China Shoehorns Its Way Into The U.S.-Australia Relationship

History and money link the U.S. and Australia but that’s not stopping China from shoehorning its way into the relationship at a business a level, as well as in laying the foundations for a push to replace the U.S. in a region it regards as its backyard and a critical supplier of raw materials.

A deal last week in one of the mining world’s least loved commodities highlighted the optimistic view China has of future demand for minerals, while the size of two diplomatic posts in Australia’s natural resources capital, Perth, does the same job.

The commodity which attracted a $468 million investment by two arms of CITIC (formerly the China International Trust and Investment Corporation) was aluminum, particularly the mineral which eventually becomes the light metal, alumina.

Target of the CITIC plunge into aluminium, the worst performing metal of the past 10 years, was an Australian affiliate of the Dow 30 member, Alcoa, with Citic Resources Holdings snapping up 7.8% stake in ASX-listed Alumina Ltd and Citic Group taking a 5.2% interest.

Alumina’s major asset is a 40% stake in Alcoa World Alumina and Chemicals, a company which operates three low-cost alumina refineries in Western Australia as well as having a share in aluminum smelters around the world.

The Chinese investment plunge into Alumina sends a number of signals, including an obvious demonstration of China’s ongoing demand for basic raw materials to feed its factories, and a willingness to upset what has been, until now, a cozy U.S.-Australian business arrangement.

At a diplomatic level the picture becomes even clearer, though to see it you need to pay a visit to the Western Australian consulates of the U.S. and China.

Perhaps because the U.S. is a country which places less emphasis on big government and more on business the U.S. legation is a relatively small affair, tucked away on the 4th floor of a non-descript building in Perth.

It is there, in the same building that houses the Greek consulate, that visitors are under-whelmed by an entry area lined with metal lockers and a sign saying the facility is undergoing renovations.

A mile to the north, in the heart of the bustling East Perth residential and commercial precinct can be found the three-storey Chinese consulate, topped with four big satellite dishes, and linked to an accommodation block and a curious building addition which is below ground height.

If size matters, the Chinese have made a bold statement with a presence that is at least 10-times that of the U.S., right down to flag size with an enormous red banner of the People’s Republic flapping proudly in the morning breeze while at the U.S. consulate a much smaller Stars and Stripes hangs alongside the Greek flag – with the proximity to that economic basket case hopefully not an omen.

What needs to be remembered when looking at the imposing white-tiled, purpose built and very Chinese piece of architecture erected in a busy part of Perth is that it is just a consulate. The Chinese embassy, which is about the same size, is in the Australian capital, Canberra.

With its Perth building, China is making a statement in a region that has developed important trade links with Western Australia the major supplier of iron ore to China, an important energy supplier in the form of liquefied natural gas, plus a range of other minerals, including titanium dioxide and alumina.

“Oh, they’ve got a big presence here,” is how one of the secretaries at the U.S. consulate described the Chinese position in Western Australia.

It’s more than U.S. consulate workers who are aware of the Chinese push into the heart of Australia’s raw materials industry which is the dominant source of the country’s export income.

Last August, the chairman and president of the Export-Import Bank of the U.S. (Exim), Fred P. Hochberg, dropped into Perth to deliver a “keen to do business” message that was interpreted locally as an example of the competition between China and the U.S. for Australia’s attention.