SOURCE / ECONOMY
As China diversifies imports, time running out for Australia
Time running out for Canberra to fix ties with Beijing: analysts
Published: Jun 22, 2020 07:48 PM


A worker works in a dairy enterprise in Xi'an, northwest China's Shaanxi Province, Feb. 26, 2020. Dairy enterprises in Xi'an took measures to ensure the supply amid novel coronavirus control and prevention efforts. (Xinhua/Liu Xiao)



Time is running out for Canberra to repair fraught ties with Beijing, which have deteriorated sharply in recent months, as China has diversified its agricultural product imports, allowing four more Russian dairy companies to enter the Chinese market, Chinese experts said on Monday.

The move could be perceived as Beijing's latest implicit action to get rid of Australian products, as relations between Australia and its largest trade partner are at their lowest point, they said.

"China's import permission for other countries' dairy products at this time could be interpreted as another silent move by Beijing to lessen its dependence on Australian imports by further diversifying its import sources," Yu Lei, chief researcher at the Research Center for Pacific Island Countries at Liaocheng University, told the Global Times on Monday.

China gave the green light to four more Russian dairy companies to participate in Chinese market, while allowing Russian milk powder to enter the market in the autumn, according to Sputnik reports. 

Since China and Russia in late 2018 agreed on dairy products trade, 34 Russian dairy companies and 49 ice-cream makers have been allowed to enter the Chinese market. In 2019, Russia exported 480 tons of dairy goods to China worth $919,000. 

Although the current volume of Russian dairy exports to China is minimal, and issues like high logistics costs and low consumer awareness persist, experts said that volume and value could both grow quickly, considering the sound bilateral relationship and the government's stated goal of doubling bilateral trade.

After China-Russia trade broke the $100 billion-mark for the first time in 2018, with a year-on-year increase of 27.1 percent, the two agreed in 2019 to further enhance cooperation in trade with the goal of doubling bilateral trade value. Promoting trade in agricultural products, along with crude oil and natural gas, is a key aspect of this drive.

"Dairy products have always been a major part of Russia's agricultural exports, and the Russian government has attached great importance to expanding its dairy exports to the Chinese market. A massive dairy-producing base in the Far East is being built with the intent to serve for export purposes," said Song Kui, president of the Contemporary China-Russia Regional Economy Research Institute in Northeast China's Heilongjiang Province. "These factors will allow Russian dairy exports to China to grow very fast."

In 2019, Mengniu Dairy group, one of the Chinese mainland's leading suppliers of milk and other dairy products, signed a joint venture with Russian conglomerate AFK Sistema Group to jointly invest $750 million in developing the dairy sector in the Russian Far East, with the aim of raising its milk production to about 500,000 tons a year. If it succeeds, the farm would be not only the largest dairy production project ever undertaken in Russia, but one of the largest in the world.

China has been a global major dairy buyer, according to official figures. Last year, China imported 2.97 million tons of dairy products valued at $11.13 billion.

Australia currently ranks fourth in terms of world dairy trade - with a 6 percent share - behind New Zealand, the EU and the US. China is the biggest destination of Australian dairy products, as 30 percent of Australia's dairy products by volume are exported to China, according to Dairy Australia.

Ties between Australia and its largest trade partner soured in recent months. In May, China imposed more than 80 percent anti-dumping and countervailing tariffs on Australian barley. China emphasized that the tariffs were intended to protect its domestic barley sector, but the move was taken by some Australian politicians as retaliation.

It was notable that days before China announced the tariffs on Australian barley, Beijing started allowing US barley to enter the market to implement the phase one trade deal with Washington.

On Friday, Chinese state-owned iron and steel company Baowu Steel Group said it will start construction of the Simandou iron mine in Guinea, which has estimated reserves of 10 billion tons of high grade ore according to caixin.com.

All of these moves - including the approval of Russian dairy products - look independent, but when they are connected, it is clear that China is moving silently to decrease its dependence on Australian products, and there will be more "silent moves" if bilateral ties keep souring, according to Yu.

"From these moves, you can tell that the time left for Australia to repair ties with China is limited," Yu said, adding that "perhaps Australian politicians are sacrificing ties with China to curry political favor with the US, but they should understand that the damage to Australia-China trade ties is irreversible as more import sources are becoming available to China." 


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