China sought to attack Australia’s wealth, but one major weakness instead helped billions of people flow into our economy.
Before the pandemic, relations between Australia and China were sometimes tense, but generally not a problem. Despite Beijing’s repeated silent treatments of the federal cabinet, the flow of trade between Australia and China remained relatively unimpeded.
However, more than 18 months after the pandemic sent Wuhan to the world’s first Covid-19-induced blockade, Australia was diplomatically “chewed, spit out, and booed” to borrow a phrase from rapper Eminem. Has endured the equivalent.
Australia continued to provoke Beijing’s anger after Prime Minister Scott Morrison called for an investigation into the cause of the coronavirus pandemic.
The prime minister’s request for investigation seems to be increasingly justified, as the theory of origin of the pandemic “Laborique” continues to be solid as a plausible explanation.
But Beijing certainly sees things that way.
Instead, the attacks on Australia’s trade interests and the generally one-sided verbal war between Beijing and Canberra continue to escalate on a regular basis.
Until recently, Beijing hid its true intentions behind a thinly obscured false allegation about Australia’s agricultural and disciplinary tariff deficiencies. But in recent weeks, Chinese officials have finally stopped pretending to be Beijing, at least for some time, after frankly confirming Beijing’s true intentions.
In early July, Zhao Lijian, deputy director of the Chinese Foreign Ministry, confirmed that Beijing had subject Australia to economic punishment.
When asked about Australia’s declining agricultural exports to China, Zhao revealed that Beijing had deliberately targeted Australian commodities.
“We do not allow any country to benefit from doing business with China, while blaming, desecrating, and undermining China’s core interests on an idealistic basis. “
But even though Beijing continues to reduce the number of fragile export industries such as shellfish and wine, there is one Australian export industry that remains unmanageable. It’s iron ore.
Iron ore exports have ensured that Australia’s export trade with China continues to rise in value, even though Beijing’s disciplinary trade behavior has hit some export industries.
In May, a record $ 12.3 billion worth of iron ore was exported only to China, according to Australian Bureau of Statistics statistics.
Looking at it, international tourism invested an estimated $ 47 billion in the economy in 2019.
For better or for worse, the iron ore industry is now Australia’s Atlas, the Greek giant that supported the world, effectively supporting the rest of the economy.
Some people in Beijing are nothing more than removing it from Australia, kneeling down our exports and squeezing our economy into a long and difficult recession.
Thankfully for us wearing greens and gold, it is impossible for China to kick Australia’s nasty iron ore habits without a mother of all withdrawal effects.
In 2020, China imported far more iron ore than any other country in the world, importing 75.4 percent of the world’s import supply. Japan, the second largest importer of iron ore, imported a total of 6.1% of the world’s imports.
When it comes to iron ore exports, there is a similar mismatch in the relative sizes of the major players. In 2020, Australia exported 56% of the world’s iron ore, followed by Brazil with 18.4%.
With this supply-demand balance in mind, if Beijing could secure an overall exportable global supply to eliminate Australia, it would only be able to meet about 59 percent of total iron ore import demand.
As long as Beijing continues to pursue a construction-led economic growth model, China will continue to boost the Australian economy for the foreseeable future, whether it likes it or not.
The federal budget from 2021 to 22 assumed that the price of iron ore would return to about US $ 55 per ton in the next fiscal year. This was a cautious move by Treasury Secretary Josh Frydenberg in light of uncertainties, so that profits from iron ore were not surprised by the downside.
But if the recent forecasts of Swiss investment bank Credit Suisse are correct, federal budget funding could be a positive surprise over the next few years.
The forecast is that the price of iron ore will be about US $ 144 per ton in 2022 and will gradually drop to US $ 70 per ton in 2025.
This represents a significant drop from the current nearly record high of about $ 220 per ton, but for the entire period of their forecasts, they forecast prices above those expected in federal budget estimates. did.
When Beijing first began targeting Australia’s various export industries, there were concerns that it could significantly undermine the nation’s economic recovery from a pandemic.
But when Australian miners, farmers and manufacturers found new destinations for their products, what it might have been was little of a blow.
Beijing is aiming to break out of the pandemic and may not want to boost Australia’s economic recovery, but as long as the status quo continues, iron ore imports at very favorable prices do just that. ..
Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator
China’s iron ore imports are boosting Australia’s economic recovery
Source link China’s iron ore imports are boosting Australia’s economic recovery