Tensions between China and Australia have taken a $4 billion toll on the important trading partnership, but Canberra says its economy has proven “remarkably resilient” as other countries moved to fill in the gaps.
Australian Treasurer Josh Frydenberg on Monday claimed the Chinese government has failed to seriously impact the country’s economy through a series of punitive measures on exports. The trade dispute has escalated since April 2020, when Prime Minister Scott Morrison called for an international inquiry into the origins of Covid-19.
“I am not downplaying the impact of China’s actions. They have hurt specific industries and regions, significantly in some cases. Nevertheless, the overall impact on our economy has, to date, been relatively modest,” Frydenberg said at the Australian National University. “This is perhaps surprising to many.”
While trade between China and Australia fell by about 5.4 billion Australian dollars ($4 billion) in the first half of 2021, compared to the previous year, Frydenberg said that loss had been mostly made up by a 4.4 billion Australian dollar ($3.27 billion) increase with the rest of the world.
Frydenberg also accused Beijing of trying to exert “political pressure” through its actions — some of Canberra’s strongest comments yet on the year-long dispute. He said Australia was “on the front line” of a new era of strategic competition between the United States and China, adding it was “no secret” that Beijing had tried to damage Australia’s economy over political grievances.
In the wake of Morrison’s comments on Covid-19 — a politically sensitive subject for Beijing — a wide range of Australia exports to China including barley, beef and coal began to encounter obstacles. Some items were subject to anti-subsidy investigations and lengthy customs delays. In March, the Chinese government announced tariffs of up to 218% on Australian wine, intensifying a dispute over the industry.
CNN Business has reached out to the Chinese government for a response to Frydenberg’s speech. In November 2020, the Chinese Foreign Ministry accused Australia of making “a series of wrong moves” in its relationship with China, delivering a list of 14 grievances to the Australian media which included “incessant wanton interference” in China’s approach to Hong Kong and Taiwan.
China is Australia’s largest trading partner by far in terms of exports and total value of trade. The trade between the two countries was valued at more than 250 billion Australian dollars ($185 billion) in the 2019/20 financial year, more than three times as much as the second largest trading partner, Japan.
But Frydenberg on Monday said that other buyers have stepped in to fill the gap left by China in some important industries. In one example, the Australian treasurer said that while exports of coal to China had fallen by 33 million tons in the past year, exports to other international buyers had risen by about 30.8 million tons.
“Australian coal, that otherwise would have gone to China, has found buyers in other markets including India, South Korea and Taiwan,” he said, adding that Australian barley had found a new market in places such as Saudi Arabia. The Chinese government placed tariffs of up to 80% on Australian barley in May 2020.
Frydenberg said that Australia also had lucrative relationships with the United States, Japan and South Korea. He said China was ranked sixth for foreign direct investment into Australia.
The treasurer said while he still hoped for a “constructive relationship” with China where both countries benefited, he warned Australian businesses that they needed to be aware that “the world has changed.”
“This creates greater uncertainty and risk. In this respect, they should always be looking to diversify their markets, and not overly rely on any one country. Essentially adopting a ‘China plus’ strategy,” he said.