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"Australia's China Reassessed:
The Management of Expectations on the 30th Anniversary of Diplomatic Relations"

Professor Stephen FitzGerald AO
Chairman, The Asia-Australia Institute, UNSW
Australia's first Ambassador to the People's Republic of China

The 2002 Australia In Asia Series
Thursday, 14 November, 2002
The Mitchell Galleries, The State Library of NSW, Sydney

The title that's been given to this talk is somewhat grander than you'll find the content. Most of it is a kind of reminiscence, with some reflections on current China at the end. I've never attempted to set down a record of my engagement with China, and I don't think I will. I like the present, and looking forward is what I'm most engaged with. And if I have any time I like to spend it on research on food, and drink - mostly of an empirical nature. This is because food and drink have been a central setting for so much in our relations with China. And there's a book I would like to write - Gastronomy in Australia-China Relations.

But the 30th anniversary of diplomatic relations has drawn me back. An introduction for a book here, a chapter there, a talk somewhere else. A wonderful morning recalling with Gough Whitlam. And as so often with Gough, a calling for a reference, in this case the 1973 Australian Who's Who, to verify the maiden name of the wife of a senior Australian official who as she left the Chinese guest house in Beijing clad in a lavish fur coat, long drop earrings and very high heeled shoes to go walking round a people's commune, Gough had addressed as 'the Empress Dowager'. In the networks of that wonderful mind, the family name was significant for other reasons, relating to tax and issues before the High Court in the 1930s. The very first time I met Gough, by the way, he ordered his lunch and turned to me and announced in a declaratory way: "I like food!". And the only time I ever saw him momentarily drop concentration in talks with Premier Zhou Enlai was when the attendants in the Great Hall in Beijing placed in front of him on the table a plate of Chinese savouries. Gough Whitlam, who has a stature in this relationship that has no Australian equal. And who despite his modesty in claiming it was for realism and not for vision or expectation that he recognised China in 1972, was not only politically and diplomatically realistic but economically prescient.

The recent LNG deal with China is a reminder. The Australian chief negotiator's chief public comment has been that without the banquets it would never have happened. But it's a reminder also of how much the public relationship with China often seems to have been driven by the economic or business side, commandeered by politicians often for their own self-serving purposes, but how much it has depended on something else, the broader relationship that provides the stabiliser when business goes up or down, and the only guarantee of a good future. So I'll talk about the business side because it has been important, but it's the something else that leads me on.

The reference point is the Australian Embassy in Beijing in the mid-70s. And our expectations for the relationship, and what we sought to set up for what we hoped would follow.

Business has been a part of how I've been involved in China, as a consultant to business Australians. But there have been others. And the political, cultural and educational parts of my life have been larger than the business, and my view about business has always been that the more business works on education and skilling for the political and cultural and linguistic the more effective it is, and for that there has to be education and training, which has been a lifelong preoccupation. The Asia-Australia Institute conducts such education and training under various titles, remedial education for Australian elites, to remedy the problem that almost none of us have had this in our formal education.

I was lucky. I was actually told to learn Chinese - I didn't choose to - when I first arrived in Canberra to enter the foreign service in 1961. How grateful I should be to those who told me! Since I learnt it, it has given me two separate diplomatic careers entirely to do with China; three separate academic careers, first just with China and then expanding out to the present one which takes in other parts of Asia but with China at the core; a business consulting career in China that began in 1978; and the academic and the business currently joined with some work on development cooperation (or aid) and matters to do with the alleviation of the condition of the Chinese poor.

It hasn't always worked for me, Chinese. I have related many times the story of my first foray into Sydney's Chinatown in 1966 after learning Chinese (of the wrong kind of course for Sydney at that time - how that has changed!) in search of a bottle of Rose Dew Liquor (beginning my lifetime research into Chinese food and drink) and the friend who nudged me in the ribs and urged "Go on Fitzie, speak Chinese", and when I did, the very ancient and wizened, tiny and near blind old Chinese lady who squinted up at me and said "Don't yer speak Australian?" But most of the time it has. It found me in China in the 1960s, before the Cultural Revolution - when Australia stamped in your passport that this was forbidden - exploring the streets of Shanghai and inspecting the fields in the Hongqiao People's Commune which is now fields of concrete and high rise. It found me in China in the late 60s and the Cultural Revolution and staying, briefly, in another commune near Shanghai, and later nearly put to death by Red Guards in Changsha. It brought me in the early 1970s, en route to China with the famous pre-diplomatic relations Whitlam mission, to Hong Kong and the home of my friend Henry Litton (until recently a judge of the Hong Kong Court of Final Appeal), where over lunch and a tankard of San Miguel beer and a mallet of croquet, Gough said to Henry: "When we win government, I'm going to send him to China as Ambassador". This was the first I knew of it.

Of course, in Beijing it didn't always work for me either. It wasn't just Red Guards in the 60s who fought. In the 1970s officials fought; Canberra officials. Who thought it impertinent of Whitlam to appoint as Ambassador one who had left the service six years earlier a second secretary and was only 34. They also fought each other, comically at times, as, when Gough came to China in 1973, over who would go with Gough to see Chairman Mao. But the luck of 1961 found me with Gough in the study in Zhongnan Hai, and receiving my very own 'Quotation from Chairman Mao'. On more strategic matters they also fought - for example, they waged a long action against the Embassy's view that whatever the constraints we should seek to have a relationship with China on political matters, for example nuclear non-proliferation and disarmament, and not just on trade.

In the Embassy, we picked our way through these constraints, and with a young team of Chinese-speaking Australian officials who established a reputation among embassies in Beijing (and in Washington) for some of the most incisive analytical reporting of Chinese politics over that time, by 1976 felt confident enough in our judgments about China to venture some projections for the future of our relations. In three major despatches that year we suggested that China would become the major political power and influence in our region and that this demanded that Australia begin then to invest strongly in the political relationship; that China would become the major economy and economic influence in our region for which Australia should begin then to position itself; and that there was critical need for a much broader popular and cultural relationship and that we should create a specially funded institution to promote this (an idea which began to form over another lunch, before I went to China, with Nugget Coombs and Jean Battersby - Jean, whose ideas were also fought by Canberra officials - an idea which led ultimately to the creation of the Australia-China Council).

It was this latter that really went to the heart of what we in the Embassy believed, and why we fought, for example, for the exchange of students - that incidentally brought to China the young Geremie Barme, who has made such an important intellectual contribution to the Australian understanding of China. There was still a formality to our relations at that time, coming both from the way in which Australian officialdom approached it, and from the extreme political constraints of Cultural Revolution and Gang of Four China. Trade for example went through state trading corporations and foreign traders were held at arm's length from the capital, in Canton, at the spring and autumn trade Fairs, to which they rushed from Hong Kong on the train (there was no plane), only to spend their time sitting around in the old Dong Fang Hotel swapping information over a warm White Cloud beer or a Qingdao if you could get one.

What we sought was a relationship of confidence and familiarity that could only come about if it was wider and deeper, in culture and intellectual life, in education and research, in scientific endeavour and technological exploration, in business that involved a closer kind of relationship, in human relationships that could extend to sexual relationships (which were at that time forbidden - and on which we persuaded Malcolm Fraser to take up one such forbidden case when he came to China as Prime Minister in 1976).

It was at the end of 1976 that I left the Embassy and the government and returned to Australia. I began to spend more time on business, by default because I was there when it opened up in 1978. In the 80s, and into the 90s, while I was involved in a variety of official and scholarly things, I was at times almost a commuter to China, and because I was a consultant I travelled with many hundreds of Australians, and when you travel together - bucking over half-made roads in Shenzhen in the old 'Shanghai' taxis or in a Russian built plane (what we used to call the 'DC3-ski') circling for a break in the clouds over Fuzhou so the plane could land, sweating over the accounts for a feasibility study in a furnace-like Hangzhou textile mill or in high summer in Nanning in singlets over a contract negotiation, running through Beijing railway station to catch a train lugging a huge TV set, drafting MoUs under a 40-watt bulb with ten or a dozen people in your bedroom in padded coats because of the cold (and every one of them smoking), and in the old pre-modern offices, and at the banquets, and more Peking Duck and Chinese liquor than you want to think about, and then, as the scene changed, in a fine five star hotel at the end of the day and a cool beer [I've done my bit to support the brewing industry - and in fact I worked at various times with five different Australian brewing companies in China, when there were still five], and through all this always the never ending talking and explaining and questing for understanding - when you travel together you learn a lot. I learnt more about China than I could have dreamt of knowing when I was Ambassador. I also learnt as much about people, Chinese and Australians, and I suppose most about Australians, and how they handled China.

The first thing you have to learn is how to handle them. Their disarming sense of humour and the constant irreverent joking and self send-up, often incomprehensible to others (including Americans), and rarely translatable into Chinese. Why a Mr. Wei should be called 'Milky' or a red-nosed Chinese official 'Rudolf' is not easy. I once tried to explain to a young Chinese woman interpreter that when one of my Australian colleagues said "stop pissing in my pocket" this was not to be taken literally but meant something like 'don't flatter me' or in Chinese "don't pat the horse's behind (pai ma pi)". Her embarrassed translation into Chinese was a very odd mix of equine and urological metaphor. Only two weeks ago I had to explain to a puzzled official why the Australians screamed and fell about with laughter when in a particular aid context an issues group or team had been designated a 'cluster'. This aspect of the Australian character can often be a retreat into the cultural comfort zone, but I see it now more as an appreciation of the essential human comedy, the funny side of things, which is a great strength for staying the distance in an unfamiliar society and particularly one as complex and challenging as China.

The Australia-China business relationship has been through many cycles of confidence and scepticism, particularly on the Australian side. Before I went to work in China in 1973 I was asked by someone who did frozen peas out of Tasmania if I could arrange for China to import these items, and with great faith (perhaps because I too was a Tasmanian) his eyes lit up as he described his vision of frozen Tasmanian peas - every night on dinner tables across China as they sat down to their meat and three veg. This conversation is not one of the great moments in our business relationship, but it tells a truth. This is that one of the most challenging aspects of our relations, on all fronts, has been the management of expectations, even as we came to deal in more sophisticated ways. We have a closer accommodation of expectations now between Australians and Chinese than we have ever had. But this was not always so.

In the 1970s, official scepticism about the political potential of the relationship did not dull official expectations for trade. A major exhibition was mounted by the Australian government in 1974. Live sheep were flown in for daily shearing demonstrations, and large blue-clad rent-a-crowds on their way through paused to watch this Australian ritual, comment that the sheep were drugged, and gasp collectively when the fleece was lifted off and flung with theatrical flourish into the air - and then shuffled on, past the agricultural machinery and on to the mining equipment and the telecommunications and the consultants - and Jim Cairns, Deputy Prime Minister, went off to try to flog the failed Leyland car plant to the Chinese. No significant contract can be attributed to that exhibition. But if that was not the point, this did not prevent the waning of interest that followed.

When the door really began to open for private business at the end of the 70s, however, the Australian interest not only revived but returned in strength. This was the period in which everyone had to go to China. But the interest was ahead of market reform and the capacity of most Chinese enterprises, and the development of a regulatory framework. I recall an agriculture joint venture negotiation in southern China before there was any Chinese Accounting Law, when on a crackling trunk line to the ministry in Beijing, clause after clause, call after call, we had to seek ad hoc rulings on the accounting and the valuation of assets including crops in the ground in the event of termination. The Chinese officials were flying blind but immensely helpful and as it turned out technically skilled because when that joint venture did in fact terminate only a few years later it was settled quickly and amicably and fairly in the opinion of all the parties.

But the difficulties of the early 80s led to a kind of duality in Australia, neither side of which was altogether realistic. Those who had tried in China and become sceptics because there were no immediate results had gone with unreal expectations in the first place, but their consequent scepticism was often deep and persistent. Some retained it for nearly two decades. On the other hand, those who were about to try in China rode on waves of expectation, stirred along by politicians who knew little of business and less of China, ignoring the lessons of those who had gone before. And their Chinese business counterparts at this time were incredibly stretched. They had their hands full coping with the scale and pace of reform and were mostly cadres struggling to work out what business was, and what it meant to partner even another Chinese enterprise, let alone a foreign one. Many of them, too, had unreal expectations about how a relationship with foreign business could be managed, not helped by their internal confidential negotiating handbooks that sometimes brought them small victories but often drove foreign business away.

But while the 80s was a decade of mis-matched expectations on both sides, on the Chinese side there were never anything like the expectations of Australia that there were of China on the Australian side. The sceptics notwithstanding, government and business invested substantial resources in the relationship, which was fine, but often in ill-founded or misguided adventures, which instead of building the foundation simply squandered the opportunity and meant you had to start again. There was for example the 'China Action Plan' which promised the great leap in business with China, and which incomprehensibly had a focus on inaccessible Qinghai Province - which even in 2002 has less than 6 million people. There were commercially driven government aid projects that projected business opportunity that never delivered and that have now sunk without trace. There were boardroom decisions to enter the China market, without corporate strategic preparation, research, analysis or executive skilling. There were executive decisions to enter the market without boardroom understanding of what was involved. These were also the days of the jumbo mission to China. As a consultant, I often found that what had been conceived as a targetted strategic exploration became a kind of executive caravan in which almost everyone seemed to be on board. Strong application to reconnaissance, good analysis of market intelligence and clear commitment to strategy were in short supply, and as a result the decade was not as constructive or productive as it might have been. The lesson I learnt was that the expectations that I had had at least a part in triggering in the 70s and early 80s could also go badly awry for want of essential skills for working in China.

June 1989 brought all this down with a thud, but I must say that another lesson for me was the astonishing nature of some of the sentiments expressed by many in Australia - business, government and elsewhere - about how they had seen China. It was apparent that they had not just been dealing with China but they had developed a kind of 'belief' in China. They had built China into an idea of their own imagining that was not anchored in the reality. And it was apparent that the deficit in the research and analysis had had its mirror in a deficit in their thinking about Chinese society itself, which they had seen as something other than it was, and which they had persuaded themselves would follow - was already following - their own path to political development and reform.

In any event, business recovered, as we know, and some of it was not even affected. But since the early 90s the culture of Australia-China business has been very different from the 80s. This has been due in part to acceleration of marketisation, development of the regulatory framework and the increasing sophistication of Chinese business, and in part also to the maturing of the way Australians do business in China. For Australians it has been more hard slog and less junket, more corporate business minds and fewer corporate bureaucrats, more research and analysis and somewhat more (but still far from enough) China skilling, more results orientation but less impatience, more understanding that building relationships is the precondition and not just the outcome of business. Expectations are better understood on both sides. It is therefore not only a much more mature but a much more stable business relationship, although both sides need to work at strengthening the constructive elements and reinforcing their application by all who are engaged in the relationship.

There are of course continuing issues, and one that bears attention is the vulnerability to ethical compromise in contemporary business life. I know this is an issue that confronts Chinese enterprises, but I am referring more to Australian business. Codes of conduct, however good, are useless if they are not central in the consciousness of a business. There's a cartoon from I think the Australian Financial Review that shows one businessman rushing out the door to catch a plane for Asia, and another who says to him "Have you got your code of conduct?", and he replies "No, I'll get a cheap one when I get there". It's a caution that we need to take seriously, and ethical problems can turn up anywhere. A couple of years ago I discovered that a once-Australian now-international corporation and client of mine was behaving unethically in China and that threatened to compromise me as well. When I discovered this and suggested the situation could be recovered by stopping what they were doing and acknowledging it to the relevant parties, there was denial that any standard of conduct had been breached. In the end all I could do was sever the relationship, but I raise this issue because ethical conduct has been an important part of the Australian stock-in-trade in China, I believe it is appreciated by the Chinese government and understood by the people we deal with there and is part of the reason for our successes. It would be disastrous if it were ever to be devalued.

Closely related but on the other side of the issue is the push for good governance. While this is greatly to be desired, I hope we will approach this with sensitivity to the need to avoid 'governance fundamentalism'; with sensitivity to the fact that there are many paths to good governance and not a one-only model of which western countries are the repository, and to the recent sorry examples from top to bottom in our own country that suggest the quest for good governance is something we ought to be pursuing together, in some humility, with Chinese colleagues.

Looking back again over these 30 years on the development of Australia-China relations, there's one other observation I'd make. In our projections from the Embassy in 1976 we may have had the general forecast right, but we could not claim that we foresaw the speed or magnitude of the change that followed the opening and reform that began in 1978. Nor did we anticipate that China, which we had argued was a country of vast importance demanding much greater focus and attention in our foreign policy, would attract the sometimes extraordinary centrality of focus and euphoric expectations of the 1980s. But from the late 1970s the relationship certainly took off, and it has been moving into new and more complex dimensions ever since.

The point is that much of the initiative for this has had to come from the Australian side, with the great contribution of course of Chinese people in every Australia-China encounter, private and official. This does not mean the 'credit' goes to the Australian side, and we should record more often our appreciation of the cohorts of Chinese who have laboured in ways we barely understand to bring to fruition dealings with Australians through these decades of ongoing and massive reform. But we have to recognise that China has had other, greater, external preoccupations. Since the 1970s, it has been accommodating a large number of new relationships with countries that recognised Beijing in that decade, and in particular managing its difficult but core relationship with the United States as well as the historically and culturally complex relations with near neighbours such Japan, India, Russia and the Koreas. Australia was neither a special nor a priority relationship for China.

But China has responded to Australian initiatives and persistence, across many areas and interests, and this dynamic has created its own culture, the hallmark of which is the familiarity and confidence we in the Embassy sought in the 1970s. We may not have envisaged China in 1981 selecting Australia for its first bilateral aid agreement, or in the 1990s joining an Asian regional forum because of Australia's urging, or working under an Australian command in Cambodia in its first ever Asian peacekeeping role, or accepting Australian delegations to examine its human rights and later agreeing to a collaborative human rights program in China, or admitting a bunch of Australians to the politics of its bid for the 2008 Olympics, or committing to a risk assessment of Australia in 2002 that gave us a 25 billion dollar LNG deal that is for China also an historic step in international interdependence. But these, and other less high-profile public and private examples, do exhibit the familiarity and confidence we sought as the best foundation for an effective and sustainable relationship between two so different countries of such different priority and importance to each other.

Gough, and Nugget Coombs, and Jean Battersby, and Jocelyn Chey, and many others who shared their perspective, had it right. These things could never have happened with Australia had many thousands of Australians not worked at the other aspects of the relationship over these thirty years and invested the energy that must go into having a satisfying relationship with a super power, even a nascent one.

A super power. What kind of society? What kind of China will Australians be dealing with over these next ten or twenty years? I'd like to finish with some views on that question. Its a question of so many dimensions that its difficult to get a handle on for oneself, let alone for others. The most anyone can do is to single out what seems to them to be important. Here are a few things that seem to me important.

First, of all the facts about China, here are two I think everyone ought to know and really think about. One, according to the World Bank the number of people in China lifted above the poverty line since 1978 is more than 200 million; equal to the population of Indonesia, twice that of Japan, ten times Australia. Unremarked in the sound bites from the analysts of business television, this is certainly the single biggest transformation in such short span in human history. Think about what this means about China's human, managerial and, yes, governance, capabilities and potential. It might be thought that this was an easy or inevitable outcome of the removal of the political strictures and command economy that went before. That's rubbish. Just look at the many negative examples of transition elsewhere.

Two, the official number of Chinese internet users stands at about 46 million. Some analysts believe it is more. It is projected to exceed the number of users in the United States. It links people in the PRC with people in Hong Kong and Taiwan and Singapore, in Sydney and San Francisco, in London and Paris, and Beida or Qinghua with MIT, Columbia, the LSE or UNSW. Why is this important? Because its in Chinese. Chinese is now a second global language. You can roam a virtual world in Chinese. In fact, you can even roam some parts of the physical world almost without having to move out of Chinese. Go into any bookshop in Beijing and look at the expanding shelves of international travel guides, in Chinese. Last year, the UNSW conducted a survey of what language was spoken at home by its 32,000 students. For 25%, the language is Chinese! What Chinese as a second global language means for the future of the world has barely begun to be appreciated. At minimum, it means that China's growth in power and influence will be linked to the Chinese speaking world beyond China's boundaries, which in turn will become a function of this growth. Further, when put with the almost frenetic learning of English in China, it means that very substantial numbers of educated people in the PRC will be able to be effective in two global worlds of language, culture and the mind, two worlds of human transaction, two worlds of business, two worlds of travel and experience.

Another point about this global language. Research has shown that the development of creative and inventive potential in twentieth century education in all Chinese societies including Hong Kong, Taiwan and Singapore has traditionally been and to quite a large extent still is constrained by the methods of teaching and the culture of the classroom. Evidence abounds, however, that when this classroom culture is changed or Chinese are translated to environments of open intellectual challenge and enquiry, such as the US, there is often an explosion of creative energy. Most Chinese used to have to go abroad to find this intellectual experience. Now, it is available online, and I suggest that it will utterly transform the Chinese contribution to the modern world's scientific and technological creativity.

Things change. Some things endure. Some people say that 'foreignisation' is changing everything about Chinese society. I doubt it. Here are some features of Chinese society that are enduring. There are others.

One is bureaucracy. China runs as a bureaucracy, its idea of the state is essentially a bureaucracy, it even co-opts people into bureaucracy, like the co-option of business people into the already 66 million-strong Communist Party. Contemporary market fundamentalism in our world notwithstanding, bureaucracy is not inherently bad. Practice, and governments, pervert it. When the Chinese invented it a thousand years before the Europeans it had many good principles and ideas of good governance including a career service, open to talent by competitive examination. Reform will improve it. It will not remove it.

Two is hierarchy. Distorted by later rulers for their own purposes as the essence of Confucian ideas, it is nevertheless a dominant dynamic in human, official and business relationships. It has survived the destruction of feudalism in China. It survives in Chinese communities outside China. Reform may blunt its official edge, good governance and transparency will manage it. But it will not disappear.

Three is materialism. In a pre-Marxist sense. Some people worry that China has no belief, no faith. But China is the only great civilisation not to have invented a metaphysical religion or god. Why should it need one now? Chinese materialism as the driver of the astonishing success of China's economic reform since 1978 explains much. It will endure.

Four is what sociologists describe, and people from individualist societies like Australia experience, as the collectivist nature of the society. The characteristics of the in-group, that can determine anything from workplace relations to how or whether you apply your own values and ethics to people outside your group, will persist into the foreseeable future.

Of course, China is also in a process of transformation, of becoming. What is it becoming?

It is becoming an educated society or 'clever society'. By this I mean that the faculty of top universities is already strong with advanced graduates of world class universities, including in North America and Europe. Chinese parents jostle to get their kids into elite high schools with average entry scores of 99% that feed these universities. And the government is feeding these top universities and institutes with funding - not starving them - with the explicit intention of making them world class. When Jiang Zemin decided in 1998 that Beijing and Qinghua universities should become world class he simply gave them a world class funding kick-off, in the case of Beijing University equivalent to sixteen times its annual recurrent funding. At the present rate China will have world class universities before Australia. Australian education, as it gets off the plane in China, should take very serious note.

It is becoming a modern society, in the sense that it is no longer chained to the symbols of China's past. The formative influences on its leaders, decision-makers, business and the newly affluent are no longer the Long March, the revolution or the 1950s, but what has happened since 1978.

It is becoming a global society, not only in the ways suggested earlier but in the nature of its participation in world affairs and its joining in the political culture of multilateral relations and global issues. And in many ways, the affluent along the Eastern seaboard now relate more to international global society than they do to China's west.

It is becoming an unequal society, particularly as between East and West, but now also in the dramatic increase in the numbers of urban unemployed and poor. According to some, the next ten years may deliver up to 400 million people out of rural areas into the cities and towns. This is a serious and complex problem, but it may not be the terminal problem some fear. Economically depressed regions, distressed social underclasses and social unrest have existed in other countries, the United States for example, without political collapse. In characteristic Chinese fashion, the problem is starting to be addressed, but it is on a scale not experienced by any government in history, and China is going to need help in managing it.

It is becoming a corrupt society. Not universally, but pervasively. As a Deputy Governor of Xinjiang colourfully warned a large group of Chinese officials gathered for an Australian joint venture recently, "One piece of ratshit can spoil the whole bowl of soup". Next to the migration/urbanisation issues, corruption may be the major issue for China in the next few years. It is already a cause of social unrest in a number of provinces.

And finally, it is becoming a civil society. Anyone who has come lately to China, or whose benchmark is Australia, may not see it this way. But it is there, in embryo, not unconstrained, but palpable. In the networks and NGOs and institutes that work with the poor and vulnerable, in the beginnings of society's engagement with social and development issues and the law and human rights, in the willingness of the media to deal with cases of official ineptitude, bungling and corruption at least at the local level. It is there also in the government's acknowledgment and even encouragement of non-government organisations, and in its interest in good governance for continuing development. And the surety for good governance is good civil society.

Over the next ten years, these trends will continue. China will become more open, transparent, representative and responsive; for example, in the development of public policy and the debating of policy before rather than after the fact, and in the processes of legislation that will be more transparent, and open to external input and more representative consultation. Government information (already voluminous to a point almost beyond management) will be more effectively organised and presented and more accessible. The civil service will be more professional and public officials more accountable. There will be real reform in the police and the procuracy, professionalisation of the judiciary that will lend credibility and effectiveness to the judicial system, and continuing professionalisation and de-politicisation of the army.

Those in western countries who think China will democratise in their image will be disappointed. As also will those who think there is an easy way to stop corruption. But China's own issues will impel change. Change is being driven by many issues of concern including some that have alarmed the government, including urban unemployment and poverty, but also the negatives of WTO entry now becoming apparent, or the consequences of the government's own withdrawal from provision of services to the community. And every one of these leads back in one way or another to issues of the law and the administration of justice - from enforcement of tax laws so as to collect revenue to fund poverty reduction and social welfare, to enforcement of anti-corruption measures because of the huge costs of corruption and its perversion of policy goals.

The government's own agendas for governance already run parallel to the demand for good governance from articulate urban society, and there is likely to be some convergence on this issue. This is a very different political dynamic from that which has existed before, and in the absence of a political crisis this convergence will open the way for evolution of a more substantial kind. I have just come from five weeks in China looking more deeply at these issues of governance and civil society, and most outside China would be unaware of how fast this issue is running, and surprised at the extent to which the Chinese government itself is beginning to encourage it.

For Australia, these social and political issues are central. Australia has a huge stake in China's future. Its prosperity is our prosperity. Over this coming decade we have an opportunity to greatly consolidate what has been built up over these 30 years, and I'd like to finish with a couple of quotations on this from unexpected sources. You know of course that there has been a great momentum in Canberra to re-emphasise the primacy of our relations with the United States, led by John Howard. But as you also know, last week his Treasurer, Peter Costello, uttered the dreaded words that Australia "is part of Asia", beginning I hope the laying to rest of the twisted departure from this truth in Australian foreign policy over the last five years. That's Peter Costello, you might say. But there's another one you may have missed. Following the announcement of the LNG deal, John Howard's close confidant and Finance Minister, Nick Minchin, possibly to the surprise of his Prime Minister, declared: " I think the China relationship is the relationship for Australia in the 21st century". How could we not agree!