Overview
The trade and investment relationship between Australia and China began in 1973, when the two countries established diplomatic relations, and has developed substantially since. From 1973 to 2009, two-way merchandise trade between the two countries grew from $113 million to $78.2 billion.
Australia is also home to large numbers of Australian-born Chinese and Chinese-born migrants, who have established themselves as a significant minority group in Australian society. There are Chinatowns in every Australian capital city, and large, public Chinese New Year Celebrations in both Melbourne and Sydney.
Today, China is Australia’s largest trading partner due to China’s strong demand for iron ore, coal and liquefied natural gas. Exports to China helped Australia avoid the worst effects of the global recession. Total trade between the two countries has grown in value every year.
Political overview
Whilst economic relations between China and Australia have always been strong, political relations have been more tentative. Under Prime Minister John Howard, Australia appeared reluctant to pursue closer political or military ties with the Chinese government.
That changed slightly when Kevin Rudd was elected as Prime Minister in 2007. Rudd had strong connections with Chinese culture, having studied Chinese at the Australian National University in Canberra, and being the first Australian Prime Minister to speak fluent Mandarin. In 2004, when Rudd was Shadow Minister for Foreign Affairs, he delivered a speech in Beijing entitled “Australia and China: A Strong and Stable Partnership for the 21st Century”. As Prime Minister, he declared closer engagement with Asia as one of the “Three Pillars” of his foreign policy.
Current Prime Minister Julia Gillard, however, has expressed a more familiar and tentative viewpoint. In March, she backed concerns raised by US Senator John McCain, who warned that Australia and the US must collaborate to counter the rise of China as a military power in the Asia-Pacific region. Gillard agreed and said she expects increasing military co-operation with the United States, as well as close diplomatic engagement with the Chinese.
Economic overview
In 2009, China surpassed Japan and became Australia’s largest export market, mostly in resources. In that year, Australia exported 266.2 million tones of iron ore (worth $21.7 billion) to China, and $3.4 billion in agricultural goods such as canola, fish, wine and meat.
China is also Australia’s largest source of imports. Total Chinese merchandise exports to Australia were valued at $35.8 billion in 2009. Major Chinese imports include clothing, communications equipment, computers, toys, games, sporting goods, furniture and televisions.
Two-way investment between Australia and China has not been as lucrative as the trade relationship, but it is growing.
Today, China’s infrastructure sector offers increasing opportunity for Australian exporters and investors. These opportunities will mainly be in China’s western region, which covers 10 provinces and 56 per cent of China’s landmass, and is underdeveloped.
China is set to spend a lot on infrastructure development. Under its 12th Five-Year Plan (from 2011 to 2015) the country expects to be investing as much as 7 trillion yuan into the construction of urban public facilities. Investment in urban rail transit is expected to surpass 700 billion. 3 trillion is going towards railway construction. According to an airport development plan, China will have 244 civil airports by 2020.
Infrastructural development in the aforementioned western region will include investment in railway projects, highway projects, rural irrigation projects and other general utility development. To fund these projects, China will utilize its central government budget, local government budget, private investments, and loans from multilateral funding agencies, such as the World Bank, Asian Development Bank, and Japan Bank for International Cooperation.
For Australian businesses, these investments will introduce opportunities in the fields of transportation (highways, high speed trains, urban metro systems), renewable energy and smart grid systems, and in other environmental concerns such as wastewater treatment, surface water management and air pollution control.
