China-Australia relations: trading relationship still strong with growing divide between ‘rhetoric and reality’

·4-min read

Australian businesses say there are signs the trade relationship with China will not collapse as exports and imports between the two countries continue to be healthy despite bans on certain products.

China’s total imports from Australia in May rose more than 55 per cent from the previous month to US$13.6 billion, while exports rose just over 1 per cent to US$4.9 billion, according to Chinese data released on Monday.

The growth is an extension of the buoyant trading pattern between the two countries, which, despite being at risk due to ongoing bilateral tensions, remained resilient thanks to the iron ore trade.

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In an in-depth survey of businesses released late last week, exporters told the Australian Chamber of Commerce and Industry that despite finding “business as normal” with China impossible – particularly after Beijing unofficially banned several Australian products, including wine, barley and log timber – political posturing between the two countries did not reflect the actual trading appetite.

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Exporters were confident the China-Australia Free Trade Agreement (ChAFTA) – which has led to an explosion of Australian exports to China over the past six years – would remain intact and indicated “the divide between both the rhetoric and reality will continue to grow”.

“My suspicion or my expectation is that the ChAFTA will remain in place and the reason I say that is Australia did sign up to the Regional Comprehensive Economic Partnership (RCEP) that involved China earlier in the year and it did that at a time where China was imposing its own protectionist measures and doing the steps that Australia is objecting to,” one senior manager said in the survey.

“So it’s one of those huge contradictions … [Australia] criticising China’s approach to trade but then giving China a big sign of international support by joining up to a free-trade agreement, which they were essentially the champion of … the [Australian] government understands how important the FTA is.”

The RCEP, one of the world’s biggest multilateral trade pacts that also includes Asean countries, New Zealand, South Korea and Japan, was signed late last year despite the Covid-19 pandemic and tensions between China and Australia.

Participants in the business survey also said there needed to be more balance in local messaging about the China-Australia relationship, citing the recent Chinese anti-dumping cases against Australian barley and wine as examples.

One professional service provider said protectionism existed in both countries. Australia has initiated 87 anti-dumping cases against China, and Beijing has launched four against Australia.

“[The] sort of narrative that’s being played out here that Australia is fully open for free trade and China is the one not playing by the rules doesn’t ring true to me,” the survey participant said.

“I think that ultimately Australia’s trade with China is still very strong and the volumes are high … If the government felt as strongly about all the issues as it actually does, it seems quite inconsistent then with the relationship it has with China.

“I feel like it’s quite happy to make superficial and public comments that end up having dramatic results for narrow sectors of the economy.

“But at the same time it’s prepared to maintain the structures and sort of economic arrangements … that aren’t seen by most of the voting population.”

Australia’s monthly iron ore exports to China have hit record numbers, although much of it could be attributed to high prices for the commodity rather than volume, the Australian Bureau of Statistics said in its latest trade data release for April.

Iron ore prices hit a record high of US$230 a tonne in recent months due to a strong demand for the metal as steel production in China heats up amid the nation’s industrial recovery. While there have been some fluctuations, on Tuesday prices remained elevated at about US$200 a tonne.

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In March and April, exports of Australian non-monetary gold to China also rose amid recovering demand for gold jewellery, bars and coins after a lull caused by the coronavirus outbreak.

China, the world’s largest gold producer and consumer, gave the green light in April for 150 tonnes of gold to be imported mainly from Australia, South Africa and Switzerland.

The chamber’s survey participants also said they would like to better understand Australia’s other existing bilateral trade deals, having focused heavily on ChAFTA to date, while acknowledging challenges to diversify.

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