Topless sunbathers scrambled for their costumes at the tiny Queensland resort of Palm Beach near Cairns recently. The young women were startled by the sudden, somewhat out of context appearance of Jiang Zemin, President of China, General Secretary of the Communist Party and head of the Peoples Liberation Army.
The 73-year-old Jiang, and his wife Wang Yeping, were taking a spot of recreation at the end a whirlwind four-day visit to Australia. Accompanied by a phalanx of security men, the couple embarked for the Barrier Reef. Jiang spent several hours splashing in a lagoon an peering with his trademark thick spectacles through a glass-bottomed boat at the brightly coloured fish and coral below. Reportedly he liked what he saw. Australian trade officials and diplomats are hoping that observation goes for the rest of the country.
The portents are good. Relations between the two countries are improving. On the eve of Jiang's visit, China said it would release and deport jailed Australian businessman James Peng before the end of the year. The 1995 conviction was regarded in many quarters as a gross miscarriage of justice and Australia has made strenuous behind the scene efforts to obtain Peng's release. Prime Minister John Howard responded by reiterating Australian support for Chinese entry to the World Trade Organisation and restating its One China credentials.
There is much of mutual interest. Two-way trade in goods and services is currently worth A$10.7 billion (US$7 billion) placing China close to South Korea and only behind Japan among leading regional trade partners.
Australia has a A$2 billion trade deficit with the PRC, which is widening as affluent consumers suck in more imports of clothing, toys, sporting goods, TVs, VCRs and household items. Australia sells mainly coal, iron ore, wool and oilseeds to China.
The President of the New South Wales branch of the Australia-China Business Council, Kevin Hopsgood-Brown, says: 'The visit of Jiang Zemin focuses attention on the huge potential for Australia to increase and diversify its exports to the PRC.' Hopsgood- Brown worked in China for seven years and is the Sydney-based director of international business for solicitors Deacons Graham and James. He sees major opportunities for boosted exports to China in telecommunications equipment, processed foodstuffs, canned fruit and juice, and technical equipment, including measuring and monitoring devices used in environmental control.
The Australia-China Council has set a goal of doubling bilateral business to A$20 billion a year by 2005. The fastest-growing area currently is services - a sector that presently only accounts for a quarter of China's GDP. Deacons Graham and James has just been licensed to practice in China, alongside half a dozen other Australian legal firms. Life insurance groups like Colonia, have also been given the green light, joining companies involved in information technology, health and engineering, education, building and architectural services. There are about 300 mainstream Australian companies with offices in China, and hundreds of small concerns, together working on 3,500 investment projects valued at US$5.6 billion. China has an estimated US$1.5 billion invested in Australia.
At an economic summit meeting in the Australian capital of Canberra, Howard and Jiang signed a number of memorandums of understanding aimed at enhancing trade. Easily the most important was what amounted to an endorsement of Australia as China's preferred source for up to 4 million tonnes of liquid Natural Gas (LNG) a year, in what is expected to be a 20-year contract worth some A$15 billion.
The LNG would come from Australia's North West Shelf, where natural gas flows from the huge Rankin and Goodwin offshore fields. The project is operated by a consortium led by Woodside Petroleum and including BHP, Shell, BP, Chevron and Mitsubishi-Mitsui. If the deal goes through, it will be the biggest contract Australia has ever won for the supply of a commodity since Japan signed up to take LNG shipments from the North West Shelf a decade ago. More than 50 million tonnes of natural gas have been sold by the Australia LNG group to customers including Tokyo Electric Power Company, Tokyo Gas and Osaka Gas. The clean 'green' fuel heats millions of Japanese homes as well as turning the wheels of a significant slice of industry. China needs a lot more power to underwrite its medium and long-term economic ambitions. But it will not be able to import LNG until at least 2004. First there has to be a US$2 billion receiving terminal established in Shenzhen by the Chinese National Offshore Oil Corp. The front runners to help build that facility include Shell (China), Mobil, Enron and Gaz de France. Tenders will be let in a few weeks time. It is believed that foreign investors will be offered a 35% stake in the terminal.
The Australian LNG group would fit that bill and, so the thinking goes, that would put the consortium in the box seat for further future gas sales. The Shenzhen terminal will supply gas for Guandong. Shanghai will also be a big potential customer - either getting its LNG by pipeline, or through a terminal of its own.
By June next year, the PRC government is expected to announce the winner of the LNG contract. The odds have now significantly shortened in Australia's favour. The principal competition comes from Qatar in the Middle East, Malaysia, Brunei and Indonesia.
In a strong pitch for the business, Australia LNG vice-president Alf de Souza says: 'With Australia's large gas resource, political stability, proven LNG track record and its ability to match a competitive price, there is a compelling case to select Australian supply for both commercial and long-term strategic reasons.' China might well see it that way, particularly as it perceives geopolitical advantages in drawing Australia closer.
A senior Chinese official recently told Australian Foreign Minister Alexander Downer in Beijing that relations between the two countries were better than at any time since diplomatic ties were first established in 1975. That is true, but there have been some potholes in the road along the way.
When US President Bill Clinton sent two aircraft carriers into the Taiwan Strait, in response to the missile 'tests' launched by mainland China during the election campaign of President Lee Teng-hui, Downer gave the move what sounded like a ringing endorsement. Then he abruptly cancelled some aid projects to China.
John Howards's contribution was to hold a meeting with the Tibetan Dalai Lama. Beijing was furious. But fences were mended remarkably quickly. The breakthrough was the Australian decision not to support the annual condemnation of China at the United Nations Human Rights Commission in Geneva.
The Howard position is that public hectoring of China is counter productive, and that human rights issues were best addressed in regular private diplomatic dialogues. A swift reward for that stance came in 1997 when Chinese Vice-Premier Zhu Rongji made a high-profile trip to Australia.
The charismatic visitor was a big hit with the business community. 'If Cary Grant were Chinese he would have been Zhu Rongji,' raved one man who attended an A$100 a plate lunch at the time.
Nobody would accuse Jiang of putting them in mind of Cary Grant, but he thoroughly impressed observers with his powerful presence at meetings with business leaders in Melbourne and Sydney. He has come to Australia once before, as Mayor of Shanghai. But this was the first visit of a Chinese head of state. Press coverage was muted because the visit was pushed off the front pages by the worsening crisis in East Timor.
Australia adheres to its One China policy, but it sees no problem in expanding commercial links with Taiwan, which is its fifth largest export market - while being careful to restrict itself to 'unofficial' contacts. Australia supplies half of the Taiwanese requirement for coal and iron ore, together with manufactured goods, wool, beef and dairy products. These exports are worth over A$5 billion annually. Taiwan already imports 3.5 million tonnes of LNG a year, mostly from Indonesia and Malaysia.
In an interesting piece of timing, just before Jiang's arrival in Australia, Taiwan made it known that it wants to diversify its suppliers. The State-owned Chinese Petroleum Corporation says it will need an additional 10 million tonnes of LNG by the year 2010, as it reduces its dependence on coal-fired electric generators. Although the economic effects of the earthquake have clouded the issue, Taiwan might conceivably be buying Australian LNG before China does.
Australian is quietly confident that China will follow through on its proposals to buy North West Shelf gas. In part, the optimism is based on the outcome of promises made by Zhu two years ago. He pledged that China would cut tariffs on wool imports, enter into minority joint ventures with mining companies, and free up regulations on Chinese tourists. Within the limits of economic strictures in the PRC, these initiatives are proceeding. Australia has been added to the list of approved destinations for Chinese tour groups. There was an 11% rise in Chinese arrivals to over 75,000 last year.
The potential is put at 350,000 visitors a year, some of whom will no doubt have an eye to business opportunities. Given its happy position of having goods to sell that China wants to buy, Australia seems to be exceptionally well placed to participate in the PRC's eventual return to a rapid growth path.