China warns of 'serious harm' to relations as Australia scraps BRI deal

Beijing, China: China on Thursday said Australia's sudden scrapping of a Belt and Road Initiative deal risked "serious harm" to relations and warned of retaliatory actions, but Canberra insisted it would not be bullied.

The federal government pulled the deal with Victoria state late Wednesday in a move justified by the defense minister as necessary to prevent Australia from hosting a giant infrastructure scheme "used for propaganda".

Australia overruled the state's decision to join the Belt and Road Initiative (BRI) -- the flagship of President Xi Jinping's geostrategic vision for the Asia-Pacific region -- by saying the agreement was inconsistent with Australia's foreign policy.

As relations nosedive -- following spats over the origins of the coronavirus and Canberra's blocking of Chinese telecoms giant Huawei -- Defence Minister Peter Dutton said Canberra was "worried" about local governments entering into such agreements with Beijing.

"We can't allow these sort of compacts... to pop up because they're used for propaganda reasons and we're just not going to allow that to happen," he told local radio.

Dutton said the government's problem was not with the Chinese people but rather "the values or virtues or the outlook of the Chinese Communist Party".

Australia last year enacted new powers -- widely seen as targeting China -- that allow it to scrap any agreements between state authorities and foreign countries deemed to threaten the national interest.

Canberra's first target was the BRI, a vast network of investments that critics say is cover for Beijing to create geopolitical and financial leverage.

Prime Minister Scott Morrison said the decision "followed through" on his government's pledge to ensure Australia had a consistent foreign policy that strives for a "world that seeks a balance in favor of freedom".

The schism between Australia and its largest export market widened on Thursday as Beijing railed at the abrupt cancellation and warned it would damage trust between the two countries.

The move "has poisoned mutual trust... and seriously harms China-Australia relations", said foreign ministry spokesman Wang Wenbin at a briefing in Beijing.

"China reserves the right to take further action in response to this."

Earlier, Dutton said he would be "very disappointed" if China retaliated but retorted that Australia "won't be bullied by anyone".

"We are going to stand up for what we believe in and that's exactly what we've done here," he said.

'Fraying relations'

The BRI is the showpiece of Xi's vision for Asia, a lattice of ports, train tracks, economic zones and other infrastructure investments to tether the continent and beyond tighter into China's commercial orbit.

It was unclear if the Victoria state deal had "any projects that were in the pipeline or whether any investments had been pledged", Peter Cai, a specialist on Australia-China relations at the Lowy Institute, told AFP.

But Canberra's bold move is an indicator "of how fraying foreign relations or political instability can affect China's global infrastructure push", he said.

China has already slapped tariffs on more than a dozen Australian industries, including wine, barley, and coal, in what many see as punishment for Canberra's increasingly assertive stance against its largest trading partner.

Australia infuriated China by calling for an independent probe into the origins of the coronavirus pandemic, banning controversial telecoms giant Huawei from building Australia's 5G network and tightening foreign investment laws for corporations.

Other agreements between foreign powers and local governments are still under consideration, and Canberra could yet target the presence of Chinese government-backed Confucius Institutes at Australia's public universities.

Critics say the institutes, which have been the subject of controversy on some campuses, promote the Communist Party's self-serving version of Chinese culture and history.

Australia-China relations in freefall

Spying charges, calls for a probe into the origins of Covid-19, and now a body blow to Chinese Belt and Road ambitions Down Under -- tensions between Australia and its biggest trade partner China is going from bad to worse.

Here is a look at the latest rupture in relations and how the long-running rumble started.

Goodbye BRI

Australia on Wednesday announced revocation of the Victorian state government's deal to join China's sprawling Belt and Road Initiative, saying it did not meet national foreign policy priorities.

The decision comes after months of painful trade blows to Australian exports from Beijing, and routine exchanges of outrage over everything from espionage to the administration of Hong Kong.

By tearing up documents signed in 2018 and 2019 -- a memorandum of understanding and a framework agreement -- Foreign Minister Marise Payne risks seriously irking Beijing by taking aim at one of its big geostrategic priorities.

All eyes will be on China for potential retaliation after Canberra's blow to President Xi Jinping's vast infrastructure plan to lasso much of the Asia-Pacific and beyond into China's orbit.

The tone was set early as China's embassy in Australia railed at the scrapping of the deal as "unreasonable and provocative."

Coronavirus origins

Australia last April joined the United States in calling for a thorough investigation into how the coronavirus transformed from a localized epidemic in central China into a pandemic -- triggering outraged warnings from the Chinese ambassador to the country.

Cheng Jingye said demands for a probe could lead to a consumer boycott of Australian wine or tourist trips, adding that the push for an independent inquest was "dangerous".

The call by Canberra, which enraged China, is seen in Beijing as a US-backed attempt to discredit it.

Trade hit

The rift has since left Australian exporters exposed, with China imposing a series of retaliatory bans on agricultural products such as beef, barley, and timber.

Weeks after Cheng warned of a consumer boycott, Beijing suspended imports from four major Australian beef suppliers.

Neither side openly linked the suspension to the call for an inquiry, citing technical issues instead.

But soon after, China announced anti-dumping tariffs on barley as well, and its latest measures take aim at Australian wine.

Detention and spying

Another area of contention involves high-profile Australian citizens detained by China: writer Yang Jun and journalist Cheng Lei.

Chinese-born Yang, who also goes by the pen name Yang Hengjun, was taken into custody in January last year and faces spying charges, which he denies.

Australia's Payne has previously decried China's treatment of Yang as "unacceptable".

Cheng, an anchor for China's English-language state broadcaster, has been held since at least August 14. She was formally arrested in February this year, accused of "supplying state secrets overseas" -- although Beijing has revealed few other details of the allegations against her.

Two Australian journalists were rushed out of China in September last year after police sought to question them, while Beijing accuses Canberra of raiding its journalists' homes as it investigates an alleged covert influence campaign.

'Five Eyes' kickback

Australia is among Western allies -- the so-called 'Five Eyes' -- accusing China of violating its legally binding international commitments on Hong Kong after imposing a tough security law on the city.

The United States, Britain, Australia, Canada, and New Zealand have hit out at China for ousting pro-democracy lawmakers from Hong Kong's legislature and raised fears over the intentions of Chinese tech companies overseas.

But attempts to build a united front against China provoked a typically terse response from Beijing.

A foreign ministry spokesman warned: "No matter if they have five or ten eyes, if they dare to damage China's sovereignty, security, and development interests, they should beware of being blinded."

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