AUSTRALIA/CHINA: After two and a half years of Chinese trade restrictions that hurt Australian exports of wine and coal, a diplomatic thaw between Beijing and Canberra has raised hopes for a rebound in exports and prompted businesses to take steps to mend ties.
Several official and unofficial “trade blockages” worth about A$20 ($14 billion) that China put in place in 2020 after years of disagreements over Huawei, espionage, and COVID are starting to melt as a result of diplomatic work that has been going on between the two countries since November.
Australian corporate leaders are following political cues. Andrew Forrest, the founder of Fortescue Metals (FMG.AX), Mike Henry, the CEO of BHP (BHP.AX), and Tim Ford, the CEO of Treasury Wine Estate (TWE.AX), a winery that has been negatively impacted by tariffs, have planned trips to China in March.
The head of the Australian Forest Products Association stated that recent “encouraging” discussions between Australian agriculture officials and Chinese customs officials regarding log imports, a once-a-year trade worth $600 million, have begun.
“We’re optimistic that trade will resume in the near future — it could be three months, it could be six months,” said Victor Violante, the association’s chief executive.
Last week, at least 15 ships carrying coal from Australia were on their way to China. Traders thought that trade barriers, which were already getting lower, would keep going down. In preparation for the end of an unofficial ban, Chinese buyers of cotton are bringing in cotton from Australia.
Australia is working to improve its trade with China while strengthening its security ties with the US and the UK through the AUKUS nuclear submarine alliance. The lifting of trade restrictions would be a significant first step in that direction.
The road to rekindled trade ties, though, maybe rocky and uncertain due to disagreements over matters of national security, human rights, and other matters. Beijing opposes Australia’s plans to buy nuclear submarines, which are likely to be further disclosed in March.
When it comes to China’s anti-dumping tariffs on barley, both countries are still in an official dispute with the World Trade Organization. A report is expected by March.
Still, Long Dingbin met with Western Australia’s state leader, Mark McGowan, on Wednesday. Western Australia is a big exporter of grains, iron ore, and natural gas. The Chinese consulate in Perth says that McGowan plans to go to China soon. This will be his fifth trip since he took office.
Long met with political and business organisations at least eight times in February, including a Chinese New Year party that attracted more than 350 politicians and business executives.
Likewise, capital is moving tentatively. Chinese investors are interested in Australian properties, but Tianqi Lithium’s (002466.SZ) $136 million offer for Australian lithium developer Essential Metals (ESS.AX) will test the willingness of regulators to allow investment in sectors deemed crucial for national security.
Prime Minister Anthony Albanese said on Wednesday that Australia would look at any agreement based on its own merits, but that he was “mindful of Australia’s sovereign capabilities.”
A potential regulatory backlog worries traders. Following a five-day wait at a Chinese port without unloading, an Australian coal shipment was rerouted to Vietnam last week.
Albanese will go to India with his ministers of trade and resources and a large group of businesspeople next month. David Foote, the chief executive of Cattle Australia, claimed that producers cut off from China had spent more than two years seeking new clients and would be reluctant to part with them. “They’ll want to add China back in, but not at the expense of losing their new customers,” he said.
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