By Wayne Cole
SYDNEY, Sept.16 (Reuters) – Australia’s new security pact with the United States and the United Kingdom, seen as a move to contain China, could worsen strained relations with its biggest customer in the export, but China’s insatiable appetite for resources could limit its punitive responses, analysts say.
The security pact with Western powers, including access to US nuclear submarine technology, will be viewed by Beijing, which is embroiled in a long-standing trade dispute with Canberra, as a threat, Sullivan said. , professor of international relations at Flinders University.
“China will view the decision to expand defense cooperation with the United States and the United Kingdom and, in the future, to base the United States’ strategic strike capabilities in Australia as a confirmation that we We are a growing military threat to its interests, like the Belt and Road Initiative, he added, Sullivan said.
In recent years, China has imposed high tariffs and restrictions on Australian exports, including wine, beef and barley, and has outright banned coal imports to express its displeasure with Canberra’s foreign policy. , but with limited success so far.
The sums at risk are huge, as Australia exported a record A $ 173 billion ($ 127 billion) in resources primarily to China in the 12 months to July, accounting for over 35% of total exports from China. Australia. Australia bought just A $ 87 billion worth of goods, mostly manufactured, from China during the same period.
This torrent of money has blessed Australia with a series of current account surpluses, while also increasing profits and dividends for miners. It has also been a vital boon to government tax revenues as it runs huge budget deficits to fund emergency support to citizens in coronavirus lockdowns.
Iron ore is by far the biggest source of exports, as China’s demand for steel pushed ore prices to all-time highs in May. Australia’s exports of metal ores in July reached A $ 19 billion, more than 40% of total revenue.
China has partly turned the situation around in recent months by cracking down on steel production and warning of tighter controls on major carbon emitters, measures that have seen iron ore prices drop 45% relative to their peaks.
Yet China has few options other than to continue buying Australian iron ore. Its own mines produce only 15% of the ore it consumes and the only other major international source is Brazil, which faces capacity constraints.
“If China stopped importing iron ore, it would be a disaster for Australia,” said Shane Oliver, chief economist at AMP Capital. “But that would essentially mean that China would also have to shut down much of its own economy.”
“Australia has also been able to find new markets for its exports,” he added. “So while tensions with China are a threat, the impact has not really been severe so far.”
Another pressure point on Australia had been Beijing’s control over Chinese tourists and students who spent time and money in the country.
The pandemic has ended that for now by effectively closing Australia’s international borders, although the local tourism and education sectors are pushing for a reopening by the end of this year.
($ 1 = AU $ 1.3624) (Reporting by Wayne Cole; Editing by Michael Perry)