China warns of further breakdown in relations, as Australia drop-down from Belt and Road deal

Australia's state of Victoria cancelled two agreements with China on Beijing's flagship Belt and Road Initiative on Wednesday, leading Beijing's embassy in Canberra to warn that already strained bilateral ties would only get worse. Under a new mechanism in Australia, Foreign Minister Marise Payne has the authority to review agreements made by the country's states and universities with other countries.

Payne stated she intended to cancel four agreements in 2018 and 2019, including two with China, in cooperation with President Xi Jinping's flagship trade and infrastructure scheme, the Belt and Road Initiative.

In a statement, she said, "I consider these four arrangements to be inconsistent with Australia's foreign policy or detrimental to our foreign relations."

Late on Wednesday, China's embassy in Australia expressed its "extreme displeasure and resolute opposition" to the cancellations. In a statement, the embassy said, "This is yet another irrational and provocative step by the Australian side toward China. It also demonstrates the Australian government's lack of commitment to improving China-Australia ties." When Australia became the first country to officially bar Chinese tech giant Huawei from its 5G network in 2018, bilateral relations were strained.

Furthermore, after Canberra demanded an independent investigation, last year, into the causes of the coronavirus outbreak, relations between the two countries deteriorated.

The Chinese embassy says Australia's latest move "is bound to cause more harm to bilateral ties, and will only end up damaging itself." In December, Australia's federal parliament granted states the right of veto over international agreements, escalating a diplomatic spat with China, which has placed a series of trade restrictions on Australian exports ranging from wine to coal.

Liberal Prime Minister Scott Morrison and his predecessor, Malcolm Turnbull, had refused to sign a Belt and Road Initiative country-level MOU with China.

However, Victoria's Labor state premier, Dan Andrews, signed an agreement with China's National Development and Reform Commission in 2018 and 2019 to support the initiative.

Moreover, some countries are concerned that the lending associated with the Belt and Road initiative will result in unsustainable debt levels in developing countries, including the Pacific Islands region.

Morrison's government has denied that the country's new veto power is directed at China, which was Australia's largest trade partner and largest source of international university students until the pandemic forced the country to close its borders. Payne said she had received notification of more than 1,000 foreign deals from nations, local governments, and publicly-funded universities.