According to the Australian Department of Foreign Affairs and Commerce, China has become Australia’s most significant trading partner, contributing to nearly one-third of the nation’s international trade. Conversely, Australia stands as China’s fifth largest source of imports and tenth largest export market.
Despite ongoing geopolitical tensions, economic and trade cooperation between the two countries has experienced consistent growth over the past couple of years.
Recent data from the General Administration of Customs (GAC) reveals that bilateral trade between China and Australia amounted to USD 220.91 billion in 2022, representing a 3.9 percent decrease from the previous year. Australia’s exports to China reached USD 142.09 billion, marking a 13.1 percent decline compared to 2021.
China continues to serve as a primary export market for numerous Australian products, including coal, iron ore, and wine. Nevertheless, the market share for some of these goods has been affected as domestic businesses seek alternative sources to mitigate the risk of supply disruptions amid thawing diplomatic relations.
As of December 2022, Australia’s top exports to China included iron ore (USD 5.48 billion), petroleum gas (USD 1.65 billion), other minerals (USD 1.08 billion), gold (USD 742 million), and wheat (USD 214 million).
Top 5 products exported from Australia to China in 2022
| Product | Amount (USD billions) |
|---|---|
| Iron ore | 5.48 |
| Petroleum gas | 1.65 |
| Other minerals | 1.08 |
| Gold | 0.74 |
| Wheat | 0.24 |
The above table presents the top 5 products exported from Australia to China in 2022, showcasing the corresponding amounts in billions of USD dollars. Source: Observatory of Economic Complexity, 2023.
China dominates Australia’s manufactured imports while Australian products thrive in Chinese market
China has emerged as a dominant source of manufactured imports for Australia, accounting for 25 percent of the country’s imported goods. Over time, the nature of these imports has evolved, starting from textiles and clothing in earlier years to home appliances in the 1990s and currently encompassing engineering items and telecommunications equipment.
On the other hand, Australian products enjoy significant competitive advantages in the Chinese market, particularly in the areas of natural resources such as coal and gas, wool, and various food and agricultural products including beef, wine, barley, and seafood. Australia’s abundant reserves of crucial minerals like lithium and iron ore further solidify its position as a strategic trading partner for China. Notably, Chinese companies have acquired shares in significant Australian mines, indicating the depth of their economic ties.
As of December 2022, China’s top exports to Australia comprised refined petroleum (USD 496 million), computers (USD 403 million), telephones (USD 352 million), cars (USD 324 million), and other furniture (USD 157 million). These figures highlight the diverse range of goods flowing from China to meet Australian demand.
Top 5 products exported from China to Australia in 2022
| Product | Amount (USD billions) |
|---|---|
| Refined petroleum | 496 |
| Computers | 403 |
| Telephones | 352 |
| Cars | 324 |
| Other furniture | 157 |
The above table presents the top 5 products exported from China to Australia in 2022, showcasing the corresponding amounts in billions of USD dollars. Source: Observatory of Economic Complexity, 2023.
Bilateral investment
Australia’s investment in China experienced a significant upswing in 2021, positioning China as the eighth largest recipient of Australian investment. This marked a substantial 14.5 percent increase compared to the previous year, with a total investment value reaching an impressive USD 5.9 billion.
According to the 2022 survey report published by the Australian Chamber of Commerce, China continues to hold a prominent position in the investment plans of the Australian business community and organizations. Remarkably, 58 percent of the survey respondents identified China as their top priority or one of their top three investment destinations for the next three years. This finding demonstrates the enduring appeal and confidence in China’s market potential among Australian investors.
The survey participants expressed optimism regarding future market opportunities and anticipated growth in profitability when engaging with the Chinese market. These positive sentiments underline the enduring belief in the long-term viability of investment ventures in China for Australian businesses.
Despite the daunting challenges brought about by the COVID-19 pandemic and its associated measures, businesses operating in China showcased their adaptability and resilience. A remarkable 46 percent of these businesses implemented strategies to localize their sourcing and sales within the Chinese market. As a result, they achieved an impressive 19 percent growth compared to the year 2018.
Australian businesses, in particular, demonstrated a strong commitment to maintaining or even expanding their investments in China. The majority of them expressed a keen desire to return to, or surpass, pre-pandemic investment levels. This optimistic outlook reflects their confidence in the long-term potential and opportunities presented by the Chinese market.
Conversely, Chinese investment in Australia witnessed a significant decline in 2021, plummeting by 69.8 percent from USD 1.9 billion to USD 0.6 billion. When calculated in Australian dollars, the decrease amounted to a staggering 69 percent drop. This decline highlights the shifting dynamics of investment flows between the two countries during the pandemic period.
Chinese outward direct investment into Australia
| Year | Amount (USD millions) |
|---|---|
| 2007 | 1,539 |
| 2008 | 16,200 |
| 2009 | 8,549 |
| 2010 | 3,916 |
| 2011 | 9,401 |
| 2012 | 10,105 |
| 2013 | 9,185 |
| 2014 | 8,351 |
| 2015 | 10,140 |
| 2016 | 11,538 |
| 2017 | 10,008 |
| 2018 | 6,243 |
| 2019 | 2,362 |
| 2020 | 2,936 |
| 2021 | 585 |
Chinese investment in Australia was predominantly focused on the mining sector, as indicated by four significant transactions amounting to AUD 545 million. Among these transactions, one was related to iron ore, while the remaining three involved investments in the lithium industry. Mining accounted for an impressive 70.1 percent share of all Chinese investment inflows into Australia.
Commercial real estate also attracted a substantial portion of Chinese investment, comprising 26.7 percent (AUD 208 million) of the total investment inflows. This demonstrates the Chinese investors’ interest and confidence in the Australian commercial property market.
Furthermore, a smaller but notable percentage of the total AUD 778.2 million investment inflows, namely 3.2 percent (AUD 25 million), was directed towards renewable energy projects. This signifies an emerging focus on sustainable and clean energy initiatives within the Chinese investment landscape in Australia.
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Summary
The economic relationship between China and Australia has been characterized by significant trade volumes, investment flows, and mutual opportunities. Despite occasional challenges and geopolitical tensions, both countries have continued to engage in bilateral trade and investment, with China being Australia’s largest trading partner. Australian exports, including natural resources, agricultural products, and minerals, have found a substantial market in China. Moreover, Chinese investment in Australia, particularly in the mining sector, has played a vital role in driving economic growth.
Looking ahead, while the economic landscape may face uncertainties, the strong trade and investment ties between China and Australia present opportunities for further collaboration and cooperation. Both countries recognize the mutual benefits and continue to explore avenues for deepening economic engagement. The evolving dynamics of the global economy and emerging sectors, such as renewable energy, offer new avenues for future partnerships.
As China and Australia navigate their economic relationship, it becomes crucial to maintain open channels of communication, address challenges, and foster a mutually beneficial environment. By fostering strong economic ties and embracing opportunities for cooperation, both nations can continue to strengthen their economic resilience and contribute to regional and global prosperity.