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Summary
- China's exports rose 7.2% in July, while imports fell 1.4% compared to a year ago.
- The rise in exports came due to the rising demand for medical supplies, and automobiles as coronavirus restrictions eased around the world.
- China's trade surplus with the US swelled to $32.46 billion in July from $29.41 billion in June, but US-China relations remain rocky.
- Australians must take steps to reduce their dependency on China to protect the economic growth.
China, where coronavirus started in December last year, was the first economy to close down for battling the pandemic and first one to restart economy after the ruling Communist Party won over the disease by March 2020. The second-biggest economy worldwide, rose by 3.2% in the second quarter ended June 2020, as production lines and stores opened again for business, bouncing back from the past quarter's 6.8% reduction.
Chinese exports recuperated more rapidly than the international aggregate, indicating manufacturers taking the market share from rivals in nations that may still be under limitations that obstruct trade.
China's exports rose 7.2% in July
China posted a surprisingly solid 7.2% bounce in exports for July, led by the rising overseas demand for medical supplies, electronics and other goods that were consumed in coronavirus lockdown period. In contrast, imports shrunk by 1.4% from 2019 in July.
The trade surplus of China was noted at US$62 billion in July, down from record US$63 billion in May. The politically vulnerable trade surplus with the US expanded to US$32.5 billion for July compared to US$29.41 billion in June.
However, market experts have stated that the jump is not likely to carry on because coronavirus clusters have developed since late July due to rising number of cases in US and other countries, prompting governments to reimpose restrictions on businesses. Tensions are also expected to increase ahead of presidential elections in the US.
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As per customs data released on 7 August, sales to the US rose 12.5% in spite of declining economic activity and a lingering tariff war with the country. US and Chinese officials are likely to meet on 15 August to review the implementation of the Phase 1 trade deal.
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Australia's exports to China surge amid stressful relations
In spite of rising conflicts among China and Australia, overall trade between the two nations has stayed consistent, with certain sectors even posting increases. China has been a vital trading partner for Australia due to its limitless demand for mineral resources and agricultural products.
In June, China raised an alarm, cautioning its residents not to make a trip to Australia. The notice from Australia's biggest trading partner came after China imposed tariffs on barley shipments after Prime Minister Scott Morrison led the call for an autonomous probe into the origin of coronavirus in Wuhan.
However, Australia's overall exports soared between March and May, as China gradually recuperated from the different lockdowns forced all through the nation to battle the spread of the coronavirus.
As per ABS data, Chinese-bound shipments reached 14.6 billion in June. China got 48.8% of all goods, comprising Australian commodities like iron ore and coal, exported by Australia in the month. Also, China purchased $3.8 billion in goods and was Australia's biggest export partner in May, ahead of Japan and the US that hold second, and third positions, respectively.
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Trade between Australia and China could extensively be divided into two classifications: essential items like iron metal, coal etc. and services industry like travel industry and training.
China greatly depends on iron metal for its steel industry, and Australia has influence there. Australia is not just one of the biggest iron metal makers of the world, but also geologically closer to China than most others. The transportation costs are ostensibly much lower than from the world's second-biggest iron ore maker, Brazil.
The COVID-19 pandemic may prompt a financial breakdown of the Latin American nation. About 87% of all Australian iron ore exports go to China. Hence, Australia will keep profiting by the demand from China for its mineral assets in its assurance to support growth after the nation's GDP shrunk by 6.8% year-on-year in the first quarter of 2020.
Australia can reduce its dependence on China
Australia is confronted with an awkward and gigantic test of balancing its economic advantages with the political vulnerability presented by the presumptuous dictator power. China's methodology is of financial flourishing in return for being subservient or confronting practically certain monetary ruination. This leaves Australia contemplating how and what amount is it ready to give up so as to confront an assertive China.
In July, a parliamentary request examining Australia's weaknesses in its supply chain structure, defence, and international concerns, inferred that the country required to earnestly re-examine the hazard related with an over-dependence on China. The request, which was incited by a breakdown in the country's supply chains at the highpoint of the COVID-19 flare up in China, contended that there was a basic requirement for Australia to mostly decouple its economy, and bit by bit float away from China if it somehow happened to support its sovereign flexibility.
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Australia can take up 3 steps to lower its dependency on China.
To start with, Australia ought to cut out its own speciality in the tertiary sector to turn its deficit in import/export to a surplus. Australia may consider elevating ecotourism and education to ASEAN nations. Second, Australia could also endeavour to secure new free trade agreements with other partners in the region, including Taiwan, which additionally faces a comparable dilemma as Australia on diminishing financial reliance on China without hurting its economic growth. A third step could be for Australia to overhaul its industrial structure by changing it into an industrial economy, depending less on sending out raw materials and farming items.
