Trade and Investment
The Australian and Chinese economies are strongly complementary. As a result, our trade and investment relationship is substantial and has developed well beyond its modest beginnings in the 1970s. According to Australian statistics, two-way merchandise trade has grown from A$113 million in 1973, just after the establishment of diplomatic relations, to A$78.2 billion in 2009. China is Australia's largest trading partner, with total trade (goods and services) in 2009 valued at A$85.1 billion, an increase of 15.1 per cent over the previous year.
In 2009 China surpassed Japan to become Australia's largest export market, with total merchandise exports to China valued at A$42.4 billion, an increase of 31.2 per cent over the previous year. Resources continue to underpin Australia’s exports to China. Australia exported 266.2 million tonnes of iron ore to China in 2009 (A$21.7 billion in value terms), an increase of 45.2 per cent over the same period in 2008. Australia's coal exports to China grew by 1000 per cent last year to become our second largest export commodity, behind iron ore. Over the last 12 months, two further LNG contracts have been signed for the supply of Australian gas to Chinese terminals. The future prospects for continued growth in our resources exports to China are good.
Australia exported A$3.4 billion in agricultural goods to China in 2009 representing a fall of 2.2 per cent over 2008. Wool was our largest agricultural export to China (266,141 tonnes worth A$1.38 billion in 2009 – 66 per cent of China's total wool imports). However, wool exports to China fell 3.9 per cent in 2009, reflecting partly China's deteriorating export performance. Strong export growth in agricultural goods was recorded in canola, live animals, fish, edible products, wine and meat.
In the past ten years, China has risen from our 10th-largest export market for elaborately transformed manufactures (valued at A$642 million in 2000) to our third-largest (valued at A$1.8 billion in 2009). In the medium to long-term, Chinese government stimulus efforts are likely to impact positively on Australian exports of simply transformed manufactures (for use in the construction/infrastructure sectors) and elaborately transformed manufactures.
Australia's services exports to China, valued at A$5.5 billion in 2009, are dominated by educational and recreational travel and have averaged annual growth of 18 per cent over the past five years (the value of Australia's service imported from China was A$1.47 billion in 2009, a decrease of 8.7 per cent). China remains Australia's largest source of overseas students, with around 155,000 enrolments in Australian educational institutions in 2009. The official estimate of "actual students" in 2009 was 118,000.
China is also Australia’s largest source of imports, with China’s total merchandise exports to Australia valued at A$35.8 billion in 2009, an increase of 1.5 per cent on the previous year. Major imports from China include clothing, communications equipment, computers, prams, toys, games and sporting goods, furniture and televisions.
The Australian Government is taking forward a major new 'sector by sector and province by province' trade initiative with China. We are working with provincial governments in China to create the government-to-government frameworks through which Australian companies will be better placed to secure business opportunities. The geographic focus is on China's rapidly growing inland provinces, targeting sectors where there is a natural trade, investment and innovation fit with Australian industries. In July 2009, Australian Trade Minister Mr Simon Crean visited Shanghai, Zhejiang, Anhui and Hubei with Senator Carr to promote Australian auto capabilities and exports. Australia and China agreed to establish Frameworks for Cooperation with Anhui and Hubei provinces, with a focus on autos, clean energy and other sectors that present strategic opportunities. The Framework for Cooperation with Hubei was signed in December 2009.
During Mr Crean's visit to China from 15 to 21 May 2010, he met central and provincial government leaders in Beijing, Tianjin, Shandong and Shanghai to discuss opportunities to deepen and diversify our bilateral economic relationship with China. On 20 May, Mr Crean witnessed the signing of a framework agreement with Anhui province with an emphasis on cooperation in the auto sector.
Australia-China two-way investment has lagged behind the trade relationship, but is growing. At the end of 2008 (most recent data available), total Australian investment in China reached $6.9 billion, making China our 14th largest investment destination.
Australian financial institutions have a number of investments in Chinese banks and there is interest in the mining sector. More opportunities for Australian investment will open up as China's services sector expands.
Chinese investment interest in Australia, particularly in the resources sector, continues to increase rapidly. Since November 2007, the Government has approved over 160 proposals for Chinese investment in Australian business and total investment of around A$60 billion (at 25 May 2010). Only five involved conditions, undertakings or amendments. The Australian Government welcomes further investment into Australia from Chinese enterprises, subject to approval by the Foreign Investment Review Board.
The prospects for future for further growth in the breadth and depth of the commercial relationship are excellent. The economic complementarities underpinning rapid growth in trade over the past decade are likely to continue. Importantly, government cooperation on trade issues has grown with the increasing integration of our economies. Australia is working closely with China to conclude the WTO Doha Development Agenda. We will continue to cooperate closely on trade and investment facilitation through the G20, APEC and other regional forums. Moreover, reaching agreement on a comprehensive high-quality Free Trade Agreement will offer the greatest potential to take the economic relationship to a new level across merchandise trade, services, and investment.