Chinese Exports into Australia Suddenly Shoot Up

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March proved a good month for Australia and China. New data shows Australia’s exports to China touched a new high in that month. Though the export surge affected most commodities, the most prominent were coal and iron ore. Political and economic observers studying the relationship between the two nations interpret this as new signs of a thaw in their frosty relationship.

According to this CNN report, March thermal coal exports from Australia to China increased by 122% from a year earlier, reaching $238 million. Meanwhile, iron ore lump and fines, crucial ingredients in steel making, were also up by 28% and 22.5%, respectively. These figures amount to U.S. $380 million and $973 million.

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Iron Ore Maintained High Levels Throughout COVID

China is Australia’s largest trading partner, accounting for nearly one-third of its overseas trade. Australia is also among China’s largest suppliers of commodities. Overall, China accounts for more than one-fifth of China’s thermal coal imports (before the trade restrictions). In terms of iron ore, Australia remained the largest supplier for China even after relations soured. For example, in 2022, China bought 1.1 billion tons of iron ore, 65% of which was from Australia.

When the COVID-19 pandemic broke out in 2020, the relationship between China and Australia took an even deeper dive. Much of this stems from then-Prime Minister Scott Morrison calling for an independent investigation into the virus’s origins. The Chinese government had dubbed the move “political manipulation” and followed it up with a series of trade restrictions on Australian products, including coal.

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However, there were some early signs of a thaw after the Labor Party swept to power in Australia last year. Earlier in 2023, Beijing did away with all remaining curbs on Australian coal imports. Such is the depth of the countries’ relationship that, even during the pandemic, Australia continued to supply huge amounts of iron ore.

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Despite the Increase, Australia Still Wants to Reduce Trade with China

Several weeks ago, Australia agreed to “temporarily suspend” a World Trade Organization complaint against China. The complaint related to the country’s 2020 decision to impose 80.5% duties on Australian barley. However, Canberra recently signaled that trade with its biggest partner may never reach the levels seen prior to the COVID pandemic. Indeed, Australian Foreign Minister Penny Wong said that trade between the two countries could not return to the level when conservative Prime Minister John was in power from 1996 until 2007.

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In this Associated Press article, Wong told the National Press Club that both countries know “we are not going to go back to where we were 15 years ago.” Wong went on to say that one reason for this change had to do with the country’s allies. Specifically, she mentioned that Australia could not have a strategic relationship with the U.S. and, simultaneously, an economic relationship with China.

According to her, Australia had previously tried to keep the two policies separate, but as she put it, “we don’t live in that sort of world anymore.” Australia has already started to diversify its import-export efforts. However, it remains clear that, in the short-term, China will remain Australia’s largest trading partner.

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