Australian exporters rekindle China ties amid diplomatic thaw

By Reuters   February 26, 2023 | 06:21 pm PT
Australian exporters rekindle China ties amid diplomatic thaw
Bottles of wine sit on racks inside the cellar door tasting room at Petersons Wines, November 14, 2021. Photo by Reuters/Loren Elliott
Two and a half years after Chinese trade restrictions hit Australian products from coal to wine, a diplomatic thaw between Beijing and Canberra has raised hopes for a revival of exports and spurred businesses to take steps to rebuild ties.

First imposed by China in 2020 after years of disputes over Huawei, espionage and COVID, a raft of official and unofficial "trade blockages" worth roughly A$20 billion ($14 billion) are showing signs of loosening under a concerted diplomatic effort that has seen the leaders, foreign ministers and trade ministers of both countries meet since November.

Australian business leaders are following the political signals. Fortescue Metals founder Andrew Forrest, BHP head Mike Henry and Tim Ford, chief executive of tariff-hit winemaker Treasury Wine Estate, have scheduled visits to China in March.

The head of the Australian Forest Products Association said that Australian agriculture officials recently started "encouraging" talks with Chinese customs over log imports, once a A$600 million-a-year trade.

"We're optimistic that in the near future - could be three months, could be six months - we might see a resumption in trade," the association's chief executive, Victor Violante, told Reuters.

At least 15 vessels carrying Australian coal were bound for China last week as traders bet already-reduced trade barriers will fall further. Chinese cotton buyers are importing Australian product in anticipation an unofficial ban will lift.

An end to trade restrictions would mark an early success in Australia's effort to repair trade links with China even as it deepens security ties with the United States and United Kingdom through the AUKUS nuclear submarine alliance.

However differences over national security, human rights and other issues mean the journey to refreshed trade relations could be tentative and bumpy. Australia is expected to announce in March further details about the nuclear submarines it plans to buy, a move Beijing opposes.

Both countries remain locked in a formal World Trade Organisation dispute process over Chinese anti-dumping tariffs on barley. A report is due by March.

Nevertheless, Long Dingbin, China's top diplomat in Western Australia, a huge exporter of grains, iron ore and natural gas, met with state Premier Mark McGowan on Wednesday. McGowan hopes to go to China very soon, in what would be his fifth visit in office, the Chinese consulate in Perth said.

Long has attended at least eight events in February, meeting politicians and business groups, including a Chinese New Year party attended by more than 350 politicians and business leaders.

"People are starting to get on the front foot," Grain Trade Australia Chief Executive Pat O'Shannassy told Reuters. "Trade is ultimately about relationship and people are getting those relationships in place."

Capital is tentatively moving, too. Chinese buyers are looking at Australian assets, although Tianqi Lithium's $136 million bid for Australian lithium developer Essential Metals will test regulator appetite for investment in areas considered important for national security.

Prime Minister Anthony Albanese on Wednesday said Australia would consider the merits of any deal but he was "conscious about Australia's sovereign capabilities".

Traders are cautious about possible bureaucratic delays. A shipment of Australian coal diverted to Vietnam last week after waiting at a Chinese port for five days without unloading.

"[The] government's attitude remains ambiguous and the bureaucratic proccess is opaque, even though the general consensus is that the rule is relaxing since last Friday," said a Chinese coal trader who declined to be named.

Even should trade resume, many producers plan to avoid becoming too reliant on China again.

Albanese travels to India next month with his trade and resources ministers and a big business delegation in tow.

The chief executive of Cattle Australia, David Foote, said producers cut off from China had spent more than two years finding new customers and would be loath to give them up.

"They'll want to add China back in but not at the offset of losing their new customers."

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