship with China.’^®
Six years after the prize was awarded to Liu, the Norwegian government
made what amounted to a grovelling apology to China.^^ Norway’s
reputation as a champion of human rights may never recover.
A study shows that a country’s exports to China are liable to fall by
eight per cent if its president or prime minister meets the Dalai Lama.^®
Around the world, leaders have come under intense pressure to snub
the spiritual leader and many have succumbed, including John Howard
in 2002, Kevin Rudd in 2008 and 2009 and Julia Gillard, who was
acclaimed’ by China’s official media for her refusal in 2012.^'
For the CCP, Tibetan independence is one of the ‘five poisons’ (the
others are Taiwanese independence, Uyghur separatism, Falun Gong’s
existence and pro-democracy activism). The Dalai Lama is denounced
as a ‘wolf in monk’s clothing’ and an ‘anti-China splittist’. (Somebody
should tell the propaganda bureau that, after Monty Pythons Life of
Brian, accusing someone of being a ‘splittist’ sounds absurd to Western
ears.) Beijing is relentless in its attempts to counter the Tibetan leader’s
enormous soft power’ around the world. Among the many leaders
reported to have been bullied into refusing to meet the Dalai Lama are
those of South Africa, India, Denmark, Norway and Scotland. Under
Chinese pressure. Pope Francis declined to meet him. Britain’s prime
minister, David Cameron, was rendered persona non grata in 2012
after he met with the Dalai Lama. In 2015 Cameron was still trying to
make up with Beijing by refusing to meet the Tibetan leader, prompting
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the latter to lament: ‘Money, money, money. That’s what this is about.
Wltere is morality?’^^ When in 2017 China imposed serious pressure
on its fragile economy, Mongolia, where Tibetan Buddhism is widely
practised, was forced to declare it would no longer welcome the
revered spiritual leader. In a refreshing display of courage under intense
pressure, in 2017 Botswana’s president. Dr Ian Khama, agreed to meet
the Dalai Lama, telling Beijing, ‘We are not your colony’.^^
China's geoeconomics
If you don’t do what Beijing’s political leaders want they will punish
you economically. They put the economic vise on politicians around
the world. They have been doing it for years and it works.
Shaun Rein, China Market Research Group, Shanghai^
To seek to dominate other countries by military means is costly and
dangerous—^just look at Iraq. For a modern state there are cheaper and
less risky means of coercion, sometimes known as economic statecraft
or geoeconomics. China has become the world s master practitioner.
Geoeconomics can be defined as the deployment of economic punish¬
ments and rewards to coerce nations to adopt preferred policies. Robert
Blackwill and Jennifer Harris, experts from the US Council on Foreign
Relations, identify seven leading instruments: trade policy, investment
policy, economic sanctions, the cybersphere, aid, monetary policy, and
energy and commodity policy.’^
Its tailor-made for a state that is economically powerful and heavily
integrated into the global economic system and at the same time has
the ability to exercise control over its own companies by rewarding
them if they serve the states strategic ambitions, and penalising them
if they don’t. And that means China. Beijing’s control over the PRC
economy is increasing rather than declining. Almost all of the 85
Chinese companies among the 2013 Fortune Global 500 were SOEs.^
Although Beijing is expanding its armed forces, its real power comes
from weaponising its economic entities.
Some of the more facile commentary argues that it is not in Chinas
mterests to cut iron ore imports from Australia or interfere in shipping
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routes in the South China Sea because China would suffer too ^ It'
yet another failure to understand the nature of China under CCP ru/'
China is far more willing than we are to absorb economic pain in pursuit
of strategic goals. It has a higher pain threshold. While our politic^
system is extremely vulnerable to industry lobbying, even by the small
but vocal, in China companies do not complain if they want to remain
in favour, and workers who take to the streets can expect retribution
When Beijing pulls the geoeconomic levers to impose real economic
pain, it usually denies that it is doing so. Beijing’s coyness is partly because
coercion that is too blatant is likely to elicit a backlash, and because
most of its actions break the rules of the World Trade Organization
China wants power, but it also wants to be seen as a responsible global
economic citizen.
China is not the only nation to use commercial pressure to achieve
political and strategic ends. But today it is the most formidable. While
the United States occasionally imposes economic sanctions—against
North Korea and Iran, for example—their use is rare and specific to
security threats. China, on the other hand, frequently aims to coerce
its neighbours into submission using these weapons. And not only its
neighbours. In their definitive account, Robert Blackwill and Jennifer
Harris lament the fact that the US has withdrawn from its global
^^E^g^^Tient. It gives China free reign in vulnerable African and Latin
American nations Unease in some African countries has been build¬
ing for several years. As early as 2007 the opposition leader in Zambia,
Michael Sata, was expressing it bluntly: ‘We want the Chinese to leave
and the old colonial rulers to return ... [A]t least Western capitalism has
a human face; the Chinese are only our to exploit us.’^‘^
At times, China will abandon any pretence and apply as much
pressure as it can as ruthlessly as it can. In March 2017, at the invita¬
tion of South Korea, the United States began to install the Terminal
High Altitude Area Defense (THAAD) anti-ballistic missile system. It
could shoot down missiles launched by an increasingly well-armed and
aggressive North Korea. China objected strongly, fearing that THAAD’s
a^anced radar system could be used to spy on it and neutralise a
Chinese response to an attack.
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SEDUCTION AND COERCION
China took forty-three retaliatory measures against South Korea in
response to the THAAD decision. The South Korean conglomerate
Lotte, whicli allowed some of its land to house part of the system, bore
the brunt of the anger whipped up by the official Chinese media. The
Global Times, for example, declared that South Korea must be punished
and Chinese consumers should teach Seoul a lesson.'*® Xinhua warned
that it ‘could turn into a nightmare for Lotte’, a prophecy fulfilled by
its nationalist readers, who launched a violent campaign against Lotte’s
department stores in China, closing most of them.'*' (The consumer
boycott and government retaliation did not let up and in September
2017 Lotte announced it would sell its stores in China and get out.)
That was only the start. The PRC blocked imports of cosmetics and
electronics and cancelled shows by K-Pop stars.'^ Korean tourists on
Chinese streets were accosted. South Korean films, very popular in
China, were banned from the Beijing International Film Festival. And
in a display of childish pique, the face of pop star Psy, who was serving
as a judge on a Chinese talent show, was blurred out.
The Korean tourism industry was thrown into panic when China
banned group tours, causing tourist numbers to collapse.'*^ In Seoul,
[Qm" operator Korea-China International Tourism reported an eighty-
five per cent drop in tourists. An executive of one of the biggest Chinese
travel companies admitted that tourism is part of diplomacy . All
chartered flights from Korea were blocked before a major football
match, forcing the Korean team to take a last-minute scheduled flight.
(The team’s exhaustion was said to have contributed to the short-priced
favourite’s loss to China.) Some top Chinese women’s golfers planned to
boycott a tournament in Hawaii sponsored by Lotte.
In June 2017 the new, more dovish, South Korean government sus¬
pended the installation of THAAD after the first two of six launchers
had been installed and were operational. Some in the local community
oppose it on security and environmental grounds. But the other four
were installed in September after Kim Jong-un tested nuclear weapons,
fired missiles over Japan and threatened to attack the US.
China has a unique advantage over nations like Australia and the
United States: it can much more effectively use social pressure to
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mobilise its citizenry to boycott or otherwise penalise a foreign company
Boycotts and sanctions by China also cause pain to its own consumers
and workers, but this ‘only underscores Beijing’s tolerance of pain when
it comes to accepting domestic costs for its geoeconomics policies’.'*^
Analysts of China’s use of economic coercion point to its 2010
shutdown of export to Japan of rare earth oxides, essential to the
manufacture of various high-tech products, including components
for Japan’s exports. Japan had arrested a Chinese ship captain who’d
rammed a Japanese coast guard vessel in a disputed maritime zone.
China had by this time become a virtual monopoly supplier of rare
earths, aided by the purchase by an SOE of a state-of-the-art processing
plant in Indiana in 1995. It had to commit to operating the plant for
at least five years, but the day after the five years were up the owners
closed the plant, dismantled it and rebuilt it in China.'*'" The US lost
its rare earth production capacity and handed control of the essential
material to China.
Under pressure, Japan soon released the captain. Blackwill and
Harris noted that the rare earth ban was ‘striking for its brazenness ...
the first time China so boldly coerced a U.S. treaty ally’.'*^ These
incidents show that, for all of President Xi’s claims that China must
lead economic globalisation, China is willing to violate the rules-based
global economic order when it suits its strategic interests.
In 2012, 150 containers of bananas were left to rot on Chinese
wharfs because the Philippines objected to Chinese fishing boats
encroaching on Scarborough Shoal. Around 200,000 banana workers
were affected.'*® Beijing also made it plain to travel agents that tours to
the Philippines should be suspended. Manila had to cave in. Vietnam,
watching from the other side of the South China Sea, took a softer line
on its territorial claims.****
The Philippines is especially vulnerable to Beijing’s influence.
Chinese-Filipinos are thought to own around half of the Philippines
market capital and they have outsized political influence for a group
that makes up only 1.5 per cent of the population.^® Moreover, in 2007
the Philippines government awarded management of the nation’s entire
electricity grid to China’s State Grid Corporation. A Chinese SOE now
has its hands on the nation’s fuse box.’*
SEDUCTION AND COERCION
During heightened Japan-China tensions, cyber attacks originating
from China were launched against the Japanese parliament in 2011.
They followed cyber theft of information on defence equipment and
nuclear power plants.” Whether these attacks emanated from govern¬
ment units is hard to know, but ‘Beijing’s patriotic army of hackers
has actively used cyber warfare to target the Taiwanese government
and infrastructure networks’. Taiwan has been a special target, with
China’s cyber militia launching ‘countless cyberattacks intended to
harass, disrupt, or paralyze Taiwan’s financial, transportation, shipping,
military, and other networks’.”
Soon after Taiwan’s new pro-independence president, Tsai Ing-wen,
took office in May 2016, tourist numbers from mainland China
plunged by thirty-six per cent, threatening the survival of an industry
that had grown rapidly and largely on the back of the flow from the
mainland.” Beijing had instructed mainland tour operators to slash
their tours to Taiwan. Thousands of tourist industry operators and their
staff marched in the streets ofTaipei demanding the government appease
the dragon by taking a more pro-Beijing position.” After the Beijing-
induced crash it was forced to diversify and now limits the number of
tourists from China.”
Beijing is believed to have deployed patriotic hackers in Australia.
The Chinese government does not own up to using these methods,
leaving those who displease China uncertain and nervous. As Blackwill
and Harris observe: ‘In fact, the arbitrariness of China’s regulatory system
is part of what makes Beijing so effective in its use of geoeconomics
instruments.’” For a nation like Australia that operates by the rules, it’s
more difficult to use domestic regulations to penalise foreign imports or
investments for geopolitical purposes.
Coercing Australia
It might be thought that Japan, Taiwan and South Korea belong to
China’s immediate strategic zone and Beijing would not try that kind
of blackmail on a nation like Australia. But consider the case of Greece.
At the United Nations, no bloc has more firmly and consistently
defended human rights than the European Union. ^'JCflien the United
Slates wavered, the European Union could be relied on to raise its
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voice against states violating the rights embedded in the UN’s charter
including the right to a fair trial, press freedom and LGBT rights. At
least, that was the case until June 2017 when Greece vetoed a European
Union resolution condemning China’s persecution of activists and dis¬
sidents.^® Greece’s rogue action sent shock waves through the EU, with
one diplomat describing it as ‘dishonourable, to say the least’. Greece
explained that it is more effective to raise human rights concerns in
private meetings, succumbing to the classic PRC tactics of keeping
everything critical out of the public eye and insisting on bilateral
discussions behind closed doors.
Why had Greece broken ranks? We do not have to look very far.
In recent years China has poured billions into the Greek economy
struggling under EU-imposed austerity measures. In 2016 China’s big¬
gest shipbuilding company, the state-owned China COSCO Shipping,
bought a majority share in Greece’s biggest port at Piraeus. Greek Prime
Minister Alexis Tsipras was present at the sign-over ceremony to hear
Chinas ambassador say, ‘the agreement marks a historic milestone for
Sino-Hellenic friendship’.^ Greek ports are seen as vital to the OBOR
initiative’s access to Europe.
In addition, in 2016 China’s State Grid Corporation bought a
quarter share of Greece’s electricity grid operator, after the EU bailout
of Greece demanded privatisation of state assets. (State Grid’s bid to buy
Ausgrid in New South Wales was blocked by the federal government on
security grounds.) Senior CCP officials have targeted Greece, crippled
by its debts to European banks, with a view to developing a close
strategic partnership and, in the words of one analyst, turning Greece
into a kind of‘Chinese observer’ at the EU.*"' Prime Minister Tsipras has
been making pilgrimages to Beijing. The EU has unwittingly thrown
Greece into the arms of China, which seems intent on using it as a
beachhead into Europe.
Across the Aegean Sea, in August 2017 the Turkish government
promised that it would stamp out all anti-China media reports.
China became annoyed with Turkey when in 2015 it had protested
the mistreatment of Muslim Uyghurs in Xinjiang during Ramadan.
Protests were staged outside the Chinese embassy in Ankara. But now
the Turkish government had its eye on cash flows from the One Belt,
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SEDUCTION AND COERCION
One Road initiative after President Erdogan attended the big OBOR
conference in Beijing three months earlier.
Australia has given way many times to Chinese threats of ill-defined
economic retaliation. In 2016 the CCPs top leaders thought hard
about punishing Australia for our stance on The Hague’s ruling on
China’s illegal occupation of islands in the South China Sea. They
held off, but it is only a matter of time before we receive the Taiwan or
South Korea treatment. In January 2018 Beijing threatened Australia
with economic harm via an article in the Global Times.^^ Ostensibly,
Qjjf offence is to side with the United States over the South China Sea,
although, as we’d done nothing different, the threat was more likely an
expression of Beijing’s fear of the Turnbull government’s proposed new
national security laws, which could sharply curtail the CCP’s influence
operations. Although the PRC has annexed disputed islands in violation
of international law and turned them into heavily armed military bases,
it is Australia, apparendy, that is engaging in provocations’ by allowing
our navy ships to cross into the sea.
Punishments could include penalising Australian exporters with
bogus quarantine or health claims, arresting staff of Australian firms
on false charges, refusing visas to businesspeople, and launching cyber
attacks by secret agencies or citizen hackers. Some industries have
become far too dependent on markets in China—milk powder, com¬
plementary medicines, wine, certain food products. These could all be
stopped on the wharves tomorrow.
But our greatest vulnerabilities to Chinese economic blackmail are
education and the tourism sector, which in 2016 respectively generated
$7 billion and $9.2 billion in revenue from China. Tourism is especially
susceptible because it is expected to grow very rapidly ($ 13 billion by
2020) and the tap can be turned off quickly. (Students want to settle,
while tourists can go to Thailand.) Moreover, the tourism industry has
more political clout than universities. In an April 2013 meeting with
then prime minister Julia Gillard, President Xi was already making
veiled threats about the importance of Chinese tourists to Australia.^’^
In late 2016 the federal government gave Chinese-owned airlines ‘open
access to Austrahan skies, so they can ramp up the number of flights
as much as they like. A fifth of Virgin Australia has been bought by the
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Hainan-based HNA Aviation, a highly secretive and opaque company
that is reported to be acting for the CCP.<^5 buying up pilot
training schools at regional airports in Australia/’<^ Some experts predict
that pilot training in Australia will soon be entirely Chinese-owned.)
The ACCC gave approval to Virgin, HNA and two other Chinese
airlines to coordinate their operations to Australia. In short, Beijing can
now turn off the tourist tap at will through the airlines it can control.
Yet the federal government seems oblivious, designating 2017 as
the year of Chinese tourism. The Queensland government is investing
heavily to attract a larger flow of Chinese tourists to Cairns, Brisbane
and the Gold Coast, banking on a boom in regional tourism jobs.^^
While tourist numbers from other countries plateaued between 2011
and 2016, those from China nearly trebled, and Queensland reckons
there is a long way up the curve still to travel.
In considering our exposure to tourist blackmail, various factors
come into play. Beijing can more easily control the flow of tour groups
booked through Chinese travel agents: independent travellers are less
likely to be deterred; they spend more too. There has been a ‘massive
upsurge’ in Chinese investment in the Australian tourism industry,
accounting for forty per cent of the total in 2016.^’® Chinese investors are
buying big hotels (Mercure, Sheraton, Hilton, Ibis, Sofitel),^^ snapping
up distressed Queensland resorts (Daydream Island, Lindeman Island)
and building new ones. Some have links to tour group agencies in
China. Turning off the tourist tap will hurt them, but any complaints
they may make would receive little sympathy in Beijing.
150
8 Spies old and new
Spying on ASIO
The sprawling Chinese embassy in Canberra and ASIO s glass-and-
steel edifice sit on opposite sides of Lake Burley Griffin, around two
kilometres apart as the crow flies. Between them, an intense struggle
is taking place over the future of Australia. Worried about infiltration
of Australia’s institutions, in 2005 ASIO established a new counter¬
intelligence unit whose main task was to monitor and combat the
escalating activity of Chinese spies. This followed the departure of
ASIO director-general Dennis Richardson, who had effectively closed
down the organisation’s counter-intelligence capability in favour of
counter-terrorism.'
ASIO is said to have been running hard to keep up ever since
(providing a new career path for those Mandarin speakers whose loyalty
to Australia can be assured). It believes that China has launched a
‘full-court press’ against Australia—that is, an all-out offensive. Along
with its sister organisations, ASIO must try to resist the campaign
coordinated out of the Chinese embassy across the lake. While ASIO
cannot neglect its counter-terrorism function, its counter-intelligence
and counter-subversion operations are arguably far more important to
Australia’s long-term future.
The construction of a new office complex for Australia’s chief spy
agency on the shores of Lake Burley Griffin provided an irresistible
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wrgct for Chinese espionage. In 2013, as it was just being completed,
the ABC reported that the buildings blueprints, including floor plan!
cable diagrams and even the location of its servers, had been stolen
through a cyber intrusion emanating almost certainly from China.^
ASIO denied its blueprints had been hacked but the shadow attorney-
general, George Brandis, told parliament that intelligence sources had
confirmed the report to him. The building could not be occupied until
the communications systems had been reworked. Denying the claims
in Beijing, a straight-faced foreign ministry spokesman declared that
China opposes all forms of cyber attack.^
In 2015 journalists Primrose Riordan and Markus Mannheim
revealed that a development site across the road from ASIO headquar¬
ters had been bought by a company controlled by a Chinese billionaire
with links to the PLA.^ Liang Guangwei has hosted top Chinese leaders,
including former president Hu Jintao, at his company, Shenzhen
Huaqiang. Until a month before SHL Development bought a block of
land in Campbell (known as C5), whose corner is eighty metres from
ASIO, Liang was a director of the Canberra development company.
His wife, a Canberra resident, remains one of the three directors, but
it is Liangs money that is now being heavily invested in Canberra’s real
estate, with two other large land acquisitions occurring in 2016 and
2017. At the auctions, other bidders were blown out of the water.^
A fifth-floor apartment eighty metres from ASIO would be a perfect
spot to monitor vehicle traffic in and out of the building. No vetting
or assessment was carried out before the prime block was sold to the
PLA-linked company. Chief minister of the Australian Capital Territory
Andrew Barr, who according to the local paper has never seen a develop¬
ment he did not like and accepted SHL’s invitation to turn the first sod,
said anyone questioning the sale is ‘racist’.^ And, he added, if there was
a security problem then it was ASIO’s fault for putting its HQ near a
residential area.^
A thousand spies and informants
In a 2005 media interview after he had defected from the consulate in
Sydney, Chen Yonglin claimed that there is a network of ‘over 1000
Chinese secret agents and informants’ operating in Australia.® It seemed
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SPIES OLD AND NEW
like an extraordinary claim and was met by some with scepticism; after
all, during the Cold War the Russians couldn’t have had more than a
lew dozen spies and agents in this country. But Chinese intelligence
gathering operates on a different model. In addition to traditional kinds
of spying, China recruits large numbers of people of Chinese heritage
to collect and pass on useful information, including commercial and
military secrets and information on the activities of‘unpatriotic’ groups
like pro-democracy activists and Falun Gong. The embassy collates
the information and sends it to Beijing or uses it in its own operations
in-country.
One intelligence expert with ASIO connections put it like this:
‘China’s intelligence gathering is pervasive but not overtly intrusive and
by and large not breaking any laws, but it is on an industrial scale.’^
Chen’s claim is consistent with China’s much larger assault on the
United States. A former FBI counter-intelligence officer described as
‘a reasonable estimate’ the claim chat China has in place up to 25,000
intelligence officers and had recruited 15,000 informants already in the
United States.'®
As we will see, Chinese students in Australia monitor other students
and academics and report any ‘anti-China’ speech and activities, such as
criticising the CCP or watching a film about the Dalai Lama. Chinese-
Australians with business links to China can be persuaded, through
patriotism or blackmail, to report any intelligence they come across in
their many conversations with Australian business leaders or officials.
Those with access to valuable technological or scientific information
will be asked to pass it on. It’s been reported that ASIO is concerned
that spies may be arriving as tourists."
After reviewing the state of affairs, in 2016 Aaron Patrick wrote in the
Australian Financial Review: ‘Chinese security services are engaging in
the most intense collection of intelligence by a foreign power Australia
has ever seen.’’- Intelligence expert Paul Monk says Chinese intelligence
officers are having a field day’, and that ‘Chinese espionage right now
is occurring on a scale that dwarfs what the Soviet Union accomplished
during the height of the Cold \Car’.'^ In his comprehensive expose,
James To reports that overseas Chinese are recruited to gather low-grade
intelligence by infiltrating or monitoring, among others, trade unions.
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Nvonien’s groups, student associations and, for technology and business
strategies, corporations.'^ ASIO, organised to monitor traditional forms
of spying, is not equipped or resourced to keep abreast of this kind of
‘decentralized micro-espionage. I was told by a former analyst that even
with rapidly expanding resources, ‘the Chinese intelligence apparatus is
just too big to defeat’.
Some in government are aware of the scale and seriousness of
the threat, at least up to a point. But, unlike their counterparts in the
United States and Canada, they have decided to stay silent about it.
Cowed by the forceful and at times hysterical rebukes from Chinese
leaders and media, they are afraid of Beijing’s retribution and worried
about provoking anti-Chinese sentiment. However, in his last public
act as a public servant, in May 2017 the outgoing secretary of the
defence department, Dennis Richardson, warned of Beijing’s spying
and influence operations.
If the Australian populace—businesspeople, public servants and
everyday citizens were alert to the kinds of activities taking place,
they could take measures to defend against this unprecedented cam¬
paign of civil society espionage. ASIO could be encouraged to provide
much more explicit reports on the nature of the threat, rather than
vague statements in its annual reports that don’t mention China at all.
If the evidence can be found, there should be, as in North America,
prosecutions of Chinese spies. Government ministers could speak out
about it, as they tentatively began to do in 2017.
It’s worth remembering that many Chinese-Australians who, one
way or another, help the PRC advance its objectives do so under pressure
and are best seen as the victims of the CCP.
In 2016, after a long silence while he built his life in Australia, Chen
Yonglin told the ABC that the number of spies and informants would
have grown since he first suggested they number one thousand.'^
Huawei and the NBN
Its well known that for some years the Chinese party-state has been
using cyber espionage to intrude into our communications networks.
In 2013 Four Comers reported that the most important government
departments had been penetrated by China-based hackers, including
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SPIES OLD AND NEW
the prime ministers department, the defence department, foreign affairs
and the Australian overseas intelligence agency, the Australian Secret
Intelligence Service. The first Chinese cyber infiltration of the foreign
affairs department is thought to have occurred in 2001. The hacking
readied a crescendo in 2007 and 2008, giving rise to a tremendous fear
inside the intelligence community.
Attempts to penetrate Australia’s communications networks are
not confined to the activities of secret organisations operating from
nondescript buildings in the suburbs of Shanghai, like the infamous
Unit 61398.’® It is suspected that Beijing may use state-owned and
private companies to access communications, including classified ones,
in Australia and elsewhere. And so in March 2012 the Gillard Labor
government banned the giant Chinese telecommunications company
Huawei from tendering to supply its equipment to the National
Broadband Network (NBN). Our intelligence agencies had warned
that there was ‘credible evidence’ that Huawei was linked to the Third
Department of the PLA. the Chinese military’s cyber-espionage arm.’^
The company’s chairwoman admitted that it had been affiliated with
the Ministr)^ of State Security, the PRC’s intelligence agency.-®
In the meantime, Huawei had been spending up to create a public
image of trustworthiness, including setting up an Australian board as
a front. It appointed Liberal and Labor elders Alexander Downer and
John Brumby, following up by employing retired rear admiral John
Lord to chair it.*' Lord said he had seen the company’s K&cD and was
excited about it. He reassured cynics that, by appointing him to chair
the board, Huawei was not aiming to ‘crack the Australian military but
was interested in him because he knows his way around Canberra.’^
Lawmakers in the United States had been looking more closely
at Huawei, along with the other big Chinese telco equipment maker
ZTE. In October 2012 the US Congress released a devastating report
confirming fears about Huawei’s close connections with the Chinese
government and its intelligence agencies.It concluded that the United
States ‘should view with suspicion the continued penetration of the
U.S. telecommunications market’ by these companies. All proposed
acquisitions or mergers with American companies by Huawei, it sug¬
gested, should be blocked and all contractors to government systems
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should exclude Huawei equipment. The bottom line, it warned, is that
Huawei and ZTE ‘cannot be trusted to be free of foreign state influence
and thus pose a security threat to the United States and to our systems’
One of the more telling features of the Congressional investigation
was the attempt to understand the relationship between Huawei (and
ZTE) and the Chinese government. In China, Huawei is designated
as belonging to a ‘strategic sector’ and receives special preferment.
The investigators made numerous attempts to persuade Huawei to
be straight with them but found the company and its executives to be
evasive, shifty, obstructionist and, in the end, ready to lie. We know
why: telling the truth would destroy the careful attempts by Huawei
over many years to construct an image of a modern, independent, global
company working solely for the benefit of its shareholders.
Although it is not a state-owned company, it would be naiVe in the
extreme to believe a company that with government support turned
itself into the world’s second biggest telecommunications equipment
maker, with contracts to supply electronic equipment to communica¬
tions networks around the world, did not have daily links with China’s
intelligence services. The Economist wrote that Huawei ‘has stolen
vast amounts of intellectual property and that it has been heavily
subsidised in its expansion by the Chinese government, eager to use
it as a Trojan horse with which to infiltrate itself into more and more
foreign networks.’^**
Huawei’s linkages with the intelligence services were in place from
its foundation by former PLA officer Ren Zhengfei. Ren was a director
of the PLA’s Information Engineering Academy, responsible for telecom
research for the Chinese military and specifically ‘3PLA, China’s
signals intelligence division’.According to a RAND Corporation
report for the US Air Force, ‘Huawei maintains deep ties with the
Chinese military, which serves a multi-faceted role as an important
customer, as well as Huawei’s political patron and research and develop¬
ment partner.’"^ A 2011 CIA report fingered Huawei’s chairwoman.
Sun Yafang, as a former employee of the Ministry of State Security, the
equivalent of the CIA itself-^
Despite this damning information, Huawei had powerfial supporters
in Australia. When the Gillard government banned the company from
156
SPIES OLD AND NEW
tlie NBN, Opposition finance spokesman Andrew Robb attacked the
decision as 'the latest clumsy, offensive and unprofessional instalment of
a truly dysfunctional government’.^® That was not long after Robb had
enjoyed an all-expenses-paid visit to Huawei’s Shenzhen headquarters.^’
Kerry Stokes, who had used Huawei to help build a broadband network
in Perth, said he had ‘the utmost respect’ for the company.^® Alexander
Downer laughed off the claims of the company’s links to Chinese intel¬
ligence agencies. ‘I don’t know what’s wrong with Australia,’ said the
Huawei Australia board member. ‘It’s not a John le Carre novel’.^'
Downer had form. In 2004 he visited China as foreign minister
where he told his Chinese counterparts that the ANZUS Treaty was
only ‘symbolic’ and that Australia was not obliged to back the US in
a conflict over Taiwan. He was sympathetic to a strategic realignment,
collaborating with China on security and political issues, causing
t^vo commentators to conclude presciently: ‘Mr Downer’s talks in
Beijing have shown how quickly the staunchly pro-US Government in
Canberra is being turned by China’s rising economic power and influ¬
ence, to the point where it is distancing itself from a key US strategic
posture.’^^ According to Chen Yonglin, ‘Downer’s stance immediately
raised the interest of CCP leaders,’ who saw an opening into which they
could drive a wedge.^^
In November 2013, after the Abbott government, acting on ASIO’s
advice, reaffirmed the ban on Huawei as an equipment supplier to
the NBN, Huawei board chair John Lord wrote to the company’s
disappointed staff members: ‘1 want to make it crystal clear that
Huawei has never been presented with any evidence that our company
or technology poses any kind of security risk.’-^** His assurances came
a year after the damning US Congressional report. The former fleet
commander spoke of Huawei’s excellent prospects, including its big
contract to help build Optus’ 4G network. He insisted that Huawei ‘has
nothing to hide’, a judgement at odds with that of the US Congressional
committee that found the company to be evasive in its testimony.
(The committee also noted credible evidence that Huawei had violated
immigradon laws and engaged in bribery and corruption.
In a strange twist, while banning Huawei the federal government
allowed ZTE to tender to supply equipment to the NBN despite the
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SILENT INVASION
US Congressional committee bracketing the two as equally suspect
The decision was apparently endorsed by ASIO. In early 2017, ZTE
was fined US$900 million for selling sensitive US-made technology
to Iran, breaking US sanctions.^^ The conviction came after years of
lying to federal investigators about the allegations. Afterwards, ZTE’s
CEO Zhao Xianming announced a new ZTE, compliant, healthy
and trustworthy’.^^
Some MPs had got the message about Huawei though. In 2016,
when the federal infrastructure minister Paul Fletcher began wear¬
ing around Parliament House a Huawei smartwatch (a gift from the
company). Senator Penny Wong grilled parliament’s chief information
officer. Is the watch connected to the building’s network? The CIO
didn’t know; it wasn’t her job to conduct a risk assessment of the device
and she really didn’t know much about Huawei.^® Yet the parliamentary
computer network had been hacked from China in 2011, giving that
country’s intelligence sources access to MPs emails for up to a year.^’
While the network was not used for classified communications, the
hackers are likely to have compiled data on the personal relationships of
current and future leaders, their real opinions on China and the United
States, and gossip about their friends and enemies, all of which could
prove very useful.
The head of our defence department in 2016, Dennis Richardson,
was not unduly worried about all of this. In March 2012, while
secretary of the Department of Foreign Affairs and Trade (DFAT) and
a member of the board of the Canberra Raiders rugby league club, he
took leave without pay from his job for half a day to help decide on a
$1.7 million sponsorship agreement between the club and Huawei.'*®
Huawei had never displayed any interest in rugby league—indeed, it
was the first sports sponsorship the company had ever entered into.'*'
Using a marketing budget to get close to influential figures is a tactic not
unknown to Chinese (and other) companies. And who better to gain
access to than Australia’s foreign affairs boss, also the former director-
general of ASIO, and soon to become defence secretary? Presumably,
when the whistle later blew for kick-off at Canberra Stadium, Richardson
stood shoulder to shoulder with Huawei executives, along with fellow
Raiders board member Allan Hawke, formerly secretary of defence.
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SPIES OLD AND NEW
Tlie careful cultivation of personal relationships with powerful people is
a Chinese specialty, one that has been applied systematically and raised
to a new level in Australia since 2005.
The Raiders were soon praising the benefits of the Huawei sponsor¬
ship, including the use of the company’s 24/7 smartwatch monitoring
of players, including their hydration, sleep, diet and wellness, as well
as, with the help of Huawei’s tablet computers, their location and
movement speed.'*^ Handy on a politician too. According to the
club’s marketing manager, the Raiders’ corporate values of ‘courage,
respect, integrity and professionalism’ are ‘a good match for Huawei’s
own values’.
Huawel’s reach
In its report on Huawei the US Congressional committee referred to the
‘ongoing onslaught of sophisticated computer network intrusions that
originate in China. It concluded that ‘China has the means, opportu¬
nity, and motives to use telecommunications companies for malicious
purposes’.'^^ Although its hardware was excluded from Australia’s
National Broadband Network, Huawei has successfully sold equip¬
ment to other communications networks, including those of Vodafone,
Optus and Telstra,'^'* aided by state subsidies that allow it to undercut
the competition.'^’ In 2014 the South China Morning Post reported
that the Home Office in London had scrapped video conferencing
equipment supplied by Huawei because of security concerns.'*^’ Acting
on intelligence advice about the risks of eavesdropping, all departments
were ordered to stop using Huawei equipment. No similar ban applies
in Australian government departments.
Perhaps more worryingly, Huawei has a close commercial relation¬
ship with State Grid, the giant Chinese state-owned corporation that
now owns a large portion of the electricity networks in Victoria and
South Australia. State Grid, using Huawei’s equipment, can collect
massive amounts of data about power usage. If it has not already been
installed, the effective operation of Australia’s electricity network could
depend on soft\s'are installed in hardware made by Huawei.
Perhaps this was a consideration that contributed to the blocking of
the sale of the New South Wales distribution network Ausgrid to State
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SILENT INVASION
Grid in 2016. After all, the US Congressional committee expressed
alarm at the fact that ‘[mjalicious implants in the components of critical
infrastructure, such as power grids or financial networks, would be
a tremendous weapon in Chinas arsenal’.**® Wade captures the broad
concern with a rhetorical question:
When a Chinese state-owned company with intimate links to the
military and to China’s intelligence activities gets the all-clear from
the Foreign Investment Review Board to control major national
infrastructure, and even to buy into the NSW electricity transmis¬
sion network that carries optical-fibre communications between
Australian government departments, the question must be asked:
Are the processes of foreign investment consideration and approval
in this country in need of revision?'**’
Huawei has been diligently building its brand and networks of influence
in Australia, that is, beyond its links with a current and former defence
secretary, a former rear admiral, a former foreign minister and a former
state premier. Serving parliamentarians have been lavished with gifts
and free travel. One target has been assistant treasurer Kelly O’Dwyer:
the company paid for lion dancers at a Chinese New Year event in her
electorate. Predictably, Sam Dastyari is in the frame, visiting Huawei’s
Shenzhen headquarters in 2013. The company flew News Corp jour¬
nalist Greg Sheridan to China, after which he wrote an article gushing
about the company’s achievements, noting that all Chinese companies
have CCP committees, telling us that ‘nothing bad about Huawei has
ever been proved’ and suggesting the company had been innocently
caught up in American anxieties about cyber hacking.^® The scales have
since fallen from Sheridan’s eyes (as they have from mine).^'
None of those who have availed themselves of Huawei’s hospitality,
or accepted its lucrative board positions, have done anything illegal.
But who would doubt that they have used their positions and reputa¬
tions to buft the company’s veneer of respectability and so contribute to
its successes?
In January 2018 the US telecom giant AT&T abandoned a deal
to supply Huawei phones to its customers. The US Senate and House
160
Mf
•rnmm
SPIES OLD AND NEW
intelligence committee had written to the Federal Communications
Commission reminding it of the evidence in the Congressional report
on Huawci and noting that additional evidence had come to light.
Honey traps
When Tony Abbott took his first trip to China as prime minister in
2014 he was accompanied by his chief of staff, Peta Credlin. They
attended die high-profile Boao Forum, reputed to be the ‘most bugged’
event in China. Officials and journalists had all been briefed on security
bv ASIO. Take a different phone. Don’t put any phone in the charger
supplied in your hotel room. Throw away USB sticks in any gift packs.
Never leave your laptop in your room, even in the safe.
Credlin looked around when she first entered her hotel room.^^ She
immediately pulled out the plug of her clock radio, and disconnected the
TV set. Within minutes there was a knock on the door. ‘Housekeeping.’
The staff member entered, plugged the clock radio and TV back in, and
left. Credlin unplugged them again and, sure enough, housekeeping
came knocking. The devices were plugged back in. So to make a point,
Credlin pulled out the clock radio and put it in the corridor outside her
door. Then she covered the TV set with a towel. At the forum, the prime
minister would tell the media that Australia was China’s ‘true friend’.
Bugged clock radios are not the only danger for officials in Chinese
hotel rooms. There are persistent stories of Australian political
representatives on organised visits to China finding ‘girls’ in their hotel
rooms. In the instances we hear of, the targets rush from their rooms
to inform their group leaders. There must be others who have been
ensnared by the honey trap and are forever owned. Intelligence expert
Nigel Inkster writes that honey traps are being used more often by
Chinese agents to recruit non-Chinese.^^ Australia’s intelligence services
are aware of‘numerous cases’. It may be mere rumour but I have been
told a former senior Australian political leader was caught in such a trap
and is now a reliable pro-Beijing commentator.
Fear of compromising photos with an escort is one kind of honey
trap. The other exploits infatuation rather than fear. Love affairs, and
even marriages, between men with access to valuable information and
women of Chinese heritage working for Beijing are not unknown.
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SILENT INVASION
Besotted men do crazy things. In 2014 in Hawaii, a 27.ycar-old Chine
student seduced a 60-year-old former army officer and defence contr^
tor. He was soon passing her classified information on US war plans
and missile defence.^^ In another case, a Chinese-American FBI agen^
Katrina Leung, a double agent for Beijing, had a sexual relationship
with her FBI handler and the head of US Chinese counter-intelligence
operations in Los Angeles. He fed her classified information for
two decades.
It would be naive to think that Chinas vast spying network was not
working at recruiting Australian academics, experts and journalists to
provide information, especially secret information. Chinas intelligence
agents exploit vulnerabilities known as the ‘four moral flaws’; lust,
revenge, fame and greed. Some of the techniques have been revealed in
court documents arising from a series of espionage trials in the United
States, but because Australia does not prosecute spies there is little
information on how it works in this country.
In July 2017 Nate Thayer, an independent US journalist, wrote a
detailed account of attempts by the Shanghai State Security Bureau,
an intelligence agency within the Ministry of State Security, to recruit
him to engage in espionage.The bureau sometimes works through
the Shanghai Academy of Social Sciences (SASS), which allows itself
to be used as cover for recruiting foreign academics to spy for China.
(The same is true of the Chinese Academy of Sciences.) Thayer notes
that ‘the FBI has assessed that the Shanghai State Security Bureau ...
has a close relationship with SASS and uses SASS employees as spotters
and assessors’. Soon after Thayer’s commentary appeared, a former
CIA agent appeared in a Virginia court charged with espionage after he
travelled to Shanghai to meet two men claiming to be employees of the
Shanghai Academy of Social Sciences.^®
I have seen no evidence that Australian academics, think tankers or
journalists have been recruited in this way, although in 2008 journal¬
ist Philip Dorling reported that an ALP staflFer had been recruited by
Chinese agents. The staflFer agreed to provide personal information on
senior Labor Party figures and write background documents on inter¬
nal party affairs, for which he was paid small sums.^^ With the 2007
election approaching (in which China’s consulate in Sydney backed
162
SPIES OLD AND NEW
Kevin Rudd), the staffer was urged to seek employment with a federal
minister. When he learned that he would need a security clearance to
work in a ministers office he broke off the relationship.
Thayer quotes an American specialist on Chinese intelligence
activities: ‘The FBI Washington Field Office has at least five counter¬
intelligence squads focused on China, covering think tanks, journalists,
students, military attaches, diplomatic personnel, and declared MSS
officers.’ The US reports ought to ring alarm bells given the heavy traffic
of academics, experts and journalists moving between Australia and
China. For example, the Australia-China Council funds an Australian
Studies Centre at the Shanghai Academy of Social Sciences, and the
University of Sydney has an exchange agreement with it. It would
be fair to assume that attempts have been made to recruit Australian
academics visiting the SASS in Shanghai.
The FItzgIbbon-LIu affair
In 1963 Britain was captivated by a sensational scandal. It emerged
that the minister for war, John Profiimo, had been sharing a mistress,
Christine Keeler, with a Russian military intelligence operative, Yevgeny
R-anov. The Profiimo affair destabilised the government, almost brought
down the prime minister, preoccupied the press for months, precipi¬
tated a wholesale security review and led to a dozen books and films.
Andrew Lloyd Webber even wrote a musical about it. It was huge.
In 2009 Australia’s minister for defence, Joel Fitzgibbon, was
reported to have ‘a very close’ and long-standing friendship with a
Chinese businesswoman, Helen Liu, who turned out to have close
links to Chinese military intelligence.'^® She was also a wealthy property
investor and a generous ALP donor. The journalists who broke the
story_Richard Baker, Philip Dorling and Nick McKenzie—noted that
when the minister was in Canberra he rented a townhouse owned by
Liu’s sister, Queena.
Defence intelligence officers carried out an unofficial, covert security
assessment, uncovering Liu’s links to the Second Department of the
People’s Liberation Army, responsible for collecting human intelligence
on matters military, political and economic outside China.®' Among the
reasons for concern were wo undeclared trips flying first-class to China
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SILENT INVASION
by Fitzgibbon before he became the minister/’^ According to a senior
defence intelligence official, when passed up the chain of command the
unauthorised report into the issue was ‘too much of a hot potato’ and
went nowhere. Then prime minister Kevin Rudd, who had reportedly
dined with Ms Liu, did not ask for Fitzgibbon’s resignation. Nor, as far
as we know, were the pair subject to an ASIO assessment.
Helen Liu’s connections with China’s intelligence agencies went
deeper. In 2017 it was revealed that one of her companies had made
a large payment to a Hong Kong company believed to be a front for
Chinese espionage. According to Baker, Dorling and McKenzie, the
company’s owner, Liu Chaoying, is or was a lieutenant colonel in the
PLA and had been engaged in procuring missile and satellite technol¬
ogy.^^ She has also had close personal ties with Helen Liu. Liu Chaoying
was well known to US authorities because she was intimately involved
in ‘Chinagate’, the scandal in the mid-1990s that saw large sums of
money funnelled into Bill Clinton’s foundation that may have come
from a Chinese intelligence agency as part of an influence operation.
Helen Liu admits she knows Liu Chaoying but denies she knows
anything of her intelligence connections. Meanwhile Helen Liu had
been making large donations to the New South Wales Labor Party and
Fitzgibbon’s election fund. Baker, Dorling and McKenzie write: Fairfax
Media is not suggesting Mr Fitzgibbon has received anything else from
Ms Liu which he is required to declare.’
That this blatant security breach, in which the nation’s defence
minister was friendly with a Chinese intelligence operative, attracted
so little scandal is a sign of the amazing naivety with which Australians
view all things Chinese. Most journalists, editors, politicians and
opinion makers took the view that China could not be so interested
in Australia that it would plant spies. The whole affair was just a quirk
deserving no further investigation. Senior politicians from both sides
of politics lobbied Fairfax, publisher of The Sydney Morning Herald
and The Age, to suppress the Fitzgibbon—Liu story, arguing it would
damage our relationship with China and stir up anti-Chinese sentiment
in Australia. They may have been right on both counts, but it is also
true that both sides had deeper links with Ms Liu that they wanted kept
in the shadows.
164
SPIES OLD AND NEW
Helen Liu was a student in Sydney at the time of the Tiananmen
Square massacre in 1989. According to pro-democracy activists, she
attended anti-Beijing protests at around this time but then disappeared,
reappearing a few years later as a wealthy businesswornan It soon
became apparent that she was well connected in China—indeed, very weH
connected with senior party cadres. In the mid-2000s she w^ appointed
an honorary chairman of the ACPPRC, along with Chau Chak Wing.
men the Fitagibbon story broke in 2009. Bob Carr immediately
came out to defend Helen Liu, branding as ‘shameftiF suggestions she
a security risk. As to claims she was a myste^ woman, Carr said
•shes no more a mystery than any other woman’.® Carr and h« wife,
Helena who is of Malaysian-Chinese descent, are close friends of Helen
Uu“ At that stage her companies, part-owned by Chinese state cor-
pomtions, had given more than $90,000 to the New South Wales ALP
Uaked documents indicate that, in reports back to Beijing through the
Bank of China, Liu was saying she won Fitzgibbon over by paying him.
The money we pay him is worthwhile, she wrote.
At the time of writing, the Department of Immigration is keen to
speak with Helen Liu about the circumstances in which she obtained
her Australian citizenship. It seems that while on a student visa in 1989
she obtained permanent residency fraudulently by making a sham
marriage. One of those involved, a naive young Australian woman
who married Lius Chinese boyfriend while her own boyfriend married
Liu confessed.^ (Liu divorced her ‘husband a lew years later. Its been
suggested she did so after realising he may have been entitled to half of
her newly made fortune.'^'^)
Questions about the legitimacy of Helen Liu’s marriage were brought
to the attention of the immigration department in 2012 by Opposition
immigration spokesman Scott Morrison.'" Journalists Baker, Dorling
and McKenzie wrote that the department declined to release informa¬
tion about Liu’s marriage after consulting the office of the minister,
Chris Bowen.^*
Hikvision
In September 2016 The Times of London splashed across its front page
a stor)' about the rapid penetration of the CCTV market by Hikvision,
165
SILENT INVASION
a company controlled by the Chinese government/^ Hikvision’s
cameras had captured fourteen per cent of the British market and were
installed in a range of government buildings as well as Stansted and
Glasgow airports and the London Underground. Officials feared that
if the CCTV cameras were internet-enabled then their data could be
fed back to Beijing. The Times claimed Hikvision grew out of Chinas
military surveillance organisation and had achieved rapid market share
by undercutting competitors, a strategy made possible because of its
cheap line of credit from state banks.
Hikvision is now the worlds leading supplier of video surveillance
equipment.^^ Hangzhou Hikvision Digital Technology is a state-owned
enterprise founded in 2001, emerging out of a government research
institute. It is controlled by a larger state-owned technology group,
China Electronics Technology Group Corporation (CETC) (whose
penetration of the University of Technology Sydney is discussed in
Chapter 10).^“^ The chair of its board also serves as the secretary of
the Communist Parry Committee of the company. He has exhorted
members to realise the unity of the ‘Hikvision Dream’ and the ‘China
Dream’.^^ When in 2015 President Xi went on an inspection tour of
Hangzhou he visited Hikvision’s headquarters rather than that of the
much more famous Alibaba. He was introduced to the company’s head
of research and development, Pu Shiliang, who is also reported to be
the director of a technology laboratory within China’s leading security
agency, the Ministry of Public Security, which conducts a massive video
surveillance program. The ministry is responsible for suppressing dis¬
sidents and for widespread abuse of human rights, including torture.^^
Hikvision’s most advanced cameras can recognise numberplates, even
in fog, and can follow individuals using sophisticated face-recognition
technology. In the United States, installation of the company’s equip¬
ment in airports, prisons and schools, and a military base in Missouri,
has led some industry experts to raise the alarm. One wrote to the US
government: ‘Every time one of their machines is plugged into the
internet, it sends all your data to three servers in China. With that
information, the Chinese government can log in to any camera system,
anytime they want.’^ While other industry leaders are less worried, a
major video surveillance software company, Genetec, has said it will no
166
SPIES OLD AND NEW
longer service Hikvision (or Huawei) devices due to security concerns.
For its part, Hikvision accuses its critics of a Cold War mentality.
Hikvision set up an Australian subsidiary in 2013. Since then it has
won a large and growing market share for its ‘incredibly cheap IP camera
(internet-enabled), in the words of one expert in Canberras security
industry.^® It may be the largest supplier of video surveillance equip¬
ment in Australia. The same expert says that Hikvision s cameras, while
very popular for monitoring commercial premises, schools, apartment
blocks and the like, are not yet of sufficient quality for high-end uses
like airports and secure government buildings (at least in Canberra).
Hikv'ision itself has said the gap between its cameras and the top
brands is closing.®" The cameras are always linked to servers, which
are usually onsite, but the images could be rerouted to servers anywhere
in the world.
One Australian supplier discontinued its relationship with Hikvision
after trade magazines exposed the company s CCP links. Other industry
experts I have spoken to are reluctant to say anything on the record
but all are aware of the doubts about Hikvision. Even if retailers do
not sell Hikvision cameras, most of the leading CCTV brands installed
in Australia—including Swann and Honeywell—are actually devices
manufactured by Hikvision in China and rebranded.®' (Some brands
will not reveal where their cameras are made.) One major national
supplier of CCTVs, including Hikvision, told me that his customers
are not aware of the risks of using Hikvision cameras, and that goes for
government agencies too.®^ If it comes up, most dismiss the concerns
as just another conspiracy theory. The security and surveillance expert
has watched the Chinese penetration with growing alarm, describing
Australians as ‘sleeping zombies’.
In March 2017 experts discovered that Hikvision had inserted
a ‘backdoor’ into its CCTV cameras allowing ‘full admin access’ to
the devices. Hikvision categorically denied it, but the United States
Department of Homeland Security (DHS) verified the reports and
gave Hikvision cameras its worst possible score for security.®^ In May
2017 the DHS issued an alen warning of malicious intruders accessing
sensitive information on networks by hacking into Hikvision cameras.®^
Hikvision cameras are seen as the weak link.
167
SILENT INVASION
When I asked a senior security industry figure if the Chinese gf/vern-
ment could use a Hikvision camera to spy on the building where
installed, he replied, ‘Of course it could be used for spying,’ After a scries
of investigative articles in 2016, the trade website IPVM concluded in
2016 that ‘the rest of the world seriously needs to consider the risks of
having a Chinese Communist Party controlled organization being their
video surveillance provider’.®^ Yet Hikvision CCTV cameras are being
installed all over Australia without any expression of official concern.
Cyber theft
In late 2015 the computer systems of the Australian Bureau of
Meteorology were the victim of a ‘massive’ cyber assault, resulting in
the installation of malicious software.®*" While most people thought
not much damage could be done to a weather-forecasting organisation,
in fact the bureau is better thought of as ‘a broad-based environmen¬
tal intelligence agency’.®^ Its work is at the cutting edge of scientific
research on weather forecasting and climate change. Moreover, its
supercomputers are linked to sensitive systems across government,
including the defence department, which receives daily weather reports,
not least in parts of the world where the armed forces are operating. If
there were a conflict with China, disrupting our weather-forecasting
capacity could be a significant strategic advantage. According to Peter
Jennings, the bureau may be seen as ‘the weakest link’ to gain access
to high-security agencies,®® the kind targeted by top-secret PRC cyber
agencies like Unit 61398. The 2015 cyber intrusion may take years to
fix at a cost of hundreds of millions of dollars.
In late 2016 security concerns were raised when the Australian
National University’s cutting-edge National Computational Infrastruc¬
ture (NCI) centre confirmed it would be installing hardware and
software supplied by Chinese company Lenovo, in which the Chinese
government has a stake.®^ The Pentagon has warned US military agen¬
cies against the use of Lenovo equipment.^® The ANU facility is used
by the Bureau of Meteorology, the CSIRO and Geoscience Australia,
among others. A source at the NCI told me that ‘the cat is out of the bag
anyway’, as Chinese equipment is used everywhere and experts like him
always assume that their systems have been infiltrated.^’ All that can be
168
SPIES OLD AND NEW
done is to take measures to limit the intrusion to those users who have
been hacked. , t ii
It is not often appreciated just how dependent Chinas remarkable
economic growth has been on foreign technology, much of which has
been acquired by devious means. As China makes the transition to a
more high-tech economic future, this dependence is increasing. Chinas
Thirteenth Five-Year Plan stresses this transition and devotes attention
to how the needed technology can be acquired. Although China has
invested huge amounts in science and technology education, Xi Jinping
complains that China is still far too dependent on foreign technolo^ ’J
The gap is so crucial that two experts writing on cyber security for a US
think tank concluded that China’s economic plans presuppose a huge
program of state-sponsored theft,® , ,
The dependence of China's future growth on Western technology
tvas disclosed in an indiscreet 2013 interview in a Japanese newspaper
with Jack Peng, a senior IT engineer and officer in the Silicon Valley
Chinese Overseas Business Association (SCOBA), linking the technol-
o«n' hub with the PRC.
I think if we [overseas Chinese scholars] quit America and went
entirely back to China, Chinas development would halt ... China
regards those of us living overseas as essential. It extends a hand to
us to make the results of our research blossom on Chinese soil ...
Most of us serve as advisors to the Chinese government through
the SCOBA organization ... Everyone has entered into a system of
hiil-scale cooperation.^'*
Its known that cyber theft is an enormous problem in Australia,
as it is in every technologically advanced nation. The Russians do it
better but the Chinese do it more. What makes China unique is the
implementation over many years of a program of systematic theft of
commercial information, a program planned, implemented and sup¬
ported by the Chinese government. While theft of intellectual property
has a long history in the United States and Australia, it is against the
law for intelligence agencies to spy for companies, unlike in China.
The PRC’s explicit aim is to build the nation’s technological and engi¬
neering capabilities on the back of research carried out in other nations.
169
SILENT INVASION
The head of the US military’s Cyber Command has described thi,
rampant theft as the greatest transfer of wealth in history’.’^ One cred
ible source estimates that IP theft costs the US economy $600 billion a
year, with the PRC as the leading culprit.’*^
The former chief of cyber crime at the FBI gave the example of
hackers who in one night stole all of the results of a $1 billion research
program carried out by an American company over ten years. Its
not only military and commercial information that’s being stolen. In
2014-15 a PRC state-sponsored agency known as Deep Panda hacked
healthcare providers, stealing patient records of some eighty million
Americans, data that could be used to compile personal dossiers and
blackmail persons of interest.^^ Another state-sponsored organisation.
Axiom, has hacked, among others, energy companies, meteorological
services, media outlets, NGOs and universities.^® Sometimes the easiest
route is to persuade a ‘malicious individual’ on the inside to do no more
than open a zip file in an email, which then installs malware such as
PoisonIvy or Hikit on the organisation’s system.
While the United States has been upfront about the nature and
scale of the cyber threat and its responses, until recently the Australian
government has kept the Australian public in the dark. Now it is talking
more, though without naming China. As always, the view seems to be
that nothing should be said that might upset Beijing. The US govern¬
ment has prosecuted scores of people, mostly of Chinese ethnicity, for
various kinds of industrial and military espionage. In Australia there
have been no prosecutions, partly because our laws are weak and partly
because there is no appetite. When the Bureau of Meteorology was
hacked the government was reluctant to point the finger at China, even
though it was almost certainly guilty.
Few companies are willing to expose the laxity of their cyber security
or frighten their shareholders by publicising the theft of their intellectual
property. An exception is Codan, an Adelaide-based communications
and mining technology firm that manufactured a very effective metal
detector sold around the world. That side of its business was booming
until 2013—14 when, unaccountably, sales collapsed. It discovered that
cheap copies of its product were being manufactured in China and sold
in large numbers in Africa.^
170
SPIES OLD AND NEW
bad!'o Australia to infect the company’s system. This ^ad bej used to
hadvtoAus ;,e mpral detector. (Government officials visiting
altam ow warned not only to avoid hotel wifi but also to leave theit
K l/nhles at home and avoid using hotel toom safes.) Codan was
rifull^nawate until ASIO officets arrived to reveal that its computer
"X rfie mo"sfdTsmrbing aspects of the case was the Australian
aos^lent’s reaction. When Codan CEO Donald McGurk contacted
^e federal government to help him track down and prosecute t e
tost he was told you’re on your own’.'» The government w^ ,n
1 middle of negotiating the free trade agreemen t wtth Chma and did
not want any dark element to disrupt the friendly atmospherics,
of offending Beijing is a constant theme in our gosternments dealings
„ith China. Beijing and its various organs know when to turn on e
histrionics and exploit this Australian cultural weakness. Codan was
forced to pursue the culprits on its own. tracking them down with the
assistance of a private investigative firm in China.
Codan makes military equipment as well as metal detectors. Its port¬
able field radios can send encrypted messages over long distances and
are widely used in training and operations by armed forces and border
operations in the United States, Britain and Australia, which explains
whv ASIO came knocking at Codans door. Every defence contractor
in Australia is a high-value target. Listening in to the enemy’s com-
muniation system has been of the highest military priority since the
decommissioning of the last carrier pigeon (and attempts were made
to intercept them too). Exports need a government permit. And it was
design information about the field radios that the malware aimed to
steal.'®' China’s defence strategy relies heavily on an ability to degrade
and disrupt the communications and surveillance capabilities of a
superior American enemy.
It’s natural to think that spies target research in fields such as
advanced materials, nanotechnology and so on, yet few sectors are
immune, including agriculture. In 2016 the US government warned
formers to be alert to Chinese businessmen showing keen interest in
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SILENT INVASION
genetically modified seeds.'"’ A Beijing-sponsored espionage ring h,d
been caught digging up seeds from Iowa farms to send to China.’'-
US authorities treated it as a national security prosecution rather than
a criminal case. There had been a spate of reported thefts of advanced
food technology—after all, biotechnology is the subject of billion-dollar
research programs. These warnings add a new dimension to the surge of
Chinese investment in Australian agriculture, including joint ventures.
Racial profiling
Nervous about accusations of‘racial profiling, US authorities have had
to tread carefully in their pursuit of Beijing’s spies. Most are of Chinese
heritage.Beijing-linked organisations in the US have been quick to
accuse US authorities of racial profiling, in the same way that their
counterparts in Australia silence critics with the ‘xenophobia word. In
the US there are examples of strong cases for prosecution being
because political authorities were nervous of this kind of accusation.
The irony is that the Chinese party-state bases its entire foreign outreac
on ethnicity-that is, on racial profiling. What matters is not beliefs, as
in the Cold War, but skin colour.
Of course, the PRC exploits Western liberal sensitivities wherever it
can, encouraging its proxies and apologists to use accusations of racisrn
and seizing on any wrongful accusation of espionage. Mu tip ymg
ironies, the PRC security services launched their own public awareness
campaign against spies, centred on a cartoon poster titled g
Love’, warning young female civil servants of the risks^^ S
seduced by handsome Westerners such as visiting scholars.
the uproar if the Australian attorney-general launched a comic
warning public servants of the dangers of being seduced by women
Chinese heritage.
The Chinese embassy and consulates pull the strings of hundreds,
perhaps thousands, of Chinese-Australians in sensitive positions. A
Falun Gong practitioner in Canberra, interviewed by Alex Joske, said
his wifes close friend had suddenly cut off contact with her. The friend
later admitted that, despite being an Australian citizen and an employee
of the Australian Public Service, she had been compelled by the Chinese
8 nment to do so. These Chinese-Australians are victims too.
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SPIES OLD AND NEW
Cyber warriors
In 2016 the federal government announced a new cyber-security
strategy that would pour more resources, staff and determination
into protecting Australia from cyber threats. The enhanced Australian
Cyber Security Centre will be led by the top-secret Australian Signals
Directorate (ASD). In addition to responding to cyber crime, in one of
the most important defence initiatives in decades the government has
begun a shake-up of the defence forces with the formation of a cyber-
warfare division tasked with defending Australia from hostile attacks
and having the ability to launch cyber offensives against enemies. The
rank of the head of the division will be similar to those leading the three
traditional services.
The new emphasis on cyber warfare is in large measure a response to
Chinas commitment to achieve cyber superiority for its armed forces,
announced in 2014. We cannot match China with troops and hardware,
but one targeted cyber attack could wreak havoc. I am told that, as in
the US, the who’s who of cyber warfare in Australia are reading Ghost
Fleet, a novel ‘grounded in hardcore research’ by Peter Singer (not the
philosopher) in which the United States is defeated, and then occupied,
because China’s superior c>^ber capability allows it to cripple America’s
satellite systems and computer nenvorks. It is believed that foreign intel¬
ligence agencies may already be planting malware for future sabotage.'®^
Although there is already a shortage of cyber skills in the civilian
workforce, the new emphasis on cyber in the Australian Defence Force
will require 100 cyber security specialists immediately, growing to 900
within ten years."" Where will they come from?
Deakin University, based in Geelong, runs one of Australia’s few
programs allowing both undergraduates and postgraduates to specialise
in cyber security. Many graduates are expected to make their way into
oovernment agencies, scientific organisations like the CSIRO and the
Australian Defence Force. The university’s Centre for Cyber Security
Research and Innovation (CSRI) ‘works with industry and government
through collaborative research projects to provide protection from
major cyber security threats’.’" It is dominated by researchers of Chinese
heritage. Of the ten academic staff members listed on its website, six,
including the centre’s director. Professor Yang Xiang, are from China.
173
SILENT INVASION
CSRI director Yang Xiang has a PhD from Deakin. He ]% zW,
the director of the Network Security and Computing Laboratory
(NSCLab) at Deakin, which is part-funded by the Australian Research
Council (ARC). It names as a research partner the Australian Bureau
of Meteorology, which, as indicated, was targeted in 2015 in a cyber
attack believed to have been launched from China. NSCLab s website
lists the Cybersecurity Lab at the Australian Defence Force Academy
(ADFA), run by professor of cyber security Hu Jiankun, as its sole
‘friend lab’, with which it shares data sets."^
Yang Xiang is closely connected to Xidian University. In May 2017
he received a Changjiang Scholar award from the Chinese government,
which includes a professorship at Xidian University. His receipt of the
award and the Xidian professorship are proudly advertised by the CSRI
as a ‘boost for cyber security collaboration’.As we will see in the next
chapter, Xidian University is closely connected to the People’s Liberation
Army and has shown a strong interest in expanding its overseas networks
through its alumni association and academic exchanges. Xidian is one
of China’s top computer science and cryptography institutions an
recently opened a school of cyber engineering."^
It’s important to make the following point in reference to all ^
scientists of Chinese heritage mentioned in this book and
at Australian universities or research institutes, including Yang S
They may have no intention of benefiting the PRC’s military or inte ^
ligence capabilities at the expense of Australia. There is, howe ^
risk of benefiting the PRC to the detriment of Australia by the a
collaborating with PLA and intelligence-linked researchers in C
Their collaboration with PLA researchers does not mean they are is
loyal to Australia, as they may see it as being part of common scient
practice in an international scientific culture.
Yang Xiang has been a visiting professor at Xidians State
Laboratory of Integrated Services Networks since at least 2015*
The laboratory’s academic committee is headed by Yu Quan, who
has served as chief engineer of the PLA General Staff Headquarters
, ^^search Institute,described by US Army-backed experts as
^on of the PLA’s information technology research Yu has
ilitary technology progress prizes for his contributions to
SPIES OLD AND NEW
the PLAs technological development."^ Gao Xinbo, the laboratory’s
director, has worked on three military armaments projects.'^® In 2016
he was awarded a highly prestigious second-place national science and
tcchnolog)^ prize.
Yang Xiang is also a foreign expert at Xidians Mobile Internet Secu¬
rity Innovation Talent Recruitment Base, also known as the National
111 Project for Mobile Internet Security, which falls under Chinas
technology transfer and innovation program. The Xidian base is headed
by Shen Changxiang, a leading communications and internet security
expert. He is also a major general in the PLA Navy (PLAN). He has
been honoured by Chinas navy as a model science and technology
worker’ for his work, which includes seventeen military technology pro¬
gress prizes and serving as a high-level engineer at the PLAN Classified
Warship Technology Research Institute.His research discoveries are
described as seeing ‘widespread use across the military
When Deakin University’s Xiang received his Xidian professorship,
he said that he would actively offer his counsel and guidance in the areas
of cyberspace security and talent cultivation, and strive to make newer
and greater academic achievements at Xidian University.
Hclipsing Deakin University as a training ground for Australias
future cj'ber warfare command is the Australian Defence Force Academy
(ADFA), which offers more cyber security training than anywhere else
in Australia. A large proportion of the new generation of Australias
cyber warfare experts will be trained there. In 2016 the academy began
a new master’s degree in Cyber Security, Strategy and Diplomacy, and
another in Cyber Security (Advanced Tradecraft), hinting at careers in
Australian spy agencies. The military academy also hosts the Australian
Centre for Cyber Security, which trains doctoral students, including
senior officers of the ADF, in the most sophisticated tools of cyber
security. ADFA’s cyber security research and teaching offer an obvious-
gateway to Australia’s emerging cyber warfare capability and therefore
represents an irresistible target for Chinese infiltration. For some years
China has sent students to enrol in PhDs and to work as post-doctoral
fellows, where they have access to the computer systems and, more
importantly, can develop a network of contacts with the future leaders
of Australia’s armed forces and intelligence services.
175
SILENT INVASION
In 2015 ADFAs Professor of Cybersecurity Hu Jiankun gave a
tribute at the Chinese embassy to scholarship students, whose awards
encourage them to return to China to work or serve the country through
many channels’.Professor Hu has worked together with experts
from the Ministry of Public Security and the State Key Laboratory
of Cryptology in Beijing.'^' He has also published many papers with
researchers at Harbin Institute of Technology and Beihang University,
both of which have been ranked in the top five ‘most secretive an
mysterious research universities in China.
When I visited ADFA, located adjacent to the Royal Military College
at Duntroon near Canberra airport, I was surprised to see a ®
PRC men in suits wandering around the campus taking p otos. et
was no security visible. As a campus of the University of New Sou^
Wales. ADFA is no more secure than any other Austr lan campus,
told that the company that has the cleaning contract, including empty g
the wastepaper baskets, is staffed by ethnic Chinese. While engaged m
conversation with an expert about PRC espionage in Austmlia. an ethn ^
Chinese cleaner entered the office to empty the bin. T ere IS ““
of the Chinese Students and Scholars Association (CSS at
othet parts ofthe world CSSAs have been accused of espionage.
In Chinas Espionage Dynasty, James Scott and Drew
that Chinese graduate students working in science an tec n
may be pressured to install malware into the university syst ^
research program’s network—by plugging in an infecte . ^
2011 FBI report on spying at American universities warned o
students (not only from China) being sent to collaborate
and attain a position of trust before stealing information. It g‘T
example of a member of a CSSA who defected to Belgium and reve<
'he had been coordinating industrial espionage agents throughou
Europe for ten years’. A professor of interest may be identified then
studied to find his or her ‘motivations, weaknesses, politics, and ambi
tions. They may then be befriended and recruited, sometimes naively
offering up information. So concerned is the US State Department th«at
in 2016 it proposed barring foreign students from research projects and
classes covering areas such as defence technologies, energy engineering
aerospace. ADFA appears to be oblivious.
9
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