Australia's export exposure to China: Assessing the costs of disruption

30 Pages Posted: 10 Sep 2021

See all articles by James Laurenceson

James Laurenceson

Australia-China Relations Institute, University of Technology Sydney

Date Written: September 9, 2021

Abstract

Australia's exports to the People's Republic of China (PRC) are being recast in terms of risk rather than opportunity. Exposure to the PRC market is seen as providing Beijing with coercive leverage that can erode sovereign decision-making in Canberra. Further, because this trade is mostly undertaken by private businesses that are focused on their own profits and not Australia’s broader strategic and national security concerns, public policy intervention aimed at cutting this exposure is touted as both necessary and desirable. Amplifying this view is a campaign of disruption that Beijing has directed at Australia’s exports since May 2020. How unusual is Australia in its export exposure to China and how costly has this exposure proven to be? This paper finds that the scale of Australia’s exposure to its top market is broadly consistent with that of other peer economies. Drawing on the latest available trade data it is then shown that firstly, Beijing’s calculations of its own economic self-interest mean that most of Australia’s big-ticket exports to China continue to flow as before, and secondly, the costs associated with the goods that have been disrupted have been largely mitigated by global markets, including “grey” ones. Given that public policy resources are finite and interventions are not cost-free, and many Australian businesses already have access to effective
risk mitigation mechanisms, the case for government to take a more prescriptive approach to business engagement with the PRC is more limited than commonly imagined.

Keywords: Australia, China, trade, economic coercion

JEL Classification: F14, F51, F52

Suggested Citation

Laurenceson, James, Australia's export exposure to China: Assessing the costs of disruption (September 9, 2021). Available at SSRN: https://ssrn.com/abstract=3920027 or http://dx.doi.org/10.2139/ssrn.3920027

James Laurenceson (Contact Author)

Australia-China Relations Institute, University of Technology Sydney ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

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