COMMENTS / EXPERT ASSESSMENT
Australian businesses need China; hope bilateral ties reset
Published: Dec 24, 2020 10:03 PM

Nick Coyle, CEO of China-Australia Chamber of Commerce (AustCham China) Photo: Courtesy of AustCham China



Editor's Note:

It's been a bumpy year for China-Australian bilateral relations in 2020 on the diplomatic front. How will the intensifying tensions affect economic and trade ties between the two countries? How do Australian firms evaluate the Chinese market at the moment and in the future? The Global Times (GT) recently conducted an exclusive interview with Nick Coyle, CEO of China-Australia Chamber of Commerce (AustCham China) to share insights on the topic.

GT: How do you evaluate the recent changes of bilateral trade relations since the outbreak of COVID-19 pandemic this year? What is the Chamber's forecast for bilateral trade value in 2020? 

Coyle: It is certainly an understatement to say that 2020 has been a challenging year for Australian business in China. The COVID-19 pandemic has disrupted markets, regional supply chains and the individual enterprise-level day-to-day operations were greatly impacted. Many member companies of AustCham China had senior executives and key staff unable to return to China for many months.  Overlaying this situation, the rapid deterioration of bilateral government-to-government relations has resulted in additional costs and uncertainties for businesses in both countries. 

The bilateral trade figures show there is a very mixed picture for exporters. Companies operating in sectors facing trade actions, such as wine, barley and beef, are experiencing significant challenges.  For many sectors, exports are holding up well so far in 2020 despite COVID-19 and bilateral issues.  Some commodities such as iron ore are experiencing near record prices and export volumes.

Export figures to China at the end of October show a 13.3 percent increase over the same period compared to 2019, however if we remove iron ore from those numbers, we see a decrease of 24 percent when compared to 2019. Clearly COVID-19 has had a significant impact. 

GT: Under the fraught trade ties sentiment, what do most Australian businesses in China evaluate the Chinese market? Do they still have confidence or begin considering withdrawing their business? 

Coyle: The fundamental drivers of the China-Australia economic relationship still very much apply today as they did one year ago or five years ago. In December 2015, the China-Australia Free Trade Agreement or ChAFTA came into force. At the time it was, and it still is, China's most comprehensive free trade agreement. Our economies are highly complementary.  The then Australian Trade Minister summed it up well when he said that ChAFTA was "built around two economies perfectly complementing each other." 

Few free trade agreements have been as successful as ChAFTA.  China's exports to Australia grew over 66 percent in four years from 270 billion yuan ($41 billion) to 406 billion yuan, while Australian exports to China have essentially doubled in the same period driven by commodities and resources feeding China's rapid development. These substantial benefits have been two way and by any measure ChAFTA has been a win-win for both countries. 

As a business chamber we naturally focus on business outcomes, however the other winners that are often overlooked and do not make media headlines, are the consumers in both countries. ChAFTA has allowed consumers in both countries to access great products at cheaper prices. 

In repeated surveys over past months our members have voiced growing concerns over the state of bi-lateral relations. The state of these relations is clearly seen by far as the "top business risk" with 72 percent of members.  Second and third risks are import diversion by China to other markets, including the US and collateral effects of the US-China trade dispute respectively. AustCham is about to launch another survey where we anticipate similar, if not higher levels of concern. As a result, it is natural that companies would reassess their business plans. So far there has not been any indication that Australian companies are withdrawing from the China market.  

GT: To your knowledge, have Australian business circle realized the importance of the Chinese market? 

Coyle: The importance of the Chinese market has been front and center of business in Australia for many years. Australian industry can say that it emphatically "realizes" the importance of the China market. China is the destination for over one third of total exports and constitutes almost 20 percent of its imports. By far, China is Australia largest trading partner. Again, this is because our markets are so complementary in their economic strengths. Our free trade agreement has accelerated these outcomes due to lower barriers for trade and investment.   

Chinese business and consumers purchase Australian products because they choose to. They are confident in Australia's supply of high-quality goods and services at prices they are prepared to pay.  This is the same for Australian consumers who readily consume and appreciate Chinese goods and services.  

The rapid growth of education services has had great impact on building solid people-to-people ties which can underpin resilience in the relationship going forward. China and Australia have always enjoyed strong people-to-people ties and Australian companies are making strenuous efforts with their Chinese business partners to ensure these ties will continue despite present challenges in being to travel extensively in the region. 

GT: Foreign reports have speculated that iron ore may be the next commodity following,  amongst others, barley and wine to be impacted by deteriorating bilateral relations, what's you take on this?

Coyle: I think it is not helpful to speculate.  Our members prefer to focus on areas which China and Australia have in common.   Iron ore is an important resource commodity for both Australia and China.  Trade will continue because it is in the interests of both countries for it to do so. 

GT: What role do you think the RCEP agreement will play for cooperation between Australia and China?

Coyle: From a business perspective, a regional trade agreement which reduces tariffs, opens up markets and provides rules that reduce regulatory risk is a very positive development. 

RCEP will be particularly beneficial for technical features such as standardizing rules of origin, and a process to reduce of non-tariff barriers.  Other initiatives include rules for provision of cross-border services in telecommunications, opening of public procurement and the promise of mutual recognition of qualifications for professional services. Movement of goods and services between North Asia through ASEAN to Australasia and vice versa will be easier. RCEP's rules and procedures will accelerate the development of regional distribution hubs.

GT: What is the Chamber's view on the prospect of bilateral trade? When do you think there will be a resetting of the relations and in what way? 

Coyle
: Despite recent headwinds, AusCham members remain optimistic when looking at long-term prospects in China and the region. Opportunities will arise in areas relating to China's goal of transitioning to a green economy and achieving carbon neutrality by 2060. Both countries are ambitious in terms of transforming themselves into digital economies and both seek to improve the quality and accessibility of their public services in education, medical services and elderly care. We anticipate more opportunities coming from the 14th Five Year Plan.

To achieve the best and the win-win results, the conditions need to be created for leading, innovative companies in China and Australia to explore how to work together to create new business opportunities to support the post-COVID19 recovery, and achieve these social and economic development objectives.

In 2014, when addressing the Australian Parliament, Chinese President Xi Jinping gave sound counsel on the topic of bilateral relations. He noted that "China and Australia differ in history, culture, social system and stage of development, so it is natural for us to have disagreements on some issues. What is important is that we should keep to the right direction of bilateral relations, talk to each other candidly, seek common ground despite our differences and meet each other half way." This advice seems even more relevant in 2020 and offers a roadmap for both governments for resetting the relationship.  

Australian companies in China are staunch advocates for a timely reset of bilateral relations.  Also, I am confident that Chinese companies invested and operating in Australia would hold similar views.  

Australia and China have built up a large reservoir of goodwill over past decades. The hundreds of thousands of students, tourists and business people who have travelled yearly between Australia and China are the glue which binds the two countries. These people-to-people ties form the foundation for sustainable trade relationships and healthy bilateral relations overall.  

President Xi's commented in the same 2014 speech in words that hold the same truth today, "everywhere I went, I have personally experienced the goodwill of the Australian people towards the Chinese people."  


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