By Rachel Pannett
SYDNEY--One of Australia's biggest states is pushing ahead on an infrastructure deal with China at a time when ties between Beijing and the federal government are at a new low, raising concerns that Chinese money may end up funding projects that are a national-security risk.
Victoria joined China's Belt and Road program--a trillion-dollar flagship foreign-policy initiative--in October. In recent days, the state's premier, Daniel Andrews, has been touting it as a "passport to export" and a way to create jobs in a coronavirus-afflicted economy.
The deal is driving a wedge between the southeastern state and the government in Canberra, where views toward Beijing are hardening as the two countries spar over China's handling of its coronavirus outbreak. An influential bloc of nationalist lawmakers is calling on the government to use the pandemic as a way to reshape the economy and reduce Australia's reliance on China.
The Victorian deal pledges cooperation on infrastructure projects, as well as on biotechnology, advanced manufacturing and technological innovation. Melbourne, the Victorian capital, is home to many of Australia's biotech startups and health-care companies.
Prime Minister Scott Morrison says that he didn't support Victoria's decision to sign up to the program and that it is "usual practice for states to respect and recognize the role of the federal government in setting foreign policy." The federal government wasn't consulted on the October framework agreement, and the country's foreign-affairs department was advised only on the day it was signed, an official said.
Clive Hamilton, a China expert at Charles Sturt University in Canberra, said Beijing's strategy is "using the countryside to surround the city," ramping up its influence efforts in state capitals. Washington's hard-line policies on China means there has been a strong push in the U.S., too, to find alternate channels of engagement via local government leaders, he said.
A summit held in Lexington, Ky., in May last year is one such example, bringing together political officials from U.S. states, including Kentucky, Tennessee, Washington, Michigan and Colorado, and Chinese municipal- and provincial-level governments.
In Australia, tensions with Beijing have been increasing since 2018, when Canberra tightened counterespionage and foreign-interference laws and banned Chinese telecom companies Huawei Technologies Co. and ZTE Corp. from its next-generation 5G mobile network, aligning it with U.S. policy on the matter and underscoring concerns about the possibility of cyberspying by Beijing.
The relationship deteriorated further in May when Beijing imposed tariffs on Australian barley exports and threatened a consumer boycott of Australian meat and wine, and visits by Chinese tourists and students, after Australian officials called for an investigation into any missteps that contributed to the coronavirus pandemic.
Beijing has denied the move was meant as economic coercion. But some lawmakers and security experts say the Victoria deal should be halted and reassessed in the rapidly changing geopolitical environment.
"The Victorian government's Belt and Road activities are simply out of step with the new international and economic environment, including the now openly coercive directions that Beijing is taking with Canberra over trade and in government relations," said Michael Shoebridge, a former top defense intelligence official and China hawk. "The Victorian political leadership's championing of the state's tie-up with Beijing on infrastructure is a glaring wedge that Beijing is driving into Australia--at a time when national cohesion on dealing with the Chinese state is essential."
U.S. Secretary of State Mike Pompeo, in a television interview on May 24, threatened to "simply disconnect" from Australia, a defense ally and partner in the Five Eyes intelligence-sharing network, if the deal affected the security of U.S. communications. The U.S. ambassador later clarified that Mr. Pompeo had said that he didn't know the exact nature of the deal and that the security of Australia's 5G telecommunications networks was a federal matter on which the U.S. and Australia are aligned.
A Chinese Foreign Ministry spokesman said Belt and Road is an economic cooperation initiative that is "completely reasonable, lawful and aboveboard."
Some Australian lawmakers say the Belt and Road program heightens the risk of foreign interference. "Victoria needs to explain why it is the only state in the country that has entered into this agreement," said Peter Dutton, the home-affairs minister.
"It's all about jobs; it is as simple as that," Mr. Andrews, the state premier, told reporters . "I'm not going to go to the hundreds and hundreds of businesses who send more products to China than they ever have and say that they shouldn't."
Many countries, including France, Canada, Australia and India, are stepping up scrutiny of foreign investment amid the economic fallout from the coronavirus, concerned that foreign entities could swoop on strategic assets weakened by the pandemic.
Security agencies are also ramping up their warnings about potential malicious cyberattacks, citing critical infrastructure facilities such as power and water-distribution networks, as well as transport and communications grids, as potential targets.
Australia's top military cyber-defense agency, the Australian Signals Directorate, warned recently that malicious actors are actively targeting health-sector organizations and medical research facilities, possibly seeking information and intellectual property relating to vaccine development, treatments and research now of higher value and priority globally.
The agency didn't specify, but it referred to Advanced Persistent Threat actors--the term given to the most sophisticated and well-resourced type of malicious cyber adversary usually associated with nations.
Mr. Shoebridge, a director of defense, strategy and national security at the Australian Strategic Policy Institute, a nonpartisan security think tank, said that although they may appear to be just concrete and steel, many new infrastructure projects are "laced with digital technologies."
China has framed the Belt and Road initiative as a way to more closely integrate its economy with those across Asia, Africa, Europe, the Middle East and Latin America, primarily through infrastructure projects. But security hawks say it is a coordinated campaign to extend its global political and military clout.
"They're after a much deeper, much more intrusive partnership," said Mr. Shoebridge. "Biotechnology is part of the People's Liberation Army's vision of a future military power. To say these things are just science and just civilian activity is to misunderstand the Chinese state and the breadth of activities under the Belt and Road."
Write to Rachel Pannett at firstname.lastname@example.org