"Why China Will Shut Down The Australian Economy In 2023"

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"Why China Will Shut Down The Australian Economy In 2023"

by Epic Economist

"For the past decade, China has been growing rapidly. Rapid urbanization and industrialization mean that China is in need of minerals and raw materials. And China’s development thirst has been fulfilled by Australia. Beijing is Australia’s largest trading partner, accounting for nearly one-third of Australia’s exports and one-fifth of Australia’s imports.

In 2019, China accounted for 82 percent of Australia’s iron ore exports. And guess what? Australian coal is home to China’s thermal power stations. But this economic bond is more complex than you think. Australia is also a leading supplier of liquified natural gas to China. This year, the LNG exports are somewhere between 18-19 billion Australian dollars. And if you think this is just it. You are mistaken.

China has also become the engine of Australia’s services sector. Universities in Canberra, Melbourne, and Sydney are home to significant enrollments from Chinese students. As of June 2019, there are around 164,317 Chinese students completing their education on Aussie turf.

Australia might be on its knees And if the Chinese economy does not stabilize in the next few months, we are afraid it would be an economic winter in Melbourne, Canberra, and the entire of Australia.

Inflation is galloping and the unemployment rate is rising in China. At first glance, you might argue that once things get right, Australia would be back to business. Some could also argue that this is short-term. And once Omicron is controlled, Chinese students and tourists would resume their pre-Covid spending habits. But things might never go back to the normal. Especially when it comes to trade between China and Australia. The reason lies in China’s property market crash.

For the last 3 decades, the property sector has been the main fuel for the Chinese economy. Despite the current geopolitical environment, a sudden decoupling from China would be a big mistake since it accounts for almost 40 percent of Australia’s exports. However, it would be wise for Australia to pursue a policy of trade diversion and look for alternative buyers.

For example, when China refused to buy Australian coal in 2020, it went to Indonesian markets. This created demand gaps in India, Japan, and South Korea, which was fulfilled by Australian coal. See, Australia needs to be smart. Dark times await. The clouds of harsh economic winters will remain for a while."

- https://www.epiceconomist.com/