Back in the 1950s Australia was paranoid about “Reds under the bed,” which became local slang for the hidden influence of overseas communists on Australian politics.

Today, Russia is no longer a communist state and China has embraced globalization and the market economy, but Australia is still fixated on the perceived influence of the two countries in its domestic affairs.

While in another era a conservative government in Canberra tried unsuccessfully to ban communism in Australia, the modern response has been for Prime Minister Malcolm Turnbull’s government to introduce legislation targeting foreign interference, political donations and espionage.

Although neither China nor Russia are specifically mentioned in the still pending “foreign interference” legislation, it is clearly aimed at them, particularly China.

Turnbull referred to “disturbing reports about Chinese influence” when making the legislation’s initial announcement, but has since blamed the media for stirring up trouble.

Nevertheless, relations between Australia and China have become increasingly tense over the past year, on issues as varied as Australia’s hardening stance on Beijing’s moves in the South China Sea to claims that Chinese money is funding projects in Australian universities which have potential military applications.

National security

Australia’s national security establishment has highlighted what it claims are unprecedented levels of Chinese interference in the country. But these calls have created divisions within the business community, which is concerned about undermining an economic relationship which continues to grow rapidly and richly.

The legislation, which the government is desperate to pass before Federal Parliament adjourns for its winter break at the end of June, is the culmination of several years of rising concern about claims of growing and undue Chinese influence.

The first piece of legislation is the “Espionage and Foreign Interference Bill,” which would strengthen existing espionage offenses and introduce new offenses defined as “cover, deceptive and threatening actions by foreign actors.”

It also updates espionage laws for the cyber-age, giving enforcement agencies new powers to combat cyber-spying, and introducing a new “theft of trade secrets offense” to protect Australia from “economic espionage.”

The second bill and third bills, dealing with foreign interference and political donations, are new legislation and are proving more controversial because they could potentially restrict the ability of universities and charities to receive foreign funding.

Under the proposals, foreign political donations will be banned and only Australians and companies registered in Australia will be able to give money to political parties.

A foreign influence transparency register is also proposed, under which a company with a foreign principal owning more than 15% of a company’s issued capital or voting power would be considered to be related to a foreign government.

This will also apply to any company with 20% of its links to foreign governments.

The ‘China Clause’

This last clause has been called the “China Clause” because it could ensnare companies like Chinese telco giant Huawei and Landbridge, the Chinese company which controversially won the 99-year lease to operate the Port of Darwin in Australia’s north.

One political source in Canberra has suggested that Landbridge’s bid for the port may have been vetoed if there had been such a register in place.

Huawei, meanwhile, which was banned from tendering for the national broadband network in 2013 on national security grounds, could potentially face a similar ban on involvement in building new 5G networks.

China’s supporters in Australia have been vocal in their response to the proposals. They have been joined by many Chinese students and members of the large Chinese diaspora in the country.

Sydney academic John Laurenceson, the deputy director of the Australia-China Relations Institute – which was funded with an A$1.8 million (US$1.3 million) gift from Chinese billionaire Huang Xiangmo – says that China has never objected to laws limiting foreign interference.

“What they have objected to is the singling China out when introducing the laws,” he told local media. “If these laws were introduced using more diplomatic language, much of the [drama] we currently find ourselves in could have been avoided.”

The Institute, founded by former Australian foreign minister Bob Carr, is considered to be a friend of China but has also been caught up in the chill. For instance, journalists planning to go on an annual trip to China with Carr were denied visas by Beijing earlier this month.

Anti-China hawks in Australia are unperturbed by the frostier relations, with many believing that sacrificing some percentage points off Australian economic growth is a small price to pay for national security.

There is, however, a lot at stake economically. China has grown rapidly in the last decades to become Australia’s biggest trading partner. Currently, more than one million of Australia’s 22 million people are of Chinese origin.

Students from China comprise the largest percentage of Australia’s A$28 billion (US$20.7 billion) education sector, and Australian universities rely heavily on their tuition fees.

The legislative debate will only deepen the growing division between Australia’s business community and the national security establishment.

At the core of the security stance is Australia’s longstanding alliance with the United States, which despite being sorely tested by Donald Trump’s unconventional and controversial presidency, is still a pillar of national policy.

Australia hosts a key US listening post at Pine Gap and has done so for decades. Australia’s defense forces operate closely alongside those of the US, while its defense industry is deeply connected to the US military supply chain.

Those calling out Chinese and even Russian influence, however, could perhaps remember back to the 1970s when the US Central Intelligence Agency and British intelligence were accused of meddling in the 1975 dismissal of the Gough Whitlam administration, undoubtedly the most left-leaning government in Australia’s recent history.

The response then from the conservative governments that followed Whitlam was that the claims of foreign interference were spurious and baseless paranoia.

In 2018, in contrast, a conservative Australian government is taking allegations of Chinese meddling so seriously that it is prepared to legislate and risk longstanding damage to the country’s most important economic relationship.