COVID-19 and the Australia-China relationship’s zombie economic idea

JAMES LAURENCESON; MICHAEL ZHOU (AUSTRALIA-CHINA RELATIONS INSTITUTE, UNIVERSITY OF TECHNOLOGY SYDNEY)

Zombie economic ideas are those that should have been slain by an accumulation of facts and evidence but continue to walk the land, stalking public policy. The Australia-China relationship has its own zombie economic idea: that Australian entities engaging heavily with the Chinese market are irresponsible in their risk management, and that, at a national level, Australia is ‘too dependent’ on China. The COVID-19 pandemic has seen this zombie economic idea injected with a fresh dose of un-life. News stories of Australian companies in distress as Chinese demand fell in January and February 2020, as well as disrupted supply chains, have been presented by some commentators as evidence that it is now a ‘necessity’ for government to force greater diversification in trade ties away from China. That is, to force a decoupling of the Australian and Chinese economies.

The latest data confirm Australia’s significant trade exposure to China. In 2018-19, this reached $235.0 billion, compared with just $88.5 billion with Japan in second place. A comparative analysis shows that by share of total goods exports going to China, Australia is now ranked 16th globally (and 1st amongst the OECD). In terms of exposure to a single export market, whether China or otherwise, Australia ranks a more modest 46th globally. Canada’s reliance on the United States (US) market, for example, is double Australia’s reliance on China. In terms of the share of goods imports from a single market, Australia ranks more modestly still at 70th globally, with Canada’s reliance on the US again double Australia’s reliance on China.

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