Dan O'Heirity

Australia Was Warned Last Year That Our Economy is Far Too Reliant on Trade With China

Today I am boing to present some facts and figures that show Australia’s complete dependency on China for its two-way trade. However, before I do that I am going to note that Australia’s politicians, Australia’s business leaders and the Vice Chancellor’s of Australia’s Universities have absolutely no excuse for the position in which they now find themselves. Back in August 2019 there was a report – and I’m sure that there were many more at the time and many more before that time – that raised the question of what would happen if China’s economy “nosedived” and the Chinese cut back on importing from Australia, visiting Australia and sending their students to Australia. So, replace their economy “nosediving” with CCP virus and you have the current Covid-19 scenario. Modelling from Deloitte predicted that the cost to Australia’s national income in the case of the Chinese economy experiencing a “hard landing” could be as much as $140 billion (7 per cent of all income) and 550,000 job losses. No time frame is given for these figures but I imagine that we are talking about annual national income and progressive job losses over time. That point aside, from what I can tell, we are pretty much in the predicted situation as a result of the CCP virus.

Consider also the almost prophetic utterance on Australian University exposure to the Chinese market where, “The Centre of Independent Studies warned this month that the heavy reliance of some universities on fees from overseas students, especially those from China, was a financial risk to the government and taxpayers“. Yep, that risk has been realized because, as the report notes, 10% of all international students in Australia come from China which represents $2 billion in revenue for Australian universities. In concrete terms, it is estimated that 23% of all University income at the University of Sydney comes from Chinese students. The University of New South Wales is not far behind with an estimated 22% of all university income coming form Chinese students. These figures are absolutely staggering. However, it should be noted that the figures have been derived from media reports, the NSW Audit Office and the Department of Education and Training because only one university in Australia publishes figures about the country of origin of their international students. Thus, not only are Australia’s universities massively over-dependent on the Chinese market, they are also trying to make sure that this fact does not surface.

Some Facts and Figures Evidencing Australia’s Over-Reliance on Trade with China

Data Sources for Australia’s Export of Goods to China

I’m going to present some figures for Australia’s trading dependence on China.. My aim has been to draw the data from reputable sources and to provide a few key figures that show how utterly dependent Australia is on its trading relationship with China. I have used a number of different data sources. First, the World Integrated Trade Solution (WITS) website which draws the data that I am looking at from The United Nation Statistical Division (UNSD) Commodity Trade (UN Comtrade) Data Base and from The World Trade Organization’s (WTO) Integrated Database (IDB). Secondly I have drawn on the Global Edge website which also utilizes the UN Comtrade data along with data from The World Bank. Both of these sites will provide you with interactive dashboards that will let you review Australia exports in terms of variables such as year, product and export destinations.

I have used a third data source “Worlds Top Exports” which uses different data sources contingent on the export product that one is reviewing. For example, for Australia’s iron ore exports, the site uses a number of sources including The World Factbook, Field Listing: Exports – Commodities, Central Intelligence Agency. If you were to look, for example, for clothes exports you would different data sources. Whilst this site is useful, it does not have an interactive dashboard and I found searching for the data that I wanted to be some what laborious. So, I would use the two sources that I have already listed or if you really want to delve deeply into Australia’s trading position then make use of UN Comtrade. The data is presented in PDFs but it is absolutely comprehensive and will provide you with a one stop shop for all your data needs.

Facts and Figures on Australia’s Trading Relationship with China

According to the WITs website, Australia exported US$252,775 billion worth of products worldwide in 2018. US$87,726 billion of these products were shipped to China representing 34.71% of our total exports. Global Edge, uses the same Comtrade data and so presents the same statistics. According to Worlds Top Exports Australia shipped US$272.4 billion worth of products worldwide during 2019. China imported US$89.2 billion worth of Australian products representing 32.7% of total Australian exports. The next biggest importer of Australian goods was Japan which imported $24.4 billion worth of Australian goods in 2019 representing 9% of Australian exports. South Korea comes in third with South Korea importing $13.6 billion worth of Australian goods in 2019 representing 5% of Australia’s total exports. So, fair to say that in terms of global exports these three data sources confirm that Australia is significantly dependent on China as an export market for its products as China imports one third of products exported from Australia.

The data sources that I am using also allow you to drill down into the different types of goods that are exported by Australia. For example, according to the WITs website, Australia exported US$57,961 billion worth of minerals in 2018. US$ 43,838 billion worth of mineral exports went to China meaning that China imported 75.63% of our mineral exports. The World Top Exports website reports that Australia exported US$65.8 billion dollars of iron ore in 2019 (53.8% of total iron ore exports worldwide) and that in 2019 China imported US$45.2 billion dollars worth or iron ore from Australia. So basically China is a massive importer of Australia’s minerals and ores with iron ore being a particularly significant component in these exports. You can put Australia’s iron ore trading relationship with China into perspective by considering the fact that the second biggest exporter of iron ore is Brazil which exported $22.2 billion worth of iron ore (18.1% of all iron ore exports) in 2019. In 2019 China imported $22.1 billion worth or iron ore from Brazil.

As this video points out, if Australia was as stupid as China and opted to tell China that it was no longer going to export iron ore to China, imagine how much damage that would do to China’s manufacturing and building industries. However, that point is rather trite because no matter which “official statistics” one views, Australia is inextricably linked to trading with China in terms of both Australia’s exports and its imports. So, if you look at these figures, Australia’s two way trading with China in 2017-2018 was worth a whopping AU$194.6 billion with trade with the next closest trading partner, Japan, worth only AU$77.6 billion. Exports to China accounted for AU$123.3 billion of the total trading figure whilst exports to Japan accounted for AU$ 51.3 billion. Australia through its own fault has become far too dependent on two way trade with China to the point where extricating ourselves from this dependency is going to prove to be a very difficult task, which is exactly what China wanted all along.

The Over-reliance of Australian Universities on Chinese Cash Cow Students

The dependence of the Australia economy on China extends to an extreme dependence on Chinese students or “cash cows” to keep our universities afloat. This point has been covered extensively – and referenced – in previous blog posts but again, as referenced here there are 260,000+ Chinese students studying in Australia and they account for about 0.6 percent of the country’s GDP. Many of these Chinese students are not studying at Australian universities due to the Covid-19 world lockdown and universities are losing hundreds of millions of dollars in international student fees with losses from Chinese students accounting for around 40% of total losses. This state of affairs is set to last for a couple of years and, if the Chinese Ambassador to Australia has his way then Australia may see a significant downfall in Chinese student numbers for years to come. Personally I believe that this would be a good thing for universities as they might have to stop taking in Chinese students who can barely speak English – University teachers know that this is true – in favour of trying to find alternatives in other markets including the domestic market.

Australia is Also Far Too Dependent on Chinese Tourists to Keep the Tourism Industry Going

Tourism tells the same story in terms of Australia’s dependency on China and you can take a look at some interesting interactive dashboards that will provide you with information about numbers of Chinese travelling to Australia for holidays. The dashboards will also tell you how much money was spent by these tourists or, in other words, what Chinese tourism is worth to the Australian economy. So, for example, roughly speaking, 2018 saw around 750,000 Chinese visiting Australia and 2019 saw around 800,000 Chinese tourists in Australia with spending by these tourists each year totalling around 12 billion dollars so a total revenue of 24 billion dollars over two years. Again, Australia has allowed itself to become far too dependent on China in yet another sector of its economy. And of course the Chinese Ambassador – remember the smarmy, self-satisfied and arrogant arsehole in the video – knows that Chinese tourists contribute a lot of dollars to the Australian economy. Still ultimately Chinese tourism to Australia only accounts for a contribution of 12 billion dollars a year to the Australian economy and necessity is the mother of invention. Get inventive Australia and find other markets.

China Shows Its Real Face to the World in Trying to Bully and Intimidate Australia

I am now going to report on one of the most disgusting and reprehensible pieces of behaviour that I have witnessed so far on the part of a Chinese official, this time the Chinese Ambassador to Australia. I would highly recommend watching the video of the Ambassador – who is arrogant, condescending and smarmy to say the least – threatening that Chinese tourists might decide to stop coming to Australia and that Chinese parents might decide to stop sending their kids to Australia if Australia is seen to be “unfriendly and even hostile to China”.

The ambassador then threatens that China will stop importing Australian beef and wine. China, not content with having instructed one of it’s diplomats to threaten Australia – something that made the diplomat behave like a petulant child – then went on to instruct the Chinese embassy to leak a private conversation with Australia’s Department of Foreign Affairs and Trade. This is something that is unforgiveable in terms of diplomatic protocol.

Having released details of the private conversation China did what it always does. It simply lied and said that details of the conversation had been leaked in the first instance by Australia and since the Australian account of the phone call was “inaccurate and misleading” China had no option to set the record straight. These events have been reported well beyond Australia and there is an excellent news report from India that covers this story along with a story about the editor of a Chinese State run media outlet – The Global Times which is a mouthpiece of the CCP – describing Australia as the gum stuck on the sole of China’s shoes that should be removed with a rock. Such a statement is obviously thoroughly objectionable in and of itself but the deeper point is surely that whilst China accuses Australia of being unfriendly, their State run media is publishing stories which are, to say the least, unfriendly – and might we even say hostile – towards Australia.

In March of 2019, 5 months before the prophetic article about Australia’s overreliance on China was published, Australia established the National Foundation for Australia-China Relations “to promote Australia-China ties” with activities of the Foundation due to commence in early 2020. The Foundation received $44 million dollars in funding. At the time that the Foundation was announced, the Hon. Warwick Smith AO, agreed to be the inaugural Chair of the Foundation. As reported on 28th April 2020, Smith stood down in March 2020 from his post as Chairman citing “concerns” about the Foundation. Unfortunately the nature of the concerns is not specified but it might be reasonable to infer that Smith does not want to be involved an a “pro-China” foundation at this point in Australia’s history. Anyhow, what a difference a year makes. Australia-China relations are now at an all time low, and whilst some might argue that the National Foundation for Australia-China Relations should continue to do its work, I would argue that the Foundation should be disbanded.

Australia Needs to Re-think Its Trading Relationship With China in Favour of Looking for Alternative Markets

The reality is that the CCP virus is already significantly impacting Australian exports to China so that ship has kind of sailed including by not limited too negatively impacting on exports of iron ore, beef and wine whilst also impacting negatively on the number of Chinese students and tourists coming to Australia. The question for Australia, having woken up to China, is how the country will re-work its economy to significantly reduce its two way trading reliance on China. I refer to my point on necessity being the mother of invention and I maintain that Australia’s only realistic choice is to unfetter itself from China because China does not have Australia’s interests at heart. The CCP thinks only of the CCP agenda which is to dominate and control the rest of the world though any means possible including economic means. If Australia acts now, it may save itself from a future in which it has no option but to kowtow to China. However, and somewhat unfortunately, there are voices in Australia would have us placate China.

You would think that Australia would be looking to stand up to China given the fact that China engaged in an act of biological warfare in deliberately sending the virus around the world which has resulted in millions of confirmed cases and hundreds of thousands of deaths. Not if this academic has his way. Unbelievably, and I quote in full, “UTS Professor Warren Hogan says Australian politicians must “be careful” in not upsetting the Communist Party of China too much as it is “the main customer” for our exports and an important economic relationship for the nation“. I find this position to be utterly incomprehensible. China can engage in an act of biological warfare and kill hundreds of thousands of people and the world should be careful not to upset China too much. Seriously, I hope that lecturer has been sequestered away in a cupboard somewhere so that he can be stopped from spouting such nonsense.

The fact is that placating China would play into China’s hands. As Greg Sheridan, Foreign Editor for “The Australian” argues, China’s message to the world is clear. Tremble and obey and you will be rewarded with, for example medical supplies. Defy us and you will be punished by, for example, China no longer importing goods from your country.

We shall ignore the point that China has shipped defective medical equipment to half a dozen countries around the world because the more pressing point is that contrary to Warren Hogan’s views, the CCP cannot be bargained with in order to get an outcome that will benefit both China and Australia in the long-term. China has a singular aim – to become the dominant world power – and we are getting glimpses now of what that would mean for countries around the world. Obey or suffer the consequences. There is an interesting point in China’s stance towards the world. China seems to believe that countries can be bullied and intimated in the same way that the people of China can be bullied and intimidated by the CCP. China’s naivety in this respect shows how immature China is on the world stage.

I’m going to give you another example of conciliatory talk with respect to China, talk that we should all worry about because if this kind of talk continues in the long term I can guarantee you that Australia’s trading relationship with China will win out and the CCP – with its evil and subhuman leadership – will seize the day through having coerced the world into backing off from seriously pursuing the origins of the virus, let alone questioning whether China did in fact engage in an act of biological warfare by closing borders within China whilst allowing Chinese citizens to travel to countries all over the world. So, in brief former Director-General of the Australian Security Intelligence Organization (ASIO) Dennis Richardson says roughly that any inquiry into the virus would be a learning experience for us all. Rubbish. The only thing we should learn from the CCPs act of biological warfare is that the CCP is a lying machine that cannot be trusted. To put it another way, we should not be placating China with talk of a learning experience for us all. China will just be laughing at us, not for the first time.

Matters get worse in Australia. Mining magnate Andrew Forrest invited, who has been vocal in the CPP virus debate despite apparently having no pollical sense – Victoria’s Chinese Consul-General – who, it has been reported was once one of China’s top cyber spies – to speak during a press conference that included Australia’s Health Minister, who by all accounts was given only a moments notice that the Consul-General would be in attendance. Mr Forrest made the invite after he had secured 10 million CCP virus testing kits from Australia. Again, I would make the point that China has sent defective medical kits all over the world including, as reported in a previous entry, India. When Mr Forrest was interviewed he said that the Consul-General had made a fantastic speech. Not of all of Australia agrees. Sky New Host Paul Murray called the “stunt” outrageous. I can only agree. The Chinese Consul-General used the opportunity to say that China “released [Covid-19] information in an open responsible and transparent manner and has worked closely with the WHO“. The Consul-General knows no shame because he has no conscience which, as I have argued on many occasions, makes such a person subhuman.

However, perhaps there is some hope. Months ago I wrote that the one thing that China does understand is “losing face” or being embarrassed in the eyes of the world. This report, argues that China has lost face, proving itself to be “insular, arrogant and unable to accept responsibility [for the CCP virus]” and the reporter suggests that this pandemic has changed Australia’s relationship with China forever “as it should”.

The report also makes a point I made above, namely that Australia’s relationship with China is not a “two way street”. This much is clear from China’s recent behaviour which reveals China’s real attitude towards the West – the West must do China’s bidding or suffer the consequences. I would argue in this respect that China has simply shown its immaturity on the world stage as China has failed to understand that using the bullying and threatening tactics that it uses on its own citizens will not work in very public arenas with countries around the world.

At the risk of heading into the land of conspiracy theory, in 2015 China produced a unified plan to acquire foreign technology. The plan was called “Made in China 2025” and the aim of the plan was to become the “world’s leading manufacture in ten high-tech sectors.” The CCP virus presents China with the opportunity to progress this plan through buying up distressed companies in the United States and Europe. You have to think that it is kind of convenient that the CCP virus presents China with an opportunity to progress their “Made in China 2025” plan on the cheap. However, thankfully, governments are introducing legislation to prevent China from swooping in and buying up distressed assets at ridiculously cheap prices. In this story the British Government has acted to prevent Chinese investment in a U.K company. Whether you buy into the conspiracy theory or not, remember this fact. China is concerned only with its own interests and it views the West as a means to an end, and end that we are glimpsing in terms of China expecting us to kowtow and do their bidding. Be afraid. Be very afraid.

First Published April 28th, 2020

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