China preparing for war with Australia

The spectre of Chinese nuclear submarines, destroyers, fighters, and bombers based in the Solomon Islands, merely 1,752 kilometres from Australia’s mainland – and closer than New Zealand – brings the looming prospect of global conflict right to our doorstep.  The secret deal struck allowing China to base military assets in the Solomon Islands, which the US and Australia had staunchly opposed but were evidently not prepared to pay larger bribes to defeat, is an iconic inflexion point in our national history. The tyranny of distance, which has protected us for so long, now becomes the tyranny of proximity. To find out more about how soon we will see military assets arrive in the Solomons, and the long-term thinking behind China's powerplay, please click the button below.
Christopher Joye

Coolabah Capital

In the AFR I write that the spectre of Chinese nuclear submarines, destroyers, fighters, and bombers based in the Solomon Islands, merely 1,752 kilometres from Australia’s mainland – and closer than New Zealand – brings the looming prospect of global conflict right to our doorstep.

Many readers might not remember that Japan, which today is a key Australian ally, pursued an almost identical strategy in the second world war when she was an adversary. Japan invaded Malaysia, Singapore, Papua New Guinea, and the Solomon Islands, including the main island of Guadalcanal, where they built an airstrip, called Henderson Field. This is now Honiara International Airport, which remains the island’s key runway.

The Battle of Guadalcanal (ie, Solomon Islands) between August 1942 and February 1942 was the first major land offensive undertaken by the Allied forces, including Australia and the US, against Japan, resulting in over 26,000 deaths and the loss of 57 warships and almost 1,300 aircraft. The largest ever Australian warship sunk in battle, HMAS Canberra, was torpedoed multiple times, claiming 84 souls.

This was superseded by conflicts between Japan and the Allies in what we now call Papua New Guinea, which was mostly an Australian territory at the time, in the Gilbert and Marshall Islands, and throughout other Pacific nations and atolls.

Months prior to the Battle of Guadalcanal, Australian and US naval ships had met their Japanese counterparts in the historic 1942 Battle of the Coral Sea, which is the stretch of ocean linking Australia to the Solomon Islands. This was the first ever engagement between opposing aircraft carriers. While it was technically declared a Japanese victory in terms of ships sunk, it was the first occasion the Allies had halted a Japanese advance.

Following the Japanese playbook, the Chinese Communist Party is trying to lay the groundwork to establish bases, runways, naval ports and close military ties with most countries situated to our north and north-east, including Fiji, Papua New Guinea, Samoa, Solomon Islands, Timor Leste, Tonga, Vanuatu and, farther afield, the tiny nation of Kiribati.

The secret deal struck allowing China to base military assets in the Solomon Islands, which the US and Australia had staunchly opposed but were evidently not prepared to pay larger bribes to defeat, is an iconic inflexion point in our national history. The tyranny of distance, which has protected us for so long, now becomes the tyranny of proximity.

China’s strategic goal is to prevent Australia from getting involved in the potential conflict over the future of Taiwan's democracy, and, more specifically, neutralising Australian and US signals intelligence and surveillance assets that would be crucial to this campaign, including bases in Geraldton, Western Australia, Shoal Bay in the Northern Territory, the Cocos (Keeling) Islands, and Pine Gap, near Alice Springs. (One might want to avoid investing in property close to these locations!)

Recall that using 160 years of data in combination with advanced statistical and machine learning methods, we estimated that the probability of a full kinetic military conflict between Taiwan and China over the next 10 years is around 74 per cent. The probability of US-China conflict was also very high at 45 per cent. And this was dated as at 2020, conspicuously prior to the sharp escalation in tensions between these nations in the period since.

Australian Strategic Policy Institute executive director Peter Jennings believes we should see the arrival of Chinese military assets in the Solomons within weeks. “Their model is what they’ve done in the South China Sea, which is to move quickly and decisively before people are able to gather their thoughts and resist,” Jennings told The Sydney Morning Herald. “So I would imagine we would see something happen before we get to our election.”

Both Jennings and Australian National University emeritus professor of strategic studies Hugh White dismissed as “absurd” and “fanciful” recent criticisms that the federal government could have prevented Chinese encroachment into Australia’s sphere of influence.

The Australian reported on Friday that prospective Labor defence minister and Solomon Islands expert, Richard Marles, had repeatedly encouraged China to build closer ties to Pacific countries and dismissed fears that China would seek to subjugate and militarise these nations. “The idea the Pacific nations would adhere to a call from Australia to not engage with China is silly,” Marles said.

In a book on Australia’s pacific relations published last year, Marles wrote that “basing our actions in the Pacific on an attempt to strategically deny China would be a historic mistake’’. “Australia has no right to expect a set of exclusive relationships with the Pacific nations,” he continued (in quotes extracted by The Australian).

“They are perfectly free to engage on whatever terms they choose with China or, for that matter, any other country. Disputing this would be resented, as the recent past has shown.”

“An attempt to engage in a calculated denial of China will only create a geo-strategic contest that Pacific Island countries will register with bewilderment, if not mirth. Besides, the idea that Australia would win a bidding war with China is laughable.”

Cruise and ballistic missiles trained on Australia from Chinese subs, warships and aircraft in the Solomon Islands will likely pierce the popular complacency around the existential national security risks we now face from a one-party communist state hell-bent on forcing Australia to bend the knee. The empirical record shows that China has had enormous success in co-opting and compromising Australian leaders, including former prime ministers, premiers, and senior ministers, much as have done throughout the rest of the Indo-Pacific.

We currently possess no ability to autonomously deter China without relying on the United States. We have no long-range missiles, no strategic bombers, and no submarines or warships with deterrence value. Coddled by the prosperity bequeathed on us since the end of the Cold War, we have massively under-invested in, and mis-managed, our national life insurance policy -- the defence forces.

While it is clear the federal government understands this, they need to be much more aggressive and bold in remedying our grave national security deficiencies. We should be spending more than 3-4 per cent of GDP on defence. We have to fast-track the purchase of both conventionally- and nuclear-powered submarines, the former for littoral defence and the latter for second-strike capabilities. We should be converting our two massive amphibious assault ships into mini-aircraft carries, as other nations are currently doing.

We have to ramp-up full-scale production of the MQ-28A “ghost bat” combat drones, expand our F-35 fleet, and seek to acquire B-21 stealth bombers. And we must quickly establish vast stores of domestically produced long-range cruise, ballistic and hypersonic missiles, which should be mobile and ideally have the ability to strike North Asia.

The constant prevaricating and delays from both sides of politics is totally unacceptable. Australia requires decision-making speed and strength. And we need the fortitude to be able to resist China and its many influence agents, who seek to control the national narrative.

In May 2020, this column ran the headline: “Welcome to Cold War 2.0”. This forecast the emerging conflict between capitalism and “socialism with Chinese characteristics”, which has long been fostered by an ideological President Xi Jinping.

Sadly, our worst fears have come to pass. What we now need is decisive leadership to protect our way of life, which faces existential threats for the first time since the last Cold War. 

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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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