Report

Too many eggs in the dragon’s basket?

Part one: Australia’s reliance on exports to China
Publisher
Economic indicators Exports International trade Relations with China China Australia
Description

In the twenty years to 2019, Australia’s exports of merchandise goods and services to China increased from $5 billion to over $153 billion, with China now accounting for 32.6% of all Australia’s exports. Australia’s exports to China over 2018-19 primarily comprised three commodities, iron ore ($63.1 billion) coal ($16.6 billion) and liquefied natural gas (LNG) ($14.1 billion) and one key services export, travel-related services, which includes education. The latter was worth $16.6 billion in 2018-19, representing 36 per cent of all international students to Australia. Gold exports also enjoyed a surge. Chinese imports into Australia are more diverse, although again are first-ranking, accounting for 19.4% of all Australia’s imports and worth $81.8 billion in 2018-19.

China has rarely said much about a trade imbalance that is consistently in Australia’s favour. Recent actions by the Chinese Government, however, to impede Australian exports now call into question the prudence of such reliance. They underscore the reality that geo-strategic power can be effectively exerted to threaten vital trade, investment or commercial goodwill. The COVID-19 pandemic, too, is appearing to be markedly affecting the composition of Australian trade with China, which will be addressed in part two of this paper.

Key points:

  • China is manifestly Australia’s principal two-way trading partner. Australian exports of goods and services to China were worth $153 billion, constituted 32.6 per cent of all exports and were growing at 9.5% per annum immediately pre-COVID-19.
  • Exports are highly concentrated and resources predominate. Iron ore, coal and liquefied natural gas, together with tourism and education, account for over 70 per cent of the total.
  • Over the past six months, the Chinese Government has either denied, or given indication of restricting, a range of Australian exports, including barley, meat, wine, cotton and services. Those sectors are significantly dependent on the Chinese market and total over $4 billion.
  • Australian trade policy and practice avoids direct retaliation. Alternative or substitute markets either do not exist, or take time and market development to form. A strategic reappraisal of, and actions to diversify and transform, Australia’s export base is required.
Related Information

Too many eggs in the dragon’s basket? Part two https://apo.org.au/node/310141

Publication Details
License type:
All Rights Reserved
Access Rights Type:
open