The rushed departure from China by the last two correspondents for Australian news organisations now raises questions about how much Australia’s $200bn trade with China can continue in the face of concern about the physical safety of Australians in China.
The recent detainment of Chinese-Australian journalist Cheng Lei and the hasty departure of the last two Australian journalists in China this week raises real questions for Australian companies about whether they can safely send their executives into China even when COVID-related travel restrictions are eased.
What happens, for example, in November, when foreign countries will be seeking the fly their flags at China’s third Import Expo in Shanghai — an event that is currently planned by China to be a combination of a physical and online presence?
How many of the falling number of Australian expatriate executives currently in China will be able to attend? Who from Australia will be able to give a cheery picture in an online presentation of the virtues of our clean and green exports?
Can Australia and Australian companies continue to make their pitches to sell into the China market in the same way that they have done so enthusiastically in the first two meetings?
When the official travel warnings from the Department of Foreign Affairs and Trade that Australians in China faced arbitrary arrest were issued some weeks ago, some in the Australia-China business community wondered whether this was a statement that unnecessarily inflamed relations even more. But this week’s events seem to confirm the potential dangers facing Australians in China as a direct fallout of deteriorating political ties.
And without the regular to and fro of business meetings on both sides, which range from business people in iron ore, beef, dairy, wine, education and tourism, how can trade continue in the long term at anywhere near the record levels it has done?
How can Australian executives in future consider attending the annual Boao forum on Hainan Island that is partly sponsored by iron ore miner Fortescue, or the Austrade organised bilateral trade fairs in the lead-up to the AFL match in Shanghai that has been a big drawcard for Australian expats in the region?
As Elders chief executive Mark Allison told The Australian, the issues around the questioning of the two Australian journalists appeared designed to send a message to Australia along the lines of the Chinese proverb “killing the chicken to scare the monkey”.
So what Australian company — particularly a listed company — can afford to send its executives into China now or in the foreseeable future?
Indeed, should those that have representatives in China now considering pulling them out?
Allison appealed to the Australian government to try to de-escalate the situation with China and try to restore calm.
But just how this might be done remains to be seen.
Olive branch
Just as China’s deputy ambassador to Australia appeared to be holding out an olive branch of sorts in a recent speech to the National Press Club, the Morrison government suddenly decided to move against Australian states doing deals with foreign governments — a move clearly aimed Victoria’s signature of China’s Belt and Road Initiative that occurred two years ago.
At the same time, it rejected overtures by a Chinese company to buy the dairy and drinks business of Japanese-owned Lion in Australia.
The former chief executive of the Australia China Business Council, Helen Sawczak, who is now a consultant to Newgate Communications, told The Australian on Tuesday that there was now “significant business risk” that needed to be taken into account by Australia companies trading with China.
“Until recently, business has been largely unaffected by escalating political tensions, with bilateral trade continuing to hit new records, despite the global pandemic and associated logistical challenges and a push for trade diversification,” Sawczak said.
But she said the case of Australian journalists being forced out of China was now part of “the new paradigm of Australia-China relations”.
She said Australian companies still remained “cautiously optimistic about trade with China”.
But “for those companies committed to the enormous potential of the China market, this new paradigm must be factored in as a significant business risk”.
Until recently the Morrison government has been able to point to the continued strength of Australia’s trade with China this year — with figures boosted by the strength of prices for iron ore, which makes up 56 per cent of the trade by value. But the happy picture of strong trade relations that can continue in the face of a sharp deterioration of political ties is now under challenge.
More than 25 per cent of Australia’s $1bn meat trade with China, which had been roaring along as a result of China’s demand for protein following the swine flu issue, is now affected by bans put on Australian abattoirs in recent months by Chinese customs officials who have found fault with the imports.
Export figures
Sales of Australia meat to China are down by 35 per cent on a year-on-year basis in the period from May to July.
The $1bn Australian wine trade with China, which has been booming given the appeal of brands such as Penfolds with the Chinese middle class, is now under a cloud with anti-dumping and anti-subsidy investigations by China’s Ministry of Commerce.
While Australian goods exports to China have been strong in the year to the end of June (totalling more than $150bn, according to the Australian Bureau of Statistics), the figures from China show a much more depressing picture with this calendar year being a generally weaker period for Australian exports to China.
The figures from China’s General Administration of Customs this week show that Chinese imports from Australia in August were down 26.2 per cent at $US8.81bn ($12.1bn) on a year-on-year basis.
They show the goods trade for the year (excluding services such as tourism and education, where the trade is almost non-existent due to COVID-driven travel bans) down by 7.5 per cent in 2020 on a year-on-year basis.
China’s nationalistic Global Times noted the fall-off in Australian exports in an editorial published this week in response to the figures, titled “Loss of Australian exports to China just beginning”.
It says the latest trade statistics beg the question “how low can bilateral trade between the countries go?”
It agrees that some of the fall-off in trade could be as a result of measures taken against Australian exports — such as the imposition of an 80 per cent tariff on the imports of most of Australian barley sold into China, a trade once worth some $1.3bn.
But it argues that “none of these has had a substantial impact on trade”.
It suggests that most of the fall-off may be an indication of “China’s decreasing trade enthusiasm for Australian goods”.
“If political tensions are not mitigated in the coming months, at the current rate of trade slide, it’s not hard to imagine bilateral trade contracting by half from July’s peak,” it says.
Patrick Hutchison, chief executive of the Australian Meat Industry Council, told The Australian on Tuesday: “These issues couldn’t have come at a worse time for the industry.
“We have been working in Victoria on the road out for production, especially in sheep meat, with the state being responsible for 50 per cent of production.
“Farmers and industry need the certainty of supply chains more than ever.”
If it is no longer safe for Australians to visit China — or some Australians to be in China (and how does one work out who that is?) — then the trade that has underpinned Australia’s almost 30 years of prosperity will inevitably be harmed.
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