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  • Writer's pictureCrest Economics

Australia's Trade with China- May 2020

In recent weeks Australia's trade with China has come under increasing pressure due to political debates regarding COVID-19. China is Australia’s largest export market. In 2018/2019, Australia’s goods exports to China were valued at around $135bn while services exports totalled about $18bn. Australia’s resources and energy exports to China are dominated by iron ore ($64.66bn); metallurgical coal ($10.24bn); thermal coal ($7.00bn); LNG ($17.82bn); gold ($5.17bn); copper ($3.67bn); and other, including zinc, lead, nickel and lithium ($4.8bn). Overall resource and energy exports represent $111bn or 72% in value of Australia’s exports to China. Agricultural exports are also important, as are services, particularly as regards education ($12bn).

China has imposed tariffs on Australian barley of 80%, effectively eliminating Australia's competitiveness in the Chinese market. While barley itself was only worth some $600m last year due to the drought, its export value is usually up to $1.5bn depending on weather conditions. Moreover, Australia's more important exports of coal and iron ore have also been hit recently, with more onerous testing of Australian iron ore, as well as an order for state-owned Chinese power utilities to stop ordering Australian coal. This seems to be due to Chinese resentment of Australia's advocacy for an independent inquiry into the Covid-19 crisis, as well as low domestic prices in the Chinese market due to low demand (as a result of Covid-19) prompting Chinese policymakers to initiate protectionist policies.

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