Get on board with China or miss out, former World Bank vice-president warns

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Get on board with China or miss out, former World Bank vice-president warns

By Eryk Bagshaw

Australia should accommodate China's expansion and tone down its rhetoric or risk missing out on a decade-long economic windfall, the former chief economist of the World Bank has warned.

Cautioning that a perception of Australia being "uncomfortable" with China's rise had reached Beijing, Justin Yifu Lin - the former senior vice-president and chief economist of the World Bank - said the resources sector would pay the price for Canberra's actions.

"What is the purpose for Australia to stop the rise of China? You are not a hegemony," Professor Lin said.

Justin Yifu Lin, former senior vice-president and chief economist for the World Bank.

Justin Yifu Lin, former senior vice-president and chief economist for the World Bank. Credit: Bloomberg

"From what I see in China the [Australian] government seems to be uncomfortable about China becoming influential in this region."

The comments, made in an interview with Fairfax Media on the sidelines of the Australian National University's China Update forum, come after local tensions with the world's second largest economy reached their highest level in a decade following allegations of political interference, corruption, military expansion and a diplomatic freeze.

Professor Lin warned that if China's economy continued to grow its demand for natural resources would only rise.

Australia's resources sector is heavily dependent on Chinese buyers - particularly for high-grade iron ore and coal.

"If there is some kind of tension between China and Australia it certainly would become a barrier for Australia and it is very unlikely that Australia can stop the rise of China unless it joins hands with the US," said Professor Lin, who is now based at Peking University.

"The US may fear that China will stop the US from being the world's single super power, but you are not a super power - so there is no reason [to oppose its expansion]."

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Professor Lin said China would be a friendly superpower with a worldwide influence that was unlikely to dominate the global economic, political or military order.

"It's not China's culture, it's better for [Australia] to accommodate," he said.

He urged Australia to sign up for the Belt and Road initiative and dismissed suggestions China has been building up its military capability in the Pacific Islands.

"If China's rise can provide a better opportunity for the Pacific Islands to prosper, that should be a good thing," he said.

"China may not have an interest in setting up military bases in those islands. The Indian Ocean and the South China Sea are more important, the Pacific Islands are too far away from China."

World-renowned Harvard University China expert Dwight Perkins said on Friday Australia was right to be cautious about China's economic expansion.

"Under [former leader Deng Xiaoping] the basic policy of China was to lay low on international issues, under Xi Jinping that is not the case," he said at the forum.

"China is now asserting itself through the Belt and Road and it has real interests, the Belt and Road is just as much strategic policy as it is economic."

Professor Ross Garnaut.

Professor Ross Garnaut.Credit: Andrew Meares

The Belt and Road initiative - estimated to already be worth more than $US5 trillion - will see an unprecedented level of Chinese investment in railways, ports and roads from the Indo-Pacific through China to Europe, with the goal of levelling the living standards of rural China and Beijing through trade over the next decade.

Australia's former ambassador to China, Ross Garnaut, said the growth in Chinese incomes meant the world was hurtling towards a paradigm shift in its association of economic prosperity with democracy.

"By about 2030 China will probably be as large an economy as the United States and average incomes are likely to come into line with other countries in the first half of 2020s," said the ANU economics professor.

"That will be a very important point for the world. China becoming a high-income country will break the association in our minds between countries with high incomes and competitive democratic political systems."

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