After years of economic and trade tension, the pandemic-era barriers to Australian exports by Chinese authorities have been steadily negotiated back to normal.
But what should be relief for Australian exporters has instead been accompanied by signs of a significant economic downturn within China.
World Bank data shows China’s population peaked around 1.4 billion in 2021, with 45 per cent of those people of working age, but is expected to steadily decline.
Meanwhile, Commonwealth Bank analysis shows housing prices across 70 Chinese cities have fallen for 15 consecutive months.
The nation’s property sales, construction starts and completions in square metres have all fallen in the past month.
China’s own National Bureau of Statistics monthly purchasing managers survey index, the PMI, shows a small declining trend from March this year.
As a major destination for Australian exports, shifts in the Chinese economy affect local producers in unexpected and expected ways.
Fewer Australian lobster banquets
Australian lobsters are a popular item on Chinese banquets, many of which are being planned now ahead of National Day holidays in October.
Western rock lobster is a prized item for Chinese banquets. (ABC News: Chris Lewis)
In 2020 the Chinese government imposed restrictions on the import of an assortment of Australian goods including wine, beef, barley and lobster.
Live rock lobster is the only item where trade barriers remain in place.
While the Australian Government sees the restrictions as a bargaining chip, trade economist Nathan Gray said Chinese authorities took a different view: hoping to discourage “gratuitous” spending on foreign luxuries.
“Part of the Chinese government’s approach over the past couple of years has been to drive austerity and try to not have overly opulent expenses,” Dr Gray said.
“Lobster will be one of those products that fits into that category of a nice to have, not an absolute need to have.”
Big wheat customer
As Australia’s largest wheat export destination by value for the past three years, farmers are particularly sensitive to any shift in Beijing’s regulatory approach.
Grain markets have moved on news from China. (ABC News: Cara Jeffery)
Agricultural commodities analyst Andrew Whitelaw saw markets move earlier this month on rumours the Chinese government had called on its domestic traders to buy more grain from Chinese farmers rather than rely on imports.
“We are in a period where they have been importing a lot since COVID, record levels of imports,” he said.
“But they have been talking a lot recently about trying to curtail how much imports they have and trying to be a bit more self-sufficient which is a hard task in a country with the population that they have.”
Mr Whitelaw said the price of grains like sorghum and barley dropped on fears China would stop buying those products.
“These are still just rumours at this point but again these rumours are enough to potentially move the market, we just have to wait and see,” he said.
Stimulus could help miners
The price of iron ore in Australia is heavily dependent on the demand for steel used to make new homes and build infrastructure in China.
Since the beginning of the year the price of iron ore has fallen from highs of $140 to around $90 dollars a tonne.
But those prices were triggered by fourth-quarter infrastructure spending by the Chinese Government, something Commonwealth Bank economist Vivek Dhar believed was likely to be repeated.
“That is about a month away, we could potentially see China go down that same route of implementing a sugar hit to the economy and infrastructure stimulus once again,” he said.
The price of iron ore has fallen since the beginning of the year. (Supplied: Mineral Resources)
But Mr Dhar said Chinese steel output was unlikely to rise.
“[China’s] steel output has likely peaked at around one to 1.1 billion tonnes per year and plateaued at that level,” Mr Dhar said.
Mr Dhar said the cycle of stimulus had been created by trying to balance China’s need to transition to a service based economy with a desire for economic growth.
“Policy makers last year certainly had the chance to [say] structural reform is number one, and we are going to let the economy slide and we didn’t see that happen,” he said.
“In the interim periods they will try and do structural reform and try and have the best of both worlds, I think they will struggle and have to make a decision at some point but we don’t think that will be this year.”
