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Australia needs to maintain its "strong" political relationship with Beijing before worrying about the effects of a possible China-US trade deal, an expert has told SBS.
Kawala Xie, Wai Yee Yeung

26 Mar 2019 - 10:17 AM  UPDATED 26 Mar 2019 - 7:49 PM

Facing challenges from its economic slowdown, China’s trade data shows a weakened performance.

Chinese President Xi Jinping is on a state visit to Italy, France and Monaco this week, hoping to boost trade and strengthen partnerships amid a trade battle with the US.

The tit-for-tat trade battle between the world’s two largest economies has lasted for almost a year since the first tariff President Trump announced on steel and aluminium products last March and has also had a detrimental effect on the global economy.

China-US trade talks have dragged on amid a delay in arranging a meeting between US President Donald Trump and President Xi, which was initially expected to take place by the end of March. 

As US-China trade talks appear to be reaching a possible solution, an expert says the two countries’ possible deal would have little effect on Australian goods.

“If China buys more from the US, they will buy less from Australia, that is absolutely true. But I think the scale of that impact will be relatively limited,” said Professor James Laurenceson, an economist and Deputy Director of the Australia-China Relations Institute at the University of Technology Sydney.

“Simply because of the fact that Australia’s and US’ exports to China don’t often compete.”

Facing tough US trade restriction, the Chinese economy has been slowing down, with a 6.6 per cent annual economic growth last year, the lowest rate in the past two decades.

The slowdown has been reflected on its trade; China’s exports and imports both fell sharply in February: exports are down 20.7 per cent compared to the same period last year, according to its customs data. Imports are down by 5.2 per cent, with a decrease in iron ore and coal, the top two Australian exports to China.

But one expert says Australia’s exports remain robust.

“China’s economy is slowing, not dramatically yet,” said Mr Richard McGregor, a China expert of Lowy Institute. “In terms of economic relationship [with China], it’s very strong. What people in Australia would be worried about is the political relationship and whether that will flow on to and affect trade.”

Last month, Chinese ports were reported to place restrictions on Australian imported coal. The Chinese government later denied the reports, citing the reason as environment quality checks.

This caused an uproar in Australia’s export industry, with some calling China’s decision politically motivated to retaliate against Australia’s ban on Huawei, the Chinese technology giant, from its 5G network.

Though China’s trade data upsets some in the Australian market, government partnership with China shows positive signs, especially in the state-level. Since Victoria signed a Memorandum of Understanding (MOU) last October to partner with China on its “Belt and Road Initiative” (BRI), aiming to boost local infrastructure building with China’s efforts, engagement with China is going well.

“It’s a working progress,” said Marty Mei, Senior Advisor to Premier Daniel Andrews

“We are definitely welcoming Chinese companies to participate in the building process of those major [infrastructure] projects.”

Mr Mei said the state is working to create more jobs and boost local trade through the Belt and Road Initiative (BRI).

But China’s proposal does not win support from the whole nation yet. The federal government has been showing an ambiguous attitude toward the BRI.

Xi in Europe is expected to bring back another success for his Belt and Road project: Italy appears to be getting on board.

If signed, Italy will become the only G7 country to join the biggest global infrastructure project in the century.

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