by Professor Ross Kingwell, AEGIC Chief Economist
It’s important to bear in mind the mutual benefits of Australia’s trade relationship with China.
Much media attention focuses on political and economic tensions between China and many other regional and western nations. In the case of Australian agriculture, attention is often focused on the trade restrictions imposed by China on a range of Australian export goods like wine, barley and lobsters.
Yet China remains an important provider of many manufactured goods used in Australia, including Australian agriculture. As Figure 1 shows, there are many goods imported by Australia for which China is either the main supplier, or one of the main suppliers. In brackets after the description of each import item is the share of imports of that item that come from China.
Figure 1 reveals that Australians are reliant on a long list of items manufactured in China. In 2021 Australia imported $91.6 billion worth of goods from China. Many Australians benefit from the quality and affordability of those manufactured goods.
Similarly, but to a lesser degree, China also heavily relies on some key products exported by Australia. As shown in Figure 2, China heavily draws on Australian iron ore and natural gas. By far these are the key exports from Australia to China. China imported $126.6 billion of iron ore from Australia in 2021, up from $94.6 billion in 2020.
Several other export items, including some agricultural goods like dairy products, raw hides, skins and wool, also are principally sold to China, but the financial magnitude of those exports pales into insignificance against iron ore and natural gas exports.
China’s total imports from Australia in 2021 were worth $179.3 billion. China’s balance of trade with Australia strongly favours Australia insofar as the value of Australian exports to China far exceeds the value of Australia’s imports from China.
Nonetheless, the magnitude of the trade flows between China and Australia, and the types of products traded, illustrates a mutual benefit.
Emphasising that common benefit is always a sensible endeavour.
Banner image: Chongqing, China
Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.