Australia’s Reliance on Chinese Trade is its Biggest Weakness

6 min.

Australia’s Reliance on Chinese Trade is its Biggest Weakness

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Australian Reliance on China Leaves Us Vulnerable to Their Influence

The Covid-19 pandemic has changed a lot in the world and one such change has come between the relations of Australia and China. Both countries have been close to each other in the past and this can be seen by the fact that almost a quarter of all Australian exports are to China and both countries have even signed a free trade agreement, with Australia been among those few countries that China has allowed access to its markets.

Once would have expected these trade relations to get stronger over the years but the Covid-19 pandemic has caused this trade relation to thaw. Covid-19 pandemic didn`t cause it no in fact problems between the two countries were already brewing since quite a while.

How the tensions started

Some time ago the former Australian spy chief said in an interview that the Australian spy agency uncovered a covert operation by the Chinese government to influence the Australian politicians and their decision making process to favor China. This story however went under the radar and then came news reports of Australian researchers and professors, critical of China`s human rights record being silenced and taken away from universities. The presence of the Confucius institute also created distrust among some Australians as it is seen as a soft power projecting arm of China.

Once again, all of these events went under the radar and the relations of the two countries seemed to be normal till the Covid-19 pandemic broke out and the Australian government took a stance like U.S.A, India and some other countries to investigate the bio research lab in Wuhan as the possible source of the virus break out. This statement from the Australian government, seemed to have triggered a particularly aggravated response from the Chinese government with the Chinese officials declaring this as a grave statement that could set back the relations between the two countries by many years.

As if this wasn`t enough, Australia entered into a pact with India to share military bases in case of a war. Now this may seem irrelevant but look at the context. India and China have locked horns over at least three different fronts recently and over 40 Indian soldiers have been killed in skirmishes with the PLA in Ladakh region. The decision by Australia to enter into a defense pact with India at such a time has sent a clear message to Beijing that Australia is looking to decouple with China.

Trade dependency on China

The question however is that, can Australia decouple with China? The situation presented above is a very grave one, make no mistake about it. Australia has been very proactive against China and it seems that the Australian government didn`t forget that the Chinese government was actively trying o carry out a covert operation, which was a direct attack on Australian sovereignty. But the question remains, can Australia afford to decouple with China right now?

Australia is currently to a very great extent dependent upon China, this is something that is simple fact. Australia knows this and China knows this as well. When it comes to political maneuvering, this type of dependence doesn`t give you much room to maneuver. Chin knows that at present Australia cannot afford to lose China as a trade partner.

Let us have a look at some of the trade partners of Australia.

The table shown above shows the top 25 export and import partners of Australia and it can be clearly seen that Australia exports almost $88 billion worth of goods to China, this is equal to almost 36% of the total exports of Australia and it imports almost $58 billion worth of goods from China which is equivalent to almost 25% of all imports.

So 36% of all exports and 25% of all imports of Australia are with China. If you take China out of the equation then almost over a quarter of Australian trade will collapse and this will push Australia into not only a severe economic crisis with shortage of crucial supply items but also into a balance of payment deficit that may be very difficult to come out of.

The next biggest trade partners of Australia are the United States, Korea, Japan and India but the volume of trade with these countries isn`t even equal to that with China even if you combine all of their imports and exports together. Here is another table for perspective.

Total exports to China: $87.72billion	Total exports to USA, Korea, Japan and India: $80.46 billion
Total imports from China: $57.7 billion	Total imports from USA, Korea, Japan and India: $56.44billion

The next important trade group for Australia is Germany, Singapore, Malaysia and Thailand but you can clearly see that there is a vast difference in the exports and imports to and from these countries. The fact remains that China is not only the biggest trade partner of Australia but it is also the most dominant one and Australia has a significant level of dependency on China. Last year the trade with China alone grew by almost 26% and this means that not only is Australian trade dependent on China but the growth of Australian economy is also closely linked with China.

Australia has an almost symbiotic relationship with China. While Australia is dependent on China for the growth of economy, China is also dependent on Australia for access to raw materials such as iron ore, agricultural products and other minerals.

This is why we have seen that the Australian government has been so proactive and vocal against China ever since the Covid-19 pandemic broke out because it knows that Australia has got leverage over China. At this point, therefore it does not seem that the two countries are going to break of their trade relationship anytime soon because doing so will be detrimental for both countries.

However in time we may see both countries going into a cold war type attitude with gradual decoupling from both sides. Bear in mind that China right now also has got very strained relationships with USA and India and it also trades with them. So just because there are political tensions among countries, doesn`t necessarily mean that trade links are also going to be completely cut off. No this is the 21^st century where the global economies are interlinked very closely.

China, is eyeing the global super power status and it knows that in order to achieve this status it needs to trade with every country. The question however is of Australia, it doesn`t matter if Australia intends to be with China or against China, in either case the issue for Australia is of dependency on China for the supply of goods and services.

Conclusion

According to the rough calculations presented above, over a quarter of the economy is dependent on China and there is a dire need for forward looking policy making to reduce this dependency over time to look for alternative supply chains. Australian government should be clear that this policy shift isn`t about going against China is it simply about securing the sovereignty of Australia be diversifying the trade dependency, so that no one country can take advantage of Australia.