THERE’S no more important issue for Australia at this time in the history of its international economic and foreign affairs than to get the relationship with China right. It’s an issue that went through to the keeper during the election. But for the new Morrison government, forging a viable, credible strategy in its dealings with China will be a priority that plays into all its foreign relations strategies, prominently also with the United States.
Despite negative commentary about the health of the Australia–China relationship, the trade and economic partnership has thrived over the past few years.
Australia–China goods trade topped AU$192 billion in 2018, having grown more than five times as fast as the world average. This remarkable growth was largely due to strong Australian commodity exports and impressive trade diversification.
Australia’s share of Chinese iron ore imports was 60 percent in 2018. Chinese external procurement of iron ore rose to 90 percent of its consumption, up from 83 percent in 2014. Australia’s share of Chinese coal imports rose to a record 54 percent in 2018, from 48 percent in 2014. China’s coal imports from Australia grew by 9.8 percent year-on-year, despite China’s reportedly tightening import restrictions on coal in the last few months of 2018.
On the back of early-stage China–Australia Free Trade Agreement (ChAFTA) tariff reductions, Australian wine and dairy exports to China have seen strong growth, despite reports in June 2018 of wine shipments being held up in Chinese customs. Australian wine exports to China grew 18 percent in 2018 to AU$1.1 billion compared with 10 percent globally. Growth of 34 percent in dairy exports the last financial year made Australia China’s fourth-largest supplier.
In services, Australian exports to China grew 17.2 percent to AU$16.9 billion in 2017–18, more than double the growth in Australia’s total services exports over the same period. This included 16.7 percent growth in the travel sector. A record 1.43 million tourists in 2018 makes China Australia’s largest source of short-term visitor arrivals. The export of education also continues to grow. The total number of Chinese students in Australia stands at a record 205,000.
It’s properly functioning markets that have delivered these strong Australia–China trade results. Australia’s largest trade relationship is one that is interdependent with (not dependent on) China, as it already draws a quarter of its imports of strategic raw materials from Australia, a proportion that continues to grow.
The bilateral investment relationship is a different story, as the data released from the Asian Bureau of Economic Research’s Chinese investment database this week indicates. That’s in part because the political relationship has sputtered.
