Australian Prime Minister strengthens military alliance with China, ignores 2009 report of threat

Julia Gillard and Xi Jinping

Australian Prime Minister Julia Gillard today will unveil a 10-year plan to tighten Australia’s embrace of China, flagging three-nation military exercises to include the US and more Chinese investment in Australia.

The declaration comes as Canberra and Beijing have clinched a deal for an annual meeting mechanism between the Australian prime minister and the Chinese premier. The deal will be announced after the Prime Minister meets Chinese Premier Li Keqiang today.

In a speech in Beijing today to the Australia China Business Council, Ms Gillard will declare she wants a more broadly based economic relationship with China and is open to closer defence ties.

Ms Gillard will argue that, in Australia, China will find a “welcome friend rich in the skills and knowledge which underpin civic life”, flagging closer education ties and links on combating climate change.

Ms Gillard will argue that defence co-operation between Australia and the US is already more effective than is generally understood, and this will grow. “Over time we would like to see this extend to trilateral exercises including with the US,” she will say. “Australia’s alliance with the US will continue to contribute to regional stability. Australia will continue to welcome space for China’s growing global role – just as we know China will continue to recognise Australia’s enormous stake in strategic stability in Asia.”

The speech comes amid continuing tensions on the Korean peninsula and Ms Gillard’s call at the weekend for China to use its influence to prevail on North Korea to end its “provocative” actions. Chinese President Xi Jinping pledged on Sunday to take his country’s relationship with Australia to a “new level” after a meeting Ms Gillard. The meeting reaffirmed both leaders’ commitment to strengthening ties. Ms Gillard’s declaration that Chinese investment in Australia is welcome comes as corporate leaders attending the Boao Forum on Hainan Island warned that Labor needed to work harder to dispel the myth it did not welcome foreign investment from China. Yesterday in Shanghai, Ms Gillard said Australia remained “hungry” for foreign capital and welcomed Chinese investment.

She said a deal to allow direct trading of the Australian dollar and the yuan on the Chinese mainland would be formally announced today and would make an important contribution to the internationalisation of the Chinese currency. “Australia’s banks, superannuation funds and financial houses will now be even better placed to help in the growth of China’s service economy.”

Ms Gillard said the People’s Bank of China had granted licences to Westpac and ANZ to be market makers in the direct trade.

ANZ chief executive Mike Smith said the market was likely to eventually run into billions of dollars when working capital requirements were taken into account.

Today in her speech in Beijing, Ms Gillard will cite the urbanisation of China and argue Australia’s economic relationship can expand from resources to providing urban planning and construction, health and welfare services, and water management and sanitation.

“There is clear potential for expanded Chinese investment in Australia and I am confident this will continue to grow,” she will say.

“The plans both nations have to diversify our economies also mean that their complementary nature will not only remain, it will extend into new industries and sectors.”

Yesterday Ms Gillard said she had told Mr Xi that Australia welcomed Chinese investment “because it equals Australian jobs”.

Ms Gillard said that in the past five years the government had approved $81 billion in proposed Chinese investment in Australian business and real estate.

Opposition foreign affairs spokeswoman Julie Bishop said China had been a priority for every Australian government in recent decades. “But Julia Gillard has come late to this recognition,” she said. “On the back of one visit to the Boao Forum she has claimed ownership of a relationship that was a high priority for the Howard government.”

Howard government foreign minister Alexander Downer said he used to meet Chinese leaders regularly and he blamed a decline in the relationship on Kevin Rudd. Mr Downer said the Chinese had gone cool on the relationship since the former prime minister’s 2009 defence white paper, which pointed to China as a possible threat.

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