Assessing the risks from Australia's economic exposure to China

Agenda: a Journal of Policy Analysis and Reform, 28(1), 2021

22 Pages Posted: 28 Sep 2021

See all articles by James Laurenceson

James Laurenceson

Australia-China Relations Institute, University of Technology Sydney

Date Written: September 24, 2021

Abstract

As Australia’s economic exposure to China has grown, so too has the perception of risk this
brings. In turn, this has led to calls for public policy to be used to cut the exposure. This paper
begins by clarifying that exposure to China creates three distinct risks for Australia: a Chinese
growth shock that comes with a ‘hard landing’, a structural shift towards less import and natural
resources-intensive Chinese growth, and the Chinese government disrupting trade ties for
coercive purposes. With external demand for Australia’s goods and services largely exogenous,
the scope to mitigate these risks by reducing exposure to China without resorting to costly
market intervention is limited. At the same time, a review of the available evidence finds that the
probability and scale of each risk should not be overstated. Further undercutting the case for an
intrusive public policy approach is that effective mitigation mechanisms exist for the Australian
economy as a whole, as well as many businesses.

Keywords: Australia, China, trade, hard landing, economic coercion

JEL Classification: F14, F51, F52

Suggested Citation

Laurenceson, James, Assessing the risks from Australia's economic exposure to China (September 24, 2021). Agenda: a Journal of Policy Analysis and Reform, 28(1), 2021 , Available at SSRN: https://ssrn.com/abstract=3929817

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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