A New Dent In Australia & China’s Declining Relationship

Why did Australia cancel the belt and road deal, and will this increase Australia-China tensions?

Just In

Australia’s Foreign Minister Marise Payne on Wednesday said that she has decided to cancel four deals, including two that Victoria agreed with China, in 2018 and 2019, on cooperation with the Belt and Road Initiative, Chinese President Xi Jinping’s signature trade and infrastructure scheme. Payne said, the deals were cancelled because she considers these four arrangements to be inconsistent with Australia’s foreign policy or adverse to the country’s foreign relations.

Before we get into the rest of the story, here is a quick explanation about the belt and road initiative: Earlier in 2013, the Chinese government announced a foreign and economic policy to set up maritime trade routes across the globe and invest in infrastructure projects in dozens of countries. The policy was estimated at $1.5 trillion and the projects included pipelines, ports, railways and other major infrastructure projects.

Past & Present

This move to cancel the deals is coming at a time when the diplomatic relations between Australia and China have been deteriorating. But what did Australia do? Earlier, Australia had raised concerns about human rights in Xinjiang and Hong Kong. Then, it decided to take the lead role in lobbying its Five Eyes partners to exclude the Chinese telecommunications company Huawei from supplying technology for their 5G networks.

But China wasn’t going to stay quite as well as it imposed anti-dumping and anti-subsidy duties on Australian barley in May 2020. In response to that, Australia said that it will initiate the World Trade Organization action for tariffs imposed on Australian barley by China.

Then, the decision by Prime Minister Scott Morrison to volunteer to lead the charge for a probe into China’s responsibility for COVID-19 also infuriated Beijing. The Australia-China tensions also rose after Treasurer Josh Frydenberg decided to prevent the Hong Kong-listed China Mengniu Dairy from taking over the Japanese-owned Lion Dairy and Drinks in a $600 million acquisition.

Impact?!

Just because Australia and China have been locked in conflicts doesn’t mean that they are doing less trade with each other. Australia’s exports to China reached A$145.2 billion in 2020, which was just 2.16% less than 2019’s total of A$148.4 billion.

Also, an analysis of UN trade data by Guardian Australia showed that Australia is by far China’s largest source of iron ore, coal, gas and wool. The data also showed that China’s importance to the Australian economy has exploded over the past decade, driven by an apparently insatiable need for iron ore and helped along by surging demand for luxury goods.

Zooming Out

At the end of the day, the relationship between Australia and China is deteriorating rapidly. This recent decision by Australia might make matters worse in the future as the Chinese Embassy has said that this move would further damage China’s ties with Australia. Will both the countries negotiate peacefully and decide how they should handle their political conflicts, or will they continue to extend this tug of war? We have to wait and see…

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Your Best Direct Mutual Fund Investing Experience Begins Here. Invest, Read and Track — at one place & for free! vist us at: www.moneyguru.in

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