China is by far Australia’s most important trading partner. In the last decade, dependence on China has increased and not decreased. Australia draws around 30% of its imports from China, up from about 21% in 2013. On the export side, China’s share of the value of Australian exports has fluctuated between 34% to 44%. Most of that is obviously driven by iron ore exports, which dwarf everything else that Australia exports to anywhere.
For context: Iron ore and coal account for about 50% of total Australian export value. About 85% of Australian iron ore exports are destined for China. Prior to 2020, about a quarter of Australian coal also went to China, but last year the main markets were Japan, South Korea and India.
China is very much less dependent on Australia, with about 5-6% of Chinese imports coming from Australia and about 2% of exports going to Australia. However, there are about 40 product groups where Australia accounts for more than 50% of Chinese imports of that product. Most of these are in mining, mineral or agricultural segments. Figure 1 shows some of the top products – of which iron ore is the most important one by far.
Excluding mining, energy and bulk related agricultural commodities the trade picture is slightly different. Here China’s share of imports increased from 26% in 2013 to 34% in 2022. On the export side, China’s share of total Australian exports increased from 15% in 2013 to 23% in 2019. However, this to 18% after China imposed an import ban on a number of Australian export products in 2020, including coal, barley, wine, beef, cotton, timber and lobsters.
Some of these segments found new markets, while others did not. Coal substituted the loss of Chinese demand with more exports to Japan and South Korea (we recently wrote about how the end of the Chinese ban imposed in 2020 on a range of Australian imports could affect the coal market). Barley also went to other markets, including Saudi Arabia. The loss of cotton exports to China was replaced with exports to Vietnam, Indonesia, Bangladesh and India. Wine, beef, cotton, timber and lobsters did not find new markets.
For example, Australian wine exporters were never able to find sufficient substitute markets. In 2022 the market was down 30% in value and 14% in weight terms compared to 2019. In that year. In that year, China accounted for 38% of the value and 18% of the volume of Australian wine exports. Put in monetary terms, the market lost about US$800 million of Chinese revenue and was only able to recover about US$200 million of that.
Australian Lobster exports were also hit hard – the market lost about US$500m million in export value. Some of this – about US$150 worth was recovered by exports to Hong Kong. Overall, however, the market is much smaller than it was pre-2020.
The end of the de-facto ban on Australian exports of the above products may be good news for Australian exporters but does little to make Australia less dependent on China.
On the import side there were over 1300 individual product groups (at HS6 level), where China accounts for more than 50% of total Australian imports of that product in 2022. Differently put – about US$107 billion or 18$ of total Australian imports are of products where China has a share of 50% of more. To be clear, a lot of other Asian countries are also very dependent on Chinese imports.
The figures below show the China share of exports and imports by broad product group for 2022. With the exception of textile raw materials (mainly wool), Australia generally exports more product to other countries than China, even where China is the number one destination. On the import side, the level of dependence is much higher.
In some areas the China share has remained unchanged – this includes segments like mobile phones and communication equipment, computers and accessories – segments where the China share is already high. In some segments – particularly household goods, industrial equipment and parts and automotive the share has increased. In other segments, such as apparel and footwear the share has decreased as more Chinese production has shifted to Southeast and South Asia.
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