With Kevin Rudd as the Australian Prime Minister, the ties between Australia and China are set to continue to strengthen writes Rowan Callick.

The China connection recurred through Australia’s federal election last October, and now in 2008, the links are still growing as the Beijing Olympic Games - in which Australian assistance is prominent - approach.

On February 1, China’s biggest mining house, Chinalco, paid – with modest support from America’s Alcoa – A$15 billion for 9 percent of Australian-British company Rio Tinto.
This is by far the biggest overseas investment by China. And it underlines emphatically, the entwining of the two economies, and the two countries.

Kevin Rudd’s chat in Chinese with President Hu Jintao in Sydney during the Asia Pacific Economic Cooperation summit echoed through the polling campaign – not to demean him as a “clever dick” but to impress an electorate that now views China not as a threat, as much of the rest of the Western world sees it, but as an opportunity, a cultural one as well as an economic one.

John Howard was defeated in his seat of Bennelong in part, it appears, because of the immense efforts of former ABC journalist Maxine McKew to convince the large Chinese section of the electorate that a change would benefit them.

Following the emergence of Lu Kewen – Kevin Rudd’s Chinese name – as prime minister, his Chinese counterpart Wen Jiabao called to congratulate him, and they talked in Chinese for 20 minutes. The Prime Minister’s office is probably now hiring a Chinese speaking
note taker.

Hong Kong-based leading business analyst Philip Bowring commented in the International Herald Tribune that the election “signalled a noteworthy shift in Australia’s foreign relations,” describing Rudd as “a Chinese-speaking ex-diplomat with an international mind-set.”
He added: “But China’s expectations, and Japan’s fears, that Rudd will prove especially friendly to Beijing are unlikely to be realized. Rudd’s knowledge of the language and a stint as a diplomat in Beijing do not necessarily lead to admiration for China’s government.”

Yang Jiechi made his first visit as China’s Foreign Minister to Canberra in early February, when he and Australia’s new Foreign Minister Stephen Smith discussed bilateral issues and then launched the first strategic dialogue between the countries – an initiative of predecessor Alexander Downer, in part to counter Beijing's concerns about the growing security ties between Australia and Japan.

Smith had earlier, on a visit to Tokyo, already defused such concerns by stressing: “We are not proposing to add to the trilateral [Australia, Japan, the US] by including India.”

Yang said he and Smith discussed increasing trade in “advanced equipment,” and increased exchanges in science and technology, cultural education and health, adding: “I’m proud to say that 90,000 Chinese students are studying in this country. And last year, about 300,000 Chinese came to tour. So in future, there will be more Chinese coming this way.”

He said: “There is long friendship between our two peoples, and the comfort level is quite high... The two economies are really, really cut out for each other. We can try to benefit from each other’s strong points. We are very open-minded. We would like you to double or triple your investment in China. We think it’s good for you, and it’s good for us.”

This is the first of a series of top level political meetings likely in the first half of this year.
In April, the joint ministerial economic commission that meets every second year will take place in Beijing, which Simon Crean will then almost certainly visit for the first time as Trade Minister.

This meeting will review the progress – or lack of it – during the ten rounds of talks towards a free trade agreement over three years. The new Rudd government has to date, focused overwhelmingly instead, on the continuing efforts to conclude a new multilateral agreement via the World Trade Organisation, and has cut almost $A10 million funding from the FTA process with China.

It remains to be seen, what alternatives the government will pursue to support Australian business in China, especially to lever open China’s still highly protected services sector.
In March, Australian culture will win a big boost in China with the first Australian Writers’ Week in Beijing, an initiative of ambassador Geoff Raby intended to underline Australia’s independence of spirit and cultural strength, and to line up publishing contracts in China.

Fujian Education Press has already launched its Australian blockbuster of the year – a translation of Robert Macklin’s authorized account of what the introduction describes in Chinese as “the legendary life” of Kevin Rudd.

Fujian had earlier published a Chinese version of Macklin’s book on George Morrison, the intrepid Australian journalist who lived in Beijing from 1897-1920.

Lin Guanzhen, the editor of both the Rudd and Morrison books, said: “Through the biography, I have gained a feeling that Lu Kewen is like a big brother next door – born in a poor family, one of several children, worked hard, like any poor family in China.”

She said: “I think Chinese readers will learn from him – rely on yourself alone, and win success.”

The publisher printed an initial 10,000 hardback copies, and the book was so well received at the recent Beijing Book Exhibition, said Lin, that “we are ready for a second edition if the market demands more.”

Rudd has been invited to the Olympics in August, and is likely to attend. But he will want to come for a full official visit before then. It’s just a matter of getting the timing right.

The earliest possibility is that he will come to Beijing and to the Boao Forum on Hainan island, which China had hoped would become “the Asian Davos.” President Hu Jintao is speaking this year, as the 30th anniversary approaches of Deng Xiaoping’s launch of China’s reform era. And attendance from the Australian prime minister would be well received by Beijing – it is not attracting many other takers among regional rulers.

Another event linking China and Australia closer together, is the appointment of the World Bank’s new chief economist Justin Lin Yifu – who comes for the first time from the developing world and is the founder and director of the influential China Centre for Economic research at Beijing University.

Ross Garnaut, Australia’s most eminent economist, and ambassador to China from 1985-88, has been close friend of Lin and his family for 20 years. Lin retains close connections also with the Australian National University, where he became an adjunct professor in the Economics Department.

The ultimate goal of Chinalco’s move on Rio remained unclear as this column was written – whether to wrest key assets from Rio, to provide a launching pad for a bold, full-scale rival bid to BHP-Billiton’s, or simply to block BHP and thus prevent a single merged entity gaining control of 35 percent of the global iron ore trade, crucial for China’s development.

But Chinalco chairman Xiao Yaqing did make the effort to visit Australia immediately after the share raid, which took place in London, in order to calm any concerns.

He said that the deal “underlines Chinalco’s determination to increase and diversify its exposure” to the global mining game.

He is no stranger to Australia. Aged 48, he was formerly a metallurgical expert, and as such flew to Australia – on his very first overseas visit from China – 19 years ago, spending three months with CSIRO in Melbourne.

More recently, he has spent considerable time in Queensland bedding down the A$3 billion Aurukun bauxite project on Cape York in north Queensland, where Chalco - Chinalco’s major operating subsidiary - is becoming the first Chinese company to develop a major Australian mine.

This has involved meetings with Noel Pearson and other Aboriginal leaders, to discuss their perspectives. “We need to know what they expect, we need to listen to them,” he said as he was finalizing the bid.

And such open-ended discussions seem to be emerging as the theme of the year for the relationship between Australia and China as
a whole.

* Rowan Callick is The Australian’s Beijing based China correspondent