I think the example of Australia raises
the question of whether China's punitive actions are now
reaching a whole new level of intensity.
Since Canberra's call for an inquiry into Covid-19,
Beijing has really started to target Australian exports.
Australia's experience stands as a cautionary tale
of what can happen when China's full wrath is unleashed.
Seven years ago Chinese President Xi Jinping
made an historic speech to the Australian parliament calling
on Canberra and Beijing to expand co-operation and deepen
trust.
The two countries swiftly signed a trade deal
which has embedded China as by far Australia's
most important trade partner.
But seven years on and bilateral relations have plummeted.
Diplomatic ties have frozen, two Australians
are detained in what critics allege is hostage diplomacy,
and Beijing has slapped sanctions
on Australian exports.
Australia's experience is by no means unique.
In March, China lashed out at the European Union, the UK,
and Canada over their criticism of alleged human rights
violations in China's Xinjiang region.
These latest moves are directed mainly
at individuals rather than the billions of dollars
in trade and investment that are at stake
in its rift with Australia.
In this context, Australia's experience
stands as a cautionary tale of what
can happen when China's full wrath is unleashed.
So Jamie, what has happened to throw the China/Australia
relationship into the deep freeze?
Well, this dramatic deterioration in relations
is really linked to geopolitical changes between the two
superpowers China and the US, but it also
reflects the combative diplomatic approach
taken by both nations.
There's no doubt that Xi Jinping has taken a far more aggressive
approach to foreign policy than his predecessors,
most notably pushing China's claims in the contested South
China Sea, clamping down on Hong Kong's autonomy,
and taking part in foreign influence operations
in democratic nations.
So this has really alarmed Canberra,
which has deep financial and personal ties to Hong Kong.
It has vital strategic interests in keeping trade routes
open to Asian countries.
And it also has a very large Chinese Australian population
at home.
The election of Donald Trump and a much more strident US foreign
policy towards China has also had an important influence
in Canberra, which has a defence alliance with Washington.
Australia's Conservative government
has often taken the lead in pushing back against Beijing,
a position that has really enraged Beijing and caused some
of its domestic critics here in Australia to warn that Canberra
risks abandoning its traditional position of not having
to choose between its largest trading partner China,
and its strategic ally, Washington.
So what have been the trigger points
for the diplomatic breakdown?
And why has it got so personal?
Well, there's been several significant trigger
points over the past few years.
In 2017 there was a political scandal here involving
an MP and some money from a Chinese businessman.
After that Canberra started to formulate
tough new foreign influence laws aimed
at preventing overseas powers from meddling
in internal politics and seeking to influence diaspora
communities in Australia.
So that was probably the first thing that angered Beijing.
The second thing happened in 2018
and Australia was the first western power
to formally ban Huawei from its 5G network rollout.
And this decision laid the groundwork for other nations
to introduce similar rules.
And so this really put Canberra in the crosshairs of Beijing.
But perhaps the most extreme example
of Canberra taking the lead was its decision last year
to unilaterally call for an inquiry
into the origins of the coronavirus outbreak in Wuhan.
And in that process, it floated this idea
of providing investigators with weapons inspector style powers.
Now unsurprisingly, this didn't go down very well in Beijing.
And since then we've seen Beijing really
unleash this wolf warrior style diplomacy against Canberra.
One of the most significant moments in this
was a decision by a senior Chinese foreign ministry
spokesman to post a fake image on Twitter
of an Australian soldier holding a knife up
to an Afghan child's throat.
This was a reference to a war crimes
investigation in Australia.
But this just provoked a major outcry in Australia
with Prime Minister Scott Morrison calling it repugnant
and demanding an apology from Beijing.
And unsurprisingly, none has been forthcoming so far.
So there's been a lot of sound and fury.
But has this also hit the bottom line in Australia?
Well, since Canberra's call for an inquiry into Covid-19
Beijing has really started to target Australian exports
through a range of different sanctions.
So we've had anti-dumping tariffs imposed
on barley and wine, and a host of technical trade barriers put
against products from coal to timber.
So this has begun to impact businesses operating
in those specific sectors.
For example, the wine industry in particular
is finding it really difficult to find alternative markets
for its products because China was its largest single market
accounting for about a third of total wine exports
from Australia.
However, the value of overall trade between the two nations,
worth about a quarter of a trillion Australian dollars,
has not so far suffered a huge downturn.
And this is really due to the importance of iron ore exports
to China from Australia.
This makes up roughly half of the total
of Australian exports to China.
And what we're seeing is iron ore prices have really
been hovering near record highs, partly
because the alternative market for China to get iron ore,
Brazil has had real problems due to the coronavirus
and also due to dam failures there.
So China hasn't been left with an alternative
to get a source iron ore.
So this has supported Australia's exports.
But if we can really point to one area
where we're seeing a massive economic impact
from this breakdown in diplomatic relations
between China and Australia, it would
have to be in investment flows.
So the value of foreign direct investment into Australia
fell 61 per cent last year to just one billion
Australian dollars.
And this is really a massive drop
compared to the peak years of Chinese investment
into Australia.
For example, in 2016 there was a total of $16.5bn Australian
investment from China into Australia.
And that made Australia one of the most important sources
for Chinese investment in that year.
This behaviour is far from unique.
South Korea suffered very similar economic pressure
from China after it decided in 2016
to accept the deployment of an American missile system
on its soil.
And a Korean company, the Lotte Group,
was targeted by Chinese cyber attacks.
And some of its stores in China were fined or closed.
Korean airlines were also refused permission
to increase flights between the countries.
And there was fallout too for several other Korean companies.
In addition, relations between China and Norway
were virtually frozen for years after the Nobel committee,
which of course is based in the Norwegian capital,
awarded the Nobel Peace Prize to the Chinese dissident
Liu Xiaobo in 2010.
Japan has had regular run-ins with China over the years.
One of the most recent was a wave
of boycotts of Japanese cars and other goods
by Chinese consumers in 2012 because
of bilateral territorial disputes.
And of course, the US has had a multi-pronged trade war
with China over the past couple of years as their wider
relationship deteriorated.
But even so, I think the example of Australia
raises the question of whether China's punitive actions are
now reaching a whole new level of intensity.
The latest focus of China's anger
are the multinational fashion brands such as H&M, Nike,
Adidas, and others.
These companies have issued statements
saying that they would not use cotton
from the Xinjiang region because of human rights concerns.
Chinese officials reacted with fury.
Xi Guixiang, a spokesman for the Xinjiang region
singled out Sweden's H&M and warned it
that it would not earn a single penny in the Chinese market
because of its stance.
Such tensions show how quickly a political issue can
have big commercial repercussions as relations
between China and the west reach their lowest point in decades.