Business

Australia lifts China sanctions as exports boom


China’s introduction of trade sanctions on some Australian products in 2020 has brought unexpected benefits, with the latest economic statistics showing booming exports to the country. this resource-rich country when the country is forced to shift its focus to other markets.

Australia’s trade figures also improved due to China’s reliance on key products, particularly iron ore, wool and natural gas. They were not punished by the new tariffs, with increased demand boosting their sales.

The country’s long-standing economic growth record looked vulnerable when China imposed punitive tariffs and controls on a range of Australian imports two years ago, as political tensions flared up. value between the two countries increased.

The measures, introduced after then-Australian prime minister Scott Morrison call for an inquiry into the origins of Covid-19, which threatens to undermine its economic resilience.

Even after the imposition of sanctions, China is still the destination for more than 42% of its exports in 2021 compared to just 14% in 2007, driven by demand for iron ore and minerals. and fossil fuels, as well as consumer goods, growth. quickly, according to the Australian Strategic Policy Institute think-tank.

David Uren, senior fellow at ASPI, said: “Australia has not been dependent on a single market since 1938, when it was the UK’s ‘mother country’. For the first time in its history, he said, it faced a situation where its biggest trading partner had turned into a rival.

At the same time, the victims of sanctions include barley growers that supply Tsingtao brewers, beef cattle farmers and the lobster industry. Luxury winemakers, who charge high prices to Chinese consumers and coal miners, whose products have been stranded on ships off the coast of China for months, was also beaten.

Two years on, the change is already evident. China’s export share fell to 29.5% in August – the first time it fell below the 30% mark since October 2015. China’s import share, according to Australian Bureau of Statistics data, The country also fell to 26% in the three months to September, compared with 30% in 2021.

The drop in export value was partly due to a drop in the price of iron ore, Australia’s biggest export, with Chinese demand for steelmaking resources boosting the country’s biggest companies, including BHP, Rio Tinto and Fortescue. However, trade is also growing strongly with other Asian countries. Excluding Japan, the traditional trading partner of Australia, South Korea, India and other ASEAN countries now accounts for more than a third of the country’s exports.

Australia’s second-quarter trade surplus hit A$43 billion (US$28 billion), fueled by strong exports and explosive coal prices.

“Sanctions have not worked. Michael Wesley, vice-chancellor for international affairs at the University of Melbourne, said the Australian economy remained buoyant, somewhat ironically due to Chinese demand.

“The Chinese economy cannot get rid of iron ore on its own. It’s a sleep-deprived situation for them,” he said. Australia exported A$175 billion worth of iron ore to China in 2021, according to the Lowy Institute.

Meanwhile, some Australian companies have been able to maintain exposure to the lucrative Chinese market. Treasury Wine Estates, one of the world’s largest wine producers, has been hit hard by the imposition of a 175% tax on Australian wines that has wiped out the luxury Penfolds brand’s sales in the market. their highest returns.

Over the next two years, sales of TWE’s Penfolds exploded in Singapore, Hong Kong, and Taiwan. However, it has not yet given up on mainland China. It has started exporting French-made Penfolds to China and has now launched a Chinese version of Penfolds, using grapes grown in Ningxia and Shangri-La provinces.

“We’ve been telling since the day the tariffs were put in place to us that we’re not going to walk away,” said Tim Ford, chief executive officer of TWE.

In another example, Bubs, a baby formula maker based in Dandenong, a Melbourne suburb, has benefited from expansion into China since 2008, where the products Theirs is selling very well.

Chairman Dennis Lim said their product is a ‘sandwich’, so banning production or imposing sanctions would have dispersion in China. “They can ban lobster, but you can’t ban baby formula,” he said.

Don Farrell, Australia’s trade minister, said this month that his government had extended an “olive branch” to China to discuss “trade bottlenecks”, but he added that the dispute Disputes show that the country has “put all our eggs into China. basket”.

Australia remains vulnerable to further Chinese action if geopolitical relations continue to sour. A report by the Lowy Institute indicates that the country’s coal industry is relying on Chinese banks for financing.

Richard McGregor, senior fellow for East Asia at the Lowy Institute, said Australia’s economic resilience had been encouraging, but its more lasting. The outlook may be less promising.

Given the longstanding geopolitical rivalry between the US and China, and Australia’s status as a strong US ally, Canberra should expect Beijing to continue with its punitive trade measures under in one form or another.

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