Discuss about the International Relation & Global Economy.
The topic of this essay is to find out how the strong growth in China had affected the Australian manufacturing industry over the past decade. This essay is developed by combining ideas gathering from various articles. In this essay, the relationship between the two countries is analyzed. It has been found that the asymmetric in the Chinese economy is not a new problem. However, it can develop problem in future for the reason that there is a key reliance on a small set of resources of minerals. Although it has been found that export to China are approximately 5.7 GDP. It is a big section of the Australian economy (Beeson and Zeng 2016).
Australia heavily depends on China for exporting goods. According to Warner (2016), Australia’s exports of services and goods to China have developed from $9 billion in the year of 2005 to $80 billion in the year of 2013. This export of goods of Australia to China represents nearly 26% annual growth of the country. As a result, China has become the biggest export market of Australia. This strong growth in Australian exports to China over the period 2005 to 2013 was due to strong urbanization and industrialization in the country (Gilpin 2016). This growth in China was considerably above the world average development for the same period. In addition, resource and commodity exports of Australia rose from $4bn to $63bn in the year of 2011 which was 45% of total exports in China.
Economic relation between Australia and China can be understood after analyzing some major aspects between these two countries. First of all, according to Frost (2012), Australia is China’s second most popular location for direct investment. Over the last 10 years, Australia has experienced the second highest volume of direct investment by China. Rom 2005 to 2015, only the US had a higher accumulated total. Within this time period, Australia received nearly US$80bn in Chinese overseas direct investment. Till the end of 2015 it was found that this investment done by China has increased up to US$11bn. On the other hand, most of the investment done by China was dedicated to real estate. A KPMG report was carried out with the help of University of Sydney estimated that real estate investment hit AUD$7bn n the year of 2015. As mentioned by Gilpin (2016), most of this investment done by China was focused in just one state which is New South Wales. It was found that renewable energy and health care was the next top investment areas. This second place was resulted because of huge deal took place between China’s State Power Investment Corporation and Pacific Hydro. Relationship between both the countries was enhanced when The China-Australia Free Trade Agreement was signed in the year of 2015. Based on the values of 2014, more than 90% of Australian good that will be exported to China will be duty free Holmes (2016). It is expected that this number will increase up to 94% by 2019 and 98% by 2029. As mentioned by Frost (2012), Australian tariffs on Chinese imports will also be eliminated progressively. On the other hand, it is also expected that this agreement will improve Chinese tourism to Australia. According to the International Institute of Education, in the year of 2014, there were nearly 90,000 Chinese students studying in Australia (Beeson and Wilson 2015). As published in The Australian Business Review, education is the champion among all other exports of Australia.
Free Trade Agreement between China and Australia was signed in the year of 2014 between President XI Jinping and Prime Minister Tony Abbott. As a result of this agreement, investment and trade relationship between the two countries will improve considerably. On the other hand, increasing number of Australia businesses are moving into the Chinese market and gaining great success. Besides, China has already spent nearly $170 billion in Australia’s research and development sector. It is also found that China’s this investment in R&D if Australia has improved by 20% each year for the past six years (Beeson and Wilson 2015). On the other hand, resource partnership between Australia and China has stimulated from trade in possessions to direct investment in projects. China has recently uttered their interest in infrastructure development of the country of Australia. It is also true that there is an huge deficit across Australian resource projects and local communities. As mentioned by Weatherbee (2014), regional communities are struggling extremely to allure funding and services. That is why; Chinese investors are planning to engage with those communities to gain great support at a grass root level.
It has been found that rise of China has transformed the economic and strategic environment of Australia (Beeson and Wilson 2015). The simple reality is that China is exerting an increasingly powerful influence on both the structure of the Australian economy. There are various industries in which the impact of China is prominent. They are such as manufacturing industry and hospitality industry. Chinese visitors are also playing a major role in the tourism sector of Australia. According to the reports published by tourism sector of Australia, last year the country was able to attract nearly 50,000 Chinese tourists. It is also expected that till 2020, Australia will be able to attract nearly 1 million tourists per year.
From the article of Austrade Economics (2005), it has been found that China is presently the most significant export market since 2009 to 2010. China is considered as the largest export market for both goods and service from 2013. The total value of Australian products exported in China is approximately A$ 107 billion. China is accounted for 32.5%. It reached 33% in the year of 2015 (Beeson and Wilson 2015). From the research work developed by Plumb et al. (2013), it has been found that twine growth in China has weighty impact on the Australian economy over the past few years. It is most prominent in resource sector (especially in case of iron ore). It has been found that there are presently 5, 500 Australian exporters available in China who are currently involved in selling products in China. It has been found that China alone accounted for 76% of exports in the same year (Morrison 2012). It holds 17% earning of the Australian manufacturing companies. Since 2004, China is considered as the largest export market for Australia.
From the research work develop by Holmes (2016), it has been found that Australia depends heavily on foreign investment. China ranks 9th in foreign direct investment in Australia with 3% share. However, the investment is growing rapidly in the last decade. It is evident that Chinese companies are keen to invest in Australia, especially in infrastructure and manufacturing sector (Kang and Jiang 2012). However, the change of saving rate has increased the interest rate in China. In order to solve these issues, the Australian and Chinese governments have established a new diplomatic infrastructure in the year of 2013. It provides an important platform for both the governments to progress negotiations around the free trade agreement. It also helps to develop other investment and trade links and resolve issues.
After analyzing all the articles related with the topic, a common pattern has been found. It is evident that most of the Australian Manufacturing companies like to import their resources from China as it is cheaper. In addition it has been found that there is a heavy dependence on the Chinese economy for their exports and investments. It made China to be admirable and useful market for Australia. However it has been found that reliance with China has both positive and negative aspects. However, the positive aspects are more prominent than the negative aspects. It has been found that the market share of China in the FDI in Australia is increasing very rapidly. It has made business more profitable for Australian manufacturers.
Reference List
Austrade Economics, 2015, Trade and Investment note: How dependent are australian Exports on China? <https://www.austrade.gov.au/ArticleDocuments/5720/TIN-How-dependent-are-Australian-exports-to-China.pdf.aspx>
Beeson, M and Wilson, JD 2015, ‘Coming to terms its China: managing complications in sino-Australian economic relationship’, Security Challenges, vol. 11, no. 2, pp. 21-37.
Beeson, M. and Zeng, J., 2016. Chinese views of Australian foreign policy: Not a flattering picture. Australian Journal of International Affairs, 70(3), pp.293-310.
Chow, G.C., 2015. China’s economic transformation. John Wiley & Sons.
Frost, S., 2012. ” Embassy” and the New Orthodoxy in Australian-Southeast Asian Relations. Southeast Asian Journal of Social Science, 22, pp.189-208.
Gilpin, R., 2016. The political economy of international relations. Princeton University Press.
Holmes A 2016, Australia’s Economic Relationship With China, Parliament of Australia.
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook44p/China
Kang, Y. and Jiang, F., 2012. FDI location choice of Chinese multinationals in East and Southeast Asia: Traditional economic factors and institutional perspective. Journal of World Business, 47(1), pp.45-53.
Morrison, W.M., 2012. China’s economic conditions. Current Politics and Economics of Northern and Western Asia, 21(3/4), p.289.
Plumb, M., Kent, C. and Bishop, J., 2013. Implications for the Australian economy of strong growth in Asia. Reserve Bank of Australia.
Warner, M. ed., 2016. Changing workplace relations in the Chinese economy. Springer.
Weatherbee, D.E., 2014. International relations in Southeast Asia: the struggle for autonomy. Rowman & Littlefield.
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