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China-focused Australian businesses are growing increasingly nervous their industry could be next in the firing line as Beijing continues its unrelenting campaign of economic coercion.
The authoritarian state has already imposed crippling tariffs on Australian wine and barley – and informally banned Chinese businesses from buying Australian barley, timbre, lobster, coal, cotton, and beef.
Now local businesses are wondering if they will be next on the chopping block as the Chinese Communist Party continues to punish Canberra for speaking out on its human rights record.
Beijing is also still enraged that Prime Minister Scott Morrison called for an independent inquiry into the Covid-19 pandemic, which originated in Wuhan.
The cartoon in the Communist Party mouthpiece – Global Times – is the latest insult hurled at Australia
The Chinese Communist Party continues to punish Canberra for speaking out on Beijing’s human rights record and the Covid-19 pandemic. (Chinese President Xi Jinping pictured left, Australian Prime Minister Scott Morrison pictured right)
Tensions could rise even further this week when Australia is expected to pass new laws giving the Federal Government the power to veto deals between state and local authorities and foreign nations.
This would include Victoria’s controversial MoU with the China on the Belt and Road Initiative, but Mr Morrison is expect to wait until tensions settle down before making a decision on whether to scrap it.
In 2019 China made up 33 per cent of Australia’s total exports, bringing in $153billion.
So far Beijing have turned the screws on more than $20billion in key Australian exports.
IBISWorld senior industry analyst Liam Harrison told news.com.au that a number of local businesses focused a great deal of energy on the Chinese market following the 2015 China-Australia Free Trade Agreement.
But with the totalitarian regime now dishonoring the deal, it’s ‘pulled out the rug from beneath many Australian businesses’.
‘For example, for the wine industry it has been quite devastating because China was a very lucrative market. It has also been a big issue for barley and the beef restrictions were a bit of a shock as we didn’t expect that, and it is now escalating,’ he said.
Beekeepers are on ‘high alert’ that the buzz around their business could be cancelled by Beijing at any moment (a beekeeper is pictured in Latrobe, Tasmania)
Larger businesses may be able to bide their time as new export markets like India, the Middle East and southeast Asia open up, but smaller operators are likely to face severe cash flow problems.
‘The potential for business shutdowns is definitely on the cards – the ones that are very heavily reliant on China will have lost their market and will have all that stock with very few places to sell to, and they will now try to compete in other markets,’ Mr Harrison said.
‘Some businesses will be feeling very real fear.’
About 300,000 tonnes of premium Manuka honey is exported to China every year, but now beekeepers are on ‘high alert’ that the buzz around their business could be cancelled by Beijing at any moment.
Australia’s lucrative dairy industry is also ‘highly vulnerable’ to the Chinese trade dispute.
Items like A2 milk products, powdered dairy and baby formula are highly sought-after goods on Chinese supermarket shelves.
‘Tariffs on Australian dairy products would represent a fairly significant escalation in trade hostilities,’ Mr Harrison said in an IBIS World report released on Tuesday.
‘Australian dairy products are highly popular, and there are few substitute markets for baby formula that Chinese parents are willing to trust.
‘Action against this market would likely cause significant backlash from Chinese consumers and could result in weakened support for continuing trade restrictions against Australia.’
Australian fruit exporters remain particularly susceptible to the whims of Beijing with the citrus and nut industry shipping over about 45 per cent of their crop to hungry Chinese buyers.
Apple, pear and stone fruit growers export about 30 percent.
‘Tariffs on Australian dairy products would represent a fairly significant escalation in trade hostilities,’ Mr Harrison said (pictured, a Chinese supermarket in Sydney’s Chatswood)
Australian fruit exporters remain particularly susceptible to the whims of Beijing with the citrus and nut industry shipping over about 45 per cent of their crop to hungry Chinese buyers
With the added strain of Covid-19 travel restrictions on seasonal workers and the fallout from summer bushfire crisis still continuing, further profit damage from tariffs could cripple a many producers.
Australia’s surging supplement industry is another sector that could also be stopped in its tracks.
Vitamin brands like Blackmores and Swisse have become very popular in China’s health-focused consumer market, with the sector raking in about $680 million from Sino consumers in 2018-19.
‘Many of these items have alternative markets, and could come under serious threat of restrictions or sanctions from China,’ Mr Harrison said.
‘Although Australian pharmaceuticals are highly popular in China, our largest advantage in providing to this market is our relative geographic proximity.’
Despite the fear gripping other industries, Australia’s largest export iron ore and bauxite are expected to remain unaffected.
China needs iron ore for steel making and there are no other suitable alternatives.
Although other countries like South America and Africa produce the commodity, the quality and price is not comparable to Australia.
‘Despite the high reliance on China as a market for Australian resources, these are highly valued commodities with few alternative markets,’ Mr Harrison said.
‘Australian iron ore is very high quality, and there are currently few markets which can produce the quality, and particularly the quantity, of resources needed to fuel China’s steel manufacturing industry.’
However, other mining commodities may soon bear the brunt of China’s fury as copper and coal exports already have.
Despite the fear gripping other industries, Australia’s largest export iron ore is expected to remain unaffected – along with Bauxite (pictured Fortescue Metals Group’s Christmas Creek iron ore operations in the Pilbara region of Western Australia)
Scott Morrison is pictured shaking hands with Chinese President Xi Jinping when relations at a time when relations were friendlier.
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