Chinese plan to cause Australia ‘economic pain’ from trade bans backfires

China has swallowed its words in what is embarrassing for the communist nation but a clear win for Australia.

Communist China’s plan to bring Australia’s economy to its knees through economic boycotts has backfired after the nation had to wind back some of its policies as its energy crisis worsened.

Since September, the Asian superpower has been struggling to cope with a power crisis leading to rolling blackouts and factories shutting down across the country.

Some of the outages were so severe that Chinese citizens had to live without traffic lights and phone reception in some areas.

But even though more than two-thirds of China’s electricity comes from coal-fired plants, the nation refused to buy any Australian coal.

Last year, China imposed a number of bans on Australian products including iron ore, wine, beef, barley and even lobsters to create “economic pain” after Prime Minister Scott Morrison called for an investigations into the origins of Covid-19.

The coal ban was imposed last November, wiping $1 billion off our economy.

But in China’s latest customs report, it revealed that last month it imported 2.78 million tonnes of Australian coal in what could be a relaxation of its ban and a major backflip on its part.

China's President Xi Jinping. Picture: Nicolas Asfouri/AFP

The General Administration of Customs, which is China’s customs office, put out its monthly report that revealed a whopping 2.78 million tonnes of Australian coal was brought into the country in October.

Part of those numbers were from 778,000 tonnes of Australian coking coal for steelmaking and a further million tonnes of thermal coal, which can be used for electricity.

It’s the first time Australian imports have been included in China’s official data since December 2020.

Commonwealth Bank’s mining and energy economist Vivek Dhar told news.com.au this was good news for the sector.

“China relaxed it [the policy] given how acute the coal problem was in China,” he said.

“The way that they approached this is they were quite practical about it. Their economy would be impacted slowly if they couldn’t provide power.”

A Western Australian coal mine. Picture: Ian Waldie/Getty Images

However, Mr Dhar said that Australian coal producers shouldn’t get too excited as it could be a one-off thing.

For the better part of a year, Australian coal has been sitting at Chinese ports but Beijing has refused to process it.

Mr Dhar said these shipments were simply showing up in the data because the products had finally cleared customs.

But that doesn’t mean they’ll start welcoming Aussie coal back into their country with open arms.

”Because of the shortage in coal, there was a lot of coal held in port. They basically were cleared from customs, and that makes it part of the official figures,” Mr Dhar explained.

“To keep the coal at the port, it would eventually mean coal would lose its potency and remain unused. I think that’s the decision that was made. We don’t believe this is a new policy [from China].”

He said that some coal sellers like BHP believe that the unofficial ban will last for years to come.

Mr Dhar said this appeared like a one-off relaxation of their policy.

This isn’t even the first time China has had to make an embarrassing concession in terms of its attempt to ban Australian coal.

Peter Cai, director of the Lowy Institute’s Australia-China Relations Project, previously told news.com.au that China is accidentally shooting itself in the foot by icing out Australia.

“It’s entirely possible that some shipments have been sold via a third country, to get around the unofficial bans,” he said.

Reports claim China is paying $595 a tonne for coal, which is more than double what Australian coal producers are selling it for at $274 a tonne.

That would also mean the demand from China is still there, buoying the prices.

The Australian Strategic Policy Institute estimated that China was screwing itself out of US$2 billion a week by paying for this premium price to receive the commodity through a third party.

“Every million tonnes of coal has recently been costing China’s steel mills more than US$400 million, compared with around US$250 million paid by steel mills everywhere else,” the Institute wrote.

“Since China’s mills use almost two million tonnes of coal every day, the premium it pays above coal costs in the rest of the world adds up to about US$2 billion a week.”

Originally published as Chinese plan to cause Australia ‘economic pain’ from trade bans backfires