Standing up to Chinese economic coercion: Is Australia a model of economic resilience?


Australia-China relations have deteriorated sharply in the last three years, most visibly because of China’s formal and informal bans on some important Australian commodity exports. Costs to Australia have been significant. The purpose of this paper is to assess those costs to the end of 2022 and to provide some sense of possible future costs if relations, while improving, remain strained and difficult.

Six points come out of our analysis:

  • Australia has escaped the worst from Chinese coercion thanks mainly to the good fortune of high international commodity prices.
  • Coercion has still come at a considerable cost to Australian export revenue, and the cost continues to grow. Gross losses for the nine restricted commodities in the Chinese market – coal, copper ores and concentrates, frozen beef, wine, cotton, barley, rough wood, rock lobster, and hay - are estimated at around A$3 billion in 2020, A$25 billion in 2021 and A$31 billion in 2022. Net losses after re-direction to third country markets are estimated in the order of A$11 billion in 2022 and around A$20 billion for 2020-22, with coal making up the majority.
  • Stabilising and then re-setting bilateral relations will continue to be challenging and are likely to slow growth in Australian goods exports to China. A rebound in trade in some commodities – wine and seafood for example – seems probable, if only as a sign of good will from China. But both countries will show a degree of caution in rebuilding trade in coal, particularly because China is attempting to spread its trade risks by diversifying sources of commodity imports. This has a long way to go and needs careful watching.
  • Recent declines in the share of Australian goods exports to China mostly reflect movements in the price of iron ore rather than any shift in the fundamentals of the trading relationship.
  • Australia-China trade in iron ore and LNG is not immune to the state of bilateral relations. There is a realistic scenario where Australian exports of iron ore and LNG to China continue at a high level because of mutual dependence, but where Australia faces the prospect of lower international prices and loses market share as China attempts to increase its economic security by widening supply options. This again needs careful watching.
  • Australia has significant agency in the bilateral economic relationship based on strong mutual benefits from existing trade and the high priority China places on security of supply. Beijing’s leadership might see sharply reducing dependence on Australian resources to become dependent on other, possibly less reliable, suppliers as a poor bargain



Mike Adams is a former DFAT economist with extensive international trade experience.
Ron Wickes was Director of the Trade Analysis Section of the Department of Foreign Affairs and Trade (DFAT), 1999-2008.


Photo credit: Joel Fulgencio - Unsplash

Tagged in Working Papers

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