(Bloomberg) — Australia’s economic and diplomatic relations with China are in recovery mode, and tensions over issues ranging from foreign investment to security have receded. The Chinese government is curbing punitive efforts to bend key commodity suppliers to its will.
Bloomberg’s most read articles
More than a dozen companies headed to China this week, including Rio Tinto and Fortescue Metals Group. Trade Minister Don Farrell is due to visit as early as May.
This is to improve relations with certain U.S. allies as President Xi Jinping seeks to underpin the world’s second-largest economy and resist the Biden administration’s efforts to isolate China on the world stage. is part of a broader shift by Beijing in
On the Australian side, the arrival of a centre-left Labor government has seen a change in tone from the more confrontational approach taken by its predecessors.
“China’s reopening comes at a time of renewed optimism in Australia-China relations,” said HSBC Australia representative Anthony Shaw, who is part of the delegation. “As Australia’s relationship with China rekindles, there is a great opportunity to support our business.”
The deterioration in Australia-China relations began in 2017, just two years after the free trade agreement between the two countries entered into force. The trigger was then-Prime Minister Malcolm Turnbull’s announcement of a bill to crack down on foreign interference, which Beijing interpreted as targeting China.
Shortly thereafter, Australia became the first country in the world to ban Chinese tech giant Huawei Technologies from its 5G network, citing what China said were “unfounded” security concerns. The US and UK soon followed.
Relations fell apart in April 2020 when then-Prime Minister Scott Morrison called for an international inquiry into the origins of Covid-19.
China responded by targeting Australia’s exports of coal, wine, barley and lobster, if diplomats issued a list of 14 grievances, including complaints that Australia was “doing US bids” is one.
Australia’s largest export remained untouched as a steady stream of iron ore was needed to keep supplies for steel mills and sustain the construction industry. Meanwhile, companies in affected industries rushed to find new markets and blunt the impact of attempts at economic coercion.
By targeting these industries, China may have forced Australian companies to look for new opportunities, said Bloomberg Economics Australia economist James McIntyre.
“Australian exporters could turn around in response to China’s measures and growth prospects look better in other markets, particularly India,” he said. “The real gains from China’s trade restrictions may be that Australian businesses are looking at brighter export opportunities.”
During the conflict, China remained Australia’s largest export market, driving a six-year trade surplus. It strengthened Australia’s financial resources, enabled Canberra to fund a defense expansion to counter China’s regional military build-up, and reported one of the best budget positions in the developed world. .
China resumed using Australian coal in February and is reviewing plans to end sanctions on barley in the coming months. Australian officials say they hope to have a similar process in place for wine by the end of the year.
Then there are the important services of tourism and education that have been supported by Chinese tourists and students. Diana Musina, deputy chief economist at AMP Capital Markets, expects Australia to see more Chinese visitors by June.
“At the height of tensions, there were reports in China that Australia was not the best place for Chinese people to study and live,” she said. “So from the point of view of tourists wanting to visit, the thawing is definitely positive.”
Faced with a tough US stance, China is looking to improve relations with other Asian countries and is pushing Europe to revive investment deals that have been shelved.
Despite the shift in tone, Labor Prime Minister Anthony Albanese has not backed down or watered down the key security policies of his centre-right predecessor. Australia remains committed to Quad security partnerships with the United States, Japan and India, and the Aukus agreement, which will see Australia deploy nuclear submarines.
Beijing has stressed that it wants to relax restrictions on foreign investment, but there has been no change there either. Instead, Canberra has announced this year that it will reject China-linked investment proposals for strategically important domestic rare earth suppliers.
Another outstanding issue is the Chinese detention of Australians Yang Hengjun and Cheng Lei, who were arrested in 2019 and 2020 respectively and are still in custody.
The 14 points highlighted the “politicization and stigmatization” of China-Australia relations and called for Australia to end its “senseless interference” in human rights topics, including in Xinjiang, Hong Kong and Taiwan. Since taking office, Labor and Foreign Affairs Minister Penny Wong has been criticizing the Chinese government behind closed doors.
Organizers said Australian business delegations in China this week were scheduled to visit Hong Kong, Shenzhen, Tianjin and Beijing, offering opportunities to reunite with colleagues and friends.
–With help from James Mayger.
(Updates third-to-last paragraph to add details about the continued detention of two Australians in China.)
Bloomberg Businessweek’s Most Read Articles
©2023 Bloomberg LP
