The Belt and Road fallout

In October 2018, Victoria's trade delegation stood in Beijing as Premier Daniel Andrews put his signature to a memorandum of understanding on China's Belt and Road Initiative — the infrastructure and investment program Beijing had spent five years building into the centrepiece of its global economic diplomacy. Victorian officials spoke of new markets for the state's food and fibre exporters, fresh capital for its infrastructure pipeline, and closer ties with the state's largest trading partner. Two years later, some of the exporters that relationship was meant to help — winemakers, barley growers, seafood processors — watched their biggest customer disappear almost overnight, not because of the Belt and Road agreement itself, but because the wider Australia–China relationship it was meant to insulate against had collapsed. By April 2021, the agreement Victoria had signed alone, and defended alone, was torn up by Canberra in an afternoon.

That reversal is the story of a state government that tried to run its own China policy inside a federation where foreign affairs is constitutionally the Commonwealth's alone — and of what happened when the two collided.

What the government did

On 8 October 2018, the Victorian Government and China's National Development and Reform Commission (NDRC) signed a memorandum of understanding on Belt and Road cooperation — a non-binding statement of intent to explore Chinese investment in Victorian infrastructure, trade facilitation and project financing. Victoria was, and remains, the only Australian state or territory ever to formally join the Belt and Road Initiative; every other jurisdiction stayed out. A year later, on 23 October 2019, Andrews returned to sign a more detailed Framework Agreement with the NDRC, widening the MoU into specific areas of cooperation across infrastructure, trade, innovation and aged care (Premier of Victoria, media release, 23-Oct-2019).

Neither document went before the Victorian Parliament for a vote. Both were executive agreements, negotiated and signed by the Premier's own department, at a time when the Commonwealth's posture toward China was already hardening: Australia banned Huawei from its 5G network in 2018 and passed new foreign interference and foreign donations laws the same year. Victoria pursued its China strategy on a separate track regardless.

The Belt and Road Initiative itself was already a contested program by 2018, not a neutral trade deal. Launched by China in 2013, it financed ports, railways and power projects across dozens of countries, mostly through Chinese state-owned lenders and contractors. By the time Victoria signed, several partner countries had run into serious difficulty repaying Belt and Road-linked debt — most visibly Sri Lanka, which in 2017 handed a 99-year lease over the Hambantota Port to a Chinese state company after struggling to service the loan that built it, an episode widely cited internationally as a caution about the strategic strings attached to Belt and Road financing. Australia's own security agencies and successive Coalition and Labor Commonwealth governments had, by 2018, become increasingly wary of Chinese state investment in strategic infrastructure, a concern reflected in the Commonwealth's own critical infrastructure and foreign investment reforms of that period. Victoria signed regardless, judging the trade upside worth the exposure.

The Commonwealth's response came in two stages. Australia's Foreign Relations (State and Territory Arrangements) Act 2020 passed federal Parliament with bipartisan support and commenced on 10 December 2020, giving the Foreign Minister power to review — and cancel — any arrangement between a state or territory government, public university or local council and a foreign government, where the Minister judged it inconsistent with Australia's foreign policy or adverse to Australia's foreign relations (Australia's Foreign Relations (State and Territory Arrangements) Act 2020 (Cth), Parts 2 & 4). On 21 April 2021, Foreign Minister Marise Payne used that power for the first time, cancelling four arrangements outright: Victoria's 2018 MoU and 2019 Framework Agreement with the NDRC, and two older Victorian education-department agreements with Iran and Syria (Minister for Foreign Affairs, media release, 21-Apr-2021). All four cancelled arrangements were Victoria's. No other state or territory had anything scrapped under the new law, then or since.

The evidence

The paper trail is short but unambiguous. Victoria signed two China agreements no other state signed; the Commonwealth built a law specifically capable of unwinding them; and when it used that law for the first time, all four casualties were Victorian.

The wider trade context matters, because it shows how little control either government retained once relations soured. From May 2020, China imposed tariffs and informal restrictions across a run of Australian export categories — barley, wine, red meat, coal, timber, cotton, lobster — after Canberra called for an independent international inquiry into the origins of COVID-19. The affected trade was worth on the order of $20 billion a year (approx.; Australian Treasury and DFAT estimates, 2020-21), and Victoria's own exporters, including its wine and barley producers, sat squarely inside that group. None of this was caused by the Belt and Road MoU, and cancelling the MoU did not cause it either — but it is the backdrop against which both the signing and the cancellation have to be read: a state government spent 2018 and 2019 building a China relationship on the assumption that Canberra's settings would hold steady, and by 2020 they had moved sharply the other way, for reasons entirely outside Victoria's control.

The critique

Start with process. Neither the 2018 MoU nor the 2019 Framework Agreement was debated or voted on by the Victorian Parliament. Both were signed by the Premier under executive power and announced through the same government media unit that promotes grant programs and ribbon-cuttings, without the independent scrutiny a formal cooperation agreement with a foreign government's central planning agency arguably deserved. Victorians learned the content of their state's China strategy from press releases, not from a parliamentary process that could test the assumptions behind it. In the 2019 release announcing the Framework Agreement, Andrews said the state did not see China merely as "our good customers" but as "our good friends" — a genuine expression of the government's optimism at the time, and, in hindsight, a measure of how far the state's rhetoric had run ahead of a bilateral relationship it did not control and could not insure against.

That gap between confidence and control is the deeper problem. Foreign affairs sits with the Commonwealth under the Constitution for a reason: a state pursuing its own international agreements can create exactly the inconsistency that occurred here, with one arm of government deepening ties to Beijing while another was banning Huawei, tightening foreign interference law and, from 2020, absorbing retaliatory tariffs. Victoria's Belt and Road diplomacy was not coordinated with, and at times ran directly against, the Commonwealth's own posture. Whatever advantage Victoria hoped to gain by being first and only, it also created a real liability: a second, uncoordinated channel of "Australian" foreign policy that Beijing could read, and that Canberra ultimately judged it had to shut down by statute rather than by negotiation.

No Victorian voted for the state to run its own China policy — and none voted to have it cancelled either.

Transparency compounds the judgement problem. Even after the cancellation, the Victorian Government has published no independent accounting of what the Belt and Road relationship actually delivered — no itemised list of Chinese investment secured, contracts signed or jobs created that can be traced to the 2018 or 2019 agreements specifically, as distinct from the much larger Victoria–China trading relationship that predated both documents by decades. The "tangible benefits" promised in October 2019 were never quantified publicly before the agreements were dissolved eighteen months later, which leaves an honest audit of this episode unable to weigh a documented cost — diplomatic friction, a first-of-its-kind Commonwealth veto, reputational exposure in Canberra and Beijing alike — against a documented benefit, because the benefit side of the ledger was never filled in.

The Commonwealth is not beyond criticism either, in fairness to the state side of this dispute. The Act gives a federal minister broad, largely unreviewable discretion to cancel a state agreement against a test — "inconsistent with Australia's foreign policy" — that the legislation does not define with precision, and Victoria has said publicly that consultation ahead of the April 2021 decision was minimal. A power this sweeping, exercised for the first time against a single state and no one else, sets a precedent the Commonwealth has not yet had to test against a state government of its own political colour.