Quick Bites | Australia/China trade is higher than ever

With China’s Premier Li Qiang visiting Australia last week, it’s a good time to note that two-way trade between Australia and China has grown to record levels now that Canberra and Beijing have put trade disputes behind them.

Total trade with China reached AUD219 billion in 2023, the highest-ever level and up from AUD168 billion in 2019, the last year before the outbreak of the pandemic and the imposition of Chinese tariffs and sanctions.

The importance of the trade ties was on display when Premier Li Qiang started a 4-day visit that included Australia’s mining and winemaking regions. The trip underscores the importance of the country’s commodities to the Chinese economy even as Australia embraces closer security ties with the US.

The recovery in trade value has been driven in particular by rising prices of iron ore, Australia’s most important export, and a rebound in services after travel and tourism dropped off during the pandemic and relations soured.

Source: Financial Times

Diplomatic relations deteriorated after Beijing enacted punitive tariffs in 2020, sanctions and informal bans on about AUD 20 billion of Australian goods including coal, barley and wine, and detained Australian citizens. China introduced the tariffs in response to then-PM Scott Morrison’s call for an inquiry into the origins of COVID-19, and after Australia became the first country to ban Chinese vendors, including Huawei, from its 5G telecoms network.

Australia has managed to weather the sanctions thanks to a surge in global commodity prices during the pandemic and diversification into other markets like India. Meanwhile, Australian iron ore and lithium, an ingredient in electric vehicle batteries, continued to flow to China, preserving our economic resilience.

Source: Financial Times

China remains the source of most of our imports, worth billions of dollars of goods every month. The 5 biggest categories of imports are shown below.

Source: Financial Times

Some question the rationale behind the expansion of trade with China, at a time when geo-political tensions have encouraged trends of “friend-shoring” and “near-shoring” to avoid dependencies that could be weaponised during periods of tension. But Australian politicians generally understand that threading the needle between economic incentives and political principles requires some finesse and skillfulness that is essential to our long-term well-being as well as our security and independence.