The new head of the PM's department just asked some really uncomfortable questions about the future of China

One of the great tensions in Australian politics and business is managing the conflicts – real or imagined – arising between our closest trading partner, China, and closest ally, the United States.

And as Japan, who Tony Abbott called “Australia’s best friend in Asia”, subtly re-militarises under prime minister Abe, it makes handling the tensions between these two Asian powers as they increasingly face off equally problematic for this nation.

These tensions occasionally surface in public, but are usually deftly handled by foreign minister Julie Bishop and her team.

Not this week.

As the Fairfax Media reports, the new head of the Department of Prime Minister and Cabinet, Michael Thawley, has entered the fray with comments many politicians, policymakers and bureaucrats might think, but rarely say.

On the emergence of China as a global leader Thawley, speaking at the Crawford Leadership Forum alongside former ALP foreign ministers Bob Carr and Gareth Evans, said China was, “not willing or able to play a serious global leadership role.”

He doubled down, saying the notion of the US and China emerging as the twin global cops, working together to avoid confrontations, was flawed because “China wasn’t ready to take on the responsibility either economically or politically or security-wise.”

His comments seem to suggest China is either self-absorbed or self-reflective and dominated by internal issues.

That’s the theme George Friedman, founder of Stratfor, used in his book The Next Hundred Years, arguing that China’s rise was not inexorable and that it would eventually turn inwards once again.

To that end, Thawley believes that when it comes to global issues and confrontations China won’t be on the side of resolution.

Rather, China will, “get in the way or get out of the way,” he said.

Self interest again.

Its hard to disagree when you observe the nation’s actions in the South China sea and the fact that its just built a military-grade island in the Spratly’s.

On the economic front, Thawley seems to believe the jury is still out on the transformation of the Chinese economy from its current planned nature to a more free market version consistent with the country taking a bigger place on the global economic stage.

He says that while anyone would be “crazy” to bet against China achieving the transition, that very fact would change the face of politics there and diminish the power of the Chinese Communist Party.

“If China does succeed it won’t be the same place afterwards. It won’t be a democracy, maybe, but it won’t have the same institutions that it does now. It will be a very different country,” he said.

In the medium term it looks like premier Li Keqiang and his colleagues will have their hands full dealing with the sharply slowing economy and crashing stock market. Shanghai stocks and the bursting of the bubble, might teach Beijing about where the real power lies in a market-based economy.

In the end, that’s the question Thawley is asking of the Communist Party and its leader Xi Jinping. Is the price they might pay to bring China and the economy to the global fore worth the loss of control they might experience internally?

This is an important question also for Australian business and politics as well. Much has been invested in the Chinese Australian free trade agreement (ChAFTA), much has been invested to supply iron ore to China, much will be invested to supply services there too. Much is also expected in terms of what Chinese growth and liberalisation will deliver to the Australian economy.

It seems Tony Abbott’s new head of department has just asked some uncomfortable questions. In public.

Perhaps he’s also belled the cat.

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