Victoria Secretly Signs Up for China’s Belt and Road Initiative

Victorian premier and Labor leader Daniel Andrews (above) signed a deal between the Victorian government and China without consulting Australian federal regulators.

The Victoria state government surprised Australia’s federal government with its decision to  sign a memorandum of understanding (MOU) with China on October 25 regarding its involvement with Chinese President Xi Jinping’s Belt and Road Initiative (BRI). Prime Minister Scott Morrison rebuked the decision, claiming that he was “‘surprised’ that the Victorian government would involve itself in a ‘matter of international relations’ without discussing it first.” The Australian government has announced its official position to not become involved with the BRI. Victorian Premier and prominent opposition Labor Party leader Daniel Andrews touts the benefits of such a deal, insisting that “this new Australian-first agreement sums up everything we have achieved with China over the past four years—it means more trade and more Victorian jobs and an even stronger relationship with China.”

The BRI is China’s attempt to increase its global influence and soft power by financing large infrastructure projects through grants and loans to countries around the world. The large-scale projects often come “with the requirement that Chinese companies be heavily involved in planning and construction.” In many cases, the loan packages necessary have been defaulted on by the borrowing countries, leading China to demand substantial concessions. Such was the case when Sri Lanka conceded a new submarine port to China for 99 years.

Although Australia had signed a national MOU earlier this year commiting Australia to closer economic ties with China and cooperation on development projects in developing nations, these MOUs have remained confidential because China has not agreed to release them. A release to the public could, in Department of Foreign Affairs and Trade official Elly Lawson’s words, “damage the government’s relationship with China … as well as with other governments and international organizations with whom Australia has concluded MOUs.”

While the details of the deal remain unclear, China may be setting an important precedent in the spread of its program. If the MOU between China and Victoria is upheld, Xi would effectively “sidestep national leaders in Canberra and court states individually.” Transparency and security in these trade deals with China remain critical as Australia seeks a balance between strong economic ties with China and its strategic partnership with the United States.