Naive cities extended China's influence and exposed Australia's interests to uncertain risk: ASPI

The 326-page report from the government-funded think tank the Australian Strategic Policy Institute found Australia's states and territories embraced relations with China thinking they could be as mutually beneficial as relationships with Asia's democracies but had little regard to the risks of dealing with a communist party-state.

Not all city or state partnerships presented serious risk, the summary report by Professor John Fitzgerald noted, but where states and territories were working directly with central or national partners in China, "they exposed themselves and the country to greater risks."

The federal government used new foreign arrangements legislation to dismantle Belt and Road Initiative deals, such as in Victoria, that angered Beijing greatly and contributed to the collapse of national ministerial-level communication between China and Australia. But not all deals and partnerships need be cancelled, the authors argued.

Existing sister-city partnerships should remain, the report recommended.

Canberra has one such partnership with Beijing. On the same day that China announced its 14-point list of grievances against the Australian government in 2020, ACT officials planted a friendship tree with then Chinese ambassador Cheng Jingye to mark the 20th anniversary of the sister-city relationship.

Beyond its city partnership, the ACT was most heavily exposed to security risks in areas of federal responsibility, the report noted.

Dr Fitzgerald said risks had intensified with the elevating of Xi Jinping as President of China but state, territory and city governments with no expertise in security risk-assessment failed to identify potential harms to Australia's interests in Xi's "New Era" until uncovered by journalists.

The risk of open-ended engagement with China was first exposed through media revelations of unorthodox political fundraising in NSW with reciprocal benefits for party figures, intimidation of students and staff at universities and editorial compromises in public broadcasting, he wrote.

"Those revelations alerted Australians in other states and territories to the downside risks to democratic systems, public institutions and community cohesion that accompanied close engagement with Chinese counterparts at state, city and community levels."

The report identifies areas of state and territory responsibility with national security implications, such as energy, that have been become more vulnerable with advances in technology and state and federal governments have diverging interests that could be exploited by foreign interests.

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Political parties also remained vulnerable to foreign influence, Dr Fitzgerald argued, with the report recommending urgent reform to political donations and party finances in state and federal politics.

Direct personal relationships between state, territory, or city officials combined with poor regulation and limited transparency was threatened public trust.

"At a time when communities are concerned about stories of Chinese political interference ... the habit of state and territory governments entering into secret engagements with China undermines public confidence," Dr Fitzgerald wrote.

"In the absence of openness and honesty, arrangements that may in fact be beneficial become indistinguishable from those that risk doing harm."

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