China’s embarrassing backflip to Australia after promising to bring ‘economic pain’

China appears to be in the process of backflipping from a policy designed to bring Australia’s economy to its knees in an embarrassing concession.

China appears to be in the process of backflipping from a policy designed to bring Australia’s economy to its knees.

This week, independent reports emerged from both Bloomberg and Reuters that China’s ban on importing Australian coal might soon be lifted.

At the beginning of the Covid-19 pandemic, 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 the coronavirus.

Although the coal ban was never officially added to the list, for the last two years China has shadow-banned the Australian resource, putting it on an invisible blacklist.

The coal ban wiped $1 billion off Australia’s balance sheet.

Now, however, Chinese state-owned enterprises have begun to make “initial inquiries” about coal imports in the near future such as pricing and availability and four major Chinese importers have been cleared to resumed trading with their Australian counterparts, according to reports.

The sudden 180 degree turnaround is reportedly as China faces the prospect of more power failures with some cities already freezing in the nation’s northeast.

This will mark the first time since China waged its trade war against Australia that the Asian superpower has backed down and come crawling back.

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The New Acland coal mine, outside Oakey, west of Toowoomba in Queensland. Picture: Lyndon Mechielsen / The Australian

On Tuesday, China’s National Development and Reform Commission informed four importers, including the country’s biggest steelmaker, Baowu, that Australian coal could be brought into the fold.

That was according to reports from Bloomberg and Reuters.

Comments from a State Council meeting have also buoyed hopes.

Chinese Premier Li Keqiang said a day after the reports emerged that “stronger efforts should be made to ensure safe and stable energy supply.

“As the momentum of economic recovery and stable growth continues, energy demand is on the rise.”

The news has caused a flurry of activity in the stock market and already impacted on coal prices.

GlobalCOAL reported metallurgical coal is trading at $US302 a tonne while on the Singapore exchange, the $US300 a tonne mark has also been broken.

Industry group the Minerals Council of Australia said it was “cautiously optimistic” following the reports.

It comes just a month after Minister for Foreign Affairs Penny Wong visited China in the first such high-profile in three years, in what many saw as a thawing of hostility between the two nations.

China and Australia have been embroiled in a trade war for three years but it could be coming to an end.

The ongoing ban has no doubt impacted the Australian economy — but it’s adversely affected Chinese citizens too.

Australia bounced back quickly after finding alternate markets in India, Japan and South Korea, among others.

Meanwhile, China experienced rolling blackouts for several months in the winter of 2022 but was unable to buy Aussie coal – which would have been an easy fix.

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

Reports from September 2021 claimed China was paying $595 a tonne for coal to come through a middle man, which is more than double what Australian coal producers were selling it for at the time.

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 product 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.”