Show some steel on China’s investment in our critical assets

HMAS Warramunga departing Port Headland harbour, dwarfed by giant bulk ore carriers which load their cargo from the Iron Ore that comes to the port via iron ore trains and is stock piled there in the yard before being loaded onto the ships via the conveyor belts that link both sides of the harbour. Source: Defence Images at

Written by

Peter Jennings

Anthony Albanese’s National Press Club speech on Wednesday offers a victory lap after just nine months in office and before the business of delivering government really has begun.

His line is that Australia was blighted with a “wasted decade of denial, delay, neglect and a pathology of political conflict”. Now a “greater sense of purpose to the work of government” has returned to Canberra.

Unlike George W. Bush toppling Saddam Hussein, the Prime Minister doesn’t have an aircraft carrier from which to declare “mission accomplished”, but the reality is that delivering on defence is all in front of the government, which will announce its plans close on a year after taking office. The centrepieces of national security policy are the AUKUS and Quad inheritance from Scott Morrison’s “dark ages”. The process of delivering military capability at best will happen years into the future.

On foreign policy the government has delivered solid outcomes based on the welcome approach of sending the Foreign Minister overseas. Long may that continue, but here Albanese’s speech is full of cliches: our regional policy is “family first”, in Southeast Asia the aim is to “deepen our connections and our strategic dialogue”. On China, Albanese repeats that Australia will “co-operate where we can while being prepared to disagree where we must and always acting in our national interest”.

None of this points to substance. Our Pacific neighbours, intelligently enough, look to self-interest. Our closest “family member”, New Zealand, is drifting rapidly into non-alignment, with Australia doing nothing to stop the trend. Dialogue with Southeast Asian countries shows a growing gap in strategic outlook exploited by Beijing.

Albanese claims “our government has worked to stabilise Australia’s relationship with China” but Beijing’s unilateral decision to end hostile wolf warrior diplomacy does not change Xi Jinping’s ambition to dominate the Indo-Pacific. Our future reality is that Australia will not be able to get wealthy from China at the same time as we deter Beijing’s military adventurism and covert influencing activities.
When asked at the press club about foreign investment, Albanese preferred to talk about “protecting national sovereignty” but, as reported exclusively in The Weekend Australian, the government recently approved the billion-dollar stake by Chinese state-owned enterprise Baowu Steel Group in Rio Tinto’s Western Range iron ore project.

No minister in Albanese’s otherwise talkative cabinet has explained or defended the Baowu Steel decision. Presumably they know how unpopular it will be.

The annual Lowy Institute opinion poll tracks the collapse in public trust towards China. Last year, 87 per cent surveyed said they had little or no trust in Beijing to “act responsibly in the world”. Only Russia was regarded as less trustworthy.

A Foreign Investment Review Board recommendation to Jim Chalmers to approve the Baowu Steel investment runs against Australia’s strategic interest. The government should be advancing every possible measure to reduce economic dependence on China, not deepening an unhealthy reliance on a country that openly attacks the global strategic balance.

Two decades ago I visited the Shanghai headquarters and steel-rolling plant of what was then known as Bao Steel. The security around the facility was amazing. Bao Steel clearly was regarded as a critical national asset. The company’s evolution across the past 20 years shows it to be a prized part of the Chinese Communist Party’s economic strategy.

As an SOE, Baowu Steel makes no secret that it is run as the industrial arm of the CCP. The company’s English language website shows that all its senior leadership are long-term party cadres. The company’s strategic planning is built around delivering the CCP’s national objectives.

The company profile states: “China Baowu has always taken loyalty to the party, the country and the people as the primary pursuit.” Chen Derong, described as “secretary of the party committee and chairman of the board of directors of China Baowu” (note the order of priority), declares he has “thoroughly studied and implemented the spirit of the 20th CPC National Congress”. The company’s mission is to “work together to build a modern socialist country in an all-round way and promote the great rejuvenation of the Chinese nation in an all-round way”.

Companies such as Baowu Steel are simply the industrial arms of the CCP. Pursuing party objectives domestically and globally is their defining purpose.

Baowu Steel has made astonishing progress in hi-tech manufacturing including in energy, transportation, maritime engineering and aerospace. Not surprisingly, the company has been drawn into Xi Jinping’s “civil-military fusion” strategy to harness industry to defence and security objectives.

The company’s 2020 corporate social responsibility report claims “breakthrough in the key manufacturing technology of civil products has laid the foundation for the manufacturing of military products, made it possible to share technological achievements between the military and the people, and enhance economic and national defence strength, and help realise the dream of a strong country and a strong military”.

A March 2018 report from the Office of the US Trade Representative investigating Chinese intellectual property theft found Baowu “was known to be one of the beneficiaries of China’s state-sponsored cyber attacks”. The report details the experience of US company ATI, which in 2012 was in a joint venture with Baowu. ATI was hacked by the Chinese military’s cyber organisation, 3PLA. User names and passwords for thousands of ATI employees were stolen, giving 3PLA access to sensitive information.

The conclusion of the report is stark: “If a company operates in a sector that China deems strategic to its economic interests or particularly if it has business relations with an SOE, the company must risk being targeted by Chinese government hackers for cyber intrusions and cyber theft, putting sensitive commercial information about its products, business strategy, and other matters at risk.”
What risk mitigation did the FIRB consider to counter this threat? The Baowu investment became known after a week of intense global interest in Beijing’s use of balloons to gather intelligence over the US and a revelation that Australian government departments in hundreds of locations had allowed easily hackable Chinese-made surveillance cameras to be installed.
As ASIO director-general Mike Burgess makes clear, Australia continues to be subject to tidal waves of hostile intelligence gathering. Make no mistake about it, China is the biggest aggressor in this area.
In a few weeks the government will announce what Albanese described as “the single biggest leap in our defence capability in our history”. Given his critique of past Coalition inaction, this moment presents a threshold test for him. Promises of defence capabilities to be delivered in the 2030s won’t address our immediate strategic needs, nor will minor tinkering with the defence budget. Spending will have to rise sharply to deliver all the equipment being considered.
After a half-decade of hard-won efforts to reduce our vulnerability to covert and malign Chinese influence in Australian public life, the decision to open the gates on an enormous investment from one of Beijing’s most favoured SOEs is a huge mistake.
Albanese urgently needs to articulate a national security strategy, one that puts an end to absurd policy outcomes such as this FIRB recommendation to the Treasurer. This starts with an honest conversation with Australians about dealing with an aggressive communist China.

This article was published in the Australian on 23 February 2023