Australia is looking to diversify its economy to rely less on China, its largest trading partner, Treasurer Josh Frydenberg said on Monday, as he warned businesses to brace for new tensions with Beijing.
Australia’s relations with China soured after it suddenly banned Huawei from its 5G broadband network in 2018 and cooled further after Canberra called for an independent investigation into the origins of COVID-19, first reported in China last year.
In turn, Beijing responded by imposing tariffs on Australian commodities, including barley, wine and grapes. “It is no secret that China has recently sought to target Australia`s economy,” Frydenberg said in a speech in Canberra.
“Heightened strategic competition is the new reality we face, now and likely into the future.”
Frydenberg said businesses should look at new markets, which have been opened as a result of recent free trade agreements.
Australia`s $2 trillion economy is at severe risk of getting into its second recession in as many years as its largest states are in prolonged COVID-19 lockdowns.
Despite the diplomatic tensions, exports to China hit a record A$19.4 billion in the 12 months to July 31, up 72% from the prior 12-month period on the back of strong iron ore demand.
In the wake of Morrison’s comments on Covid-19 — a politically sensitive subject for Beijing — a wide range of Australia exports to China including barley, beef and coal began to encounter obstacles. Some items were subject to anti-subsidy investigations and lengthy customs delays. In March, the Chinese government announced tariffs of up to 218% on Australian wine, intensifying a dispute over the industry.
China is said to be Australia’s largest trading partner by far in terms of exports and total value of trade. The trade between the two countries was valued at more than 250 billion Australian dollars ($185 billion) in the 2019/20 financial year, more than three times as much as the second largest trading partner, Japan.