The data at the Reserve Bank of Australia reminds us that Australia’s relationship with China is very important. Statistics released yesterday by the Bureau of Statistics show that the bilateral trade volume between Australia and China has reached a record level of more than A$208 billion. Australia’s annual exports to China rose from A$126.7 billion in April to A$129.99 billion in May, a record high. Exports to China this year increased by 26.7% year-on-year, and exports to China currently account for 35.4% of Australia’s total exports, setting a new high. The annual trade surplus between Australia and China rose from A$48.82 billion in April to a record A$51.7 billion in May. Economists say the trade surplus may push Australia’s GDP data for the June quarter to be driven again by net exports. One of the drivers is the surge in Australian iron ore prices for China’s major exports. Despite concerns about China’s weak economy, iron ore prices hit a high of more than $120 a tonne this week. One factor contributing to the price increase was the collapse of the tailings dam of a mine in the Brazilian mining company Vale in January, which killed more than 230 people. Therefore, it is prudent not to treat the latest recorded numbers as constants. Nonetheless, these figures still show how Australia’s sales to China support our record of more than 27 years of uninterrupted economic growth. Imports from China also increased from A$77.89 billion in the previous month to a record A$78.29 billion in May, an increase of 17.2% year-on-year.
At present, imports from China account for 25.36% of total Australian imports, setting another record. This brings the total amount of two-way trade this year to A$208.28 billion, and there is a lot of talk about trade wars. Although people have to dilute the data again because of the price of iron ore, they still show that the economic relationship between Australia and China has never been so strong. Given that the Reserve Bank is now raising interest rates to an emergency level of 1% due to concerns about the state of the economy, one can only imagine how bleak the situation would be if there was no trade with China. Trade between the two countries runs counter to the tense political relationship, highlighting the complementarity of the two economies and the fact that there are a large number of agents in both countries who want to do business with each other. Another report this week highlighted the impact of our economy on China. The latest China and World report by the McKinsey Global Institute shows that Australia’s exports to China account for 16% of domestic production, the highest of the 73 economies studied. The report pointed out that it pointed out that between 2013 and 2017, “Chinese imports now account for 16% of Australia’s total output”. In contrast, from 2003 to 2007, Chinese imports accounted for only 4% of Australia’s total output. The only country close to is South Africa, which exports 15% of its total output to China, while Chile accounts for 13%. The report said, “Only iron ore accounts for 48% of Australia’s exports to China,” while 21% of its minerals are exported to China. Australia’s tourism and education services are a growing area of business, with sales of commercial and beverages, including wine and beef, also growing. The report pointed out that the proportion of imports from China to domestic consumption has increased from 3% in 2003-07 to 7% in 2013-17. According to McKinsey’s report, “China (the world’s largest economy in terms of purchasing power parity in 2014) has made progress in integrating with the world economy and has become a truly global trading nation.”
The report said that China’s consumer market “is likely to remain active in the context of rising incomes” and has a strong space for foreign suppliers to penetrate the consumer market more broadly. It pointed out that “Chinese consumers demand more and better choices of goods and services.” More and more Chinese are traveling abroad, and the number of overseas tours in 2018 has increased to 150 million (14 times in 2000), with more than 1.3 million. People came to Australia. China is also the largest source of international students, with 608,000 people a year (16 times in 2000), with most of the students going to three main destinations – Australia, the United Kingdom and the United States. But the report pointed out that China still has many economic sectors that need to be open to the world, especially in the financial sector. It also warned that recent events, including trade wars with the United States, mean that relations between China and the rest of the world are changing. The report speculates that protectionism is on the rise, China is facing self-sufficiency and other global tensions, and it may be seen that the rising trend of China’s integration with the world is beginning to steadily. “After years of deepening relations, the beginning of the trend of China’s reduced contact with the world?” The report raises questions. Concerning China-Australia trade, people may question whether political tensions will become a problem that may limit future economic exchanges with China. However, despite some minor conflicts in coal processing and barley, there is no indication that this will happen. According to the report, the huge economic risks depend on whether China continues to interact with the rest of the world: “Depending on the number of contacts, there will be great benefits that may be threatened. Companies need to adapt to uncertainties and high potential risks.”