China-Australia relations: what has happened over the last six months? (updated October 2020)
China is Australia's most important and biggest trading partner, but after Australia Prime Minister Scott Morrison led calls for a coronavirus inquiry, Beijing has made trade moves against Australian barley, beef, wine, cotton and coal.
While many have questioned the political motives for the moves, so far, each of the actions arose out of a legitimate trade breach. China's imposition of duties on Australia barley, for example, was a result of an 18-month anti-dumping investigation.
The dispute also spread to other areas, with both countries warning their citizens about travelling to the other country. China warned about studying in and visiting Australia due to rising racism and discrimination against people with Chinese and Asian ethnicities, while Australia warned its citizens about arbitrary detention in China.
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China also visited two Australian citizens in Beijing and Shanghai in September for questioning, while Australia raided the homes of Chinese journalists in Sydney during an alleged foreign interference investigation into a local politician and cancelled their visas.
The two-way trade between the countries is worth around A$240 billion (US$171 billion), while China buys around 39 per cent of Australia's merchandise exports, including iron ore.
China buys just over 80 per cent of Australia's iron ore, while Australian iron ore makes up 60 per cent of China's supply. The value of that supply is likely to hit A$80 billion in 2020.
China and Australia have been locked in a heightened geopolitical dispute since April after Australia pushed for an international inquiry into the origins of the coronavirus. Local press reports indicated Australia Prime Minister Morrison wrote to Group of 20 leaders to galvanise support for the probe. The push came after a phone call between Morrison and US President Donald Trump and just after evidence emerged Chinese authorities initially covered up the existence of the virus.
Why has the China-Australia relationship deteriorated into 'trade war 2.0'?
Australia also did not consult China about plans for the inquiry before pursuing it internationally, which offended the Chinese government, according to a speech made in August by Wang Xining, the deputy head of mission of China's embassy in Australia.
Soon after the call for an inquiry, when asked if that would result in any consequences to Australia, China's ambassador to Australia, Cheng Jingye, said the Chinese public might think twice about visiting Australia or buying its products.
In mid-May, China confirmed it would impose an anti-dumping duty of more than 80 per cent on Australian barley exports after an 18-month investigation. The duty was a blow to the Australian barley sector, which had previously enjoyed zero tariffs courtesy of the free trade agreement between the two countries.
While the duty and investigation were in line with World Trade Organization (WTO) rules, lawyers said the duty could have been lower. Australia responded to the outcome of the investigation by saying Australian farmers were among the least subsidised in the world.
Soon after, Chinese authorities also banned beef exports from four Australian abattoirs due to mislabelling and certification issues. The ban was not without basis as the four abattoirs had a history of errors.
In June, more friction ensued when China warned its citizens against visiting and pursuing their studies in Australia due to rising racism and discrimination against people with Chinese and Asian ethnicities. Chinese tourists and students are the biggest contributors to the Australian tourism and international student sectors.
China is Australia's largest barley export market, buying around 70 per cent of Australia's barley.
Between 2014-15 and 2018-19, Australia sold an average of around A$1.2 billion (US$855 million) of barley to China a year. The diverted Australian barley trade after the imposition of the duties will result in a A$750 million (US$534 million) fall in the average Australian barley exports due to lower selling prices, according to Australian Bureau of Agricultural and Resource Economics and Sciences, with China seen as a premium market for Australian barley.
China is Australia's number one market for beef by volume, accounting for around 25 per cent of Australia's total beef exports.
In 2019, Australia exported about 300,000 tonnes of beef to China, worth A$2.67 billion (US$1.9 billion).
The four banned abattoirs are major producers of beef and are said to account for around 35 per cent of beef exports to China.
Australia disagreed it had dumped cheap barley in China, saying it would seek resolution at the WTO. It also said it was helping the beef industry to investigate and discuss the bans and denied the accusations of racism.
In July, it updated its travel advice for China, warning Australians that they might be at risk of arbitrary detention in China on alleged national security grounds. In September, China announced it had detained Australian-Chinese journalist Cheng Lei in a "residential surveillance" as she was suspected of "criminal activity endangering China's national security".
This followed the departure of Australian journalists Bill Birtles and Mike Smith from China at the start of September after a short diplomatic stand-off.
In trade terms, Australia did not respond with any specific sanctions against China, so a "formal trade war" did not take place.
After duties were imposed on barley, Australian agriculture minister David Littleproud put to bed the idea of a "war" because other exports, such as iron ore, continued to go from strength to strength.
Shipments of iron ore reached record levels in the first half of 2020 due to a rapid industrial recovery in China after coronavirus lockdowns were lifted. In June alone, Australian iron ore exports reached its highest ever monthly export value at nearly A$10 billion (US$7.1 billion).
In August, China initiated an anti-dumping and countervailing investigation into exports of cheap Australian wine into China. That investigation is expected to take around a year.
In early September, China also suspended barley imports from Australia's largest grain exporter, CBH Group, after allegedly detecting pests in a shipment.
China imports nearly 40 per cent of Australia's wine production worth A$1 billion (US$712 million) a year. The Chinese wine industry is pitching for a duty of 202.7 per cent to cover losses, a tax that could effectively "close the market", according to many Australian winemakers.
China's Ministry of Commerce has a year to complete the anti-dumping investigation, but could extend it for another six months, however it could also complete the investigation earlier.
Australia's trade minister, Simon Birmingham, has not spoken directly with his Chinese counterpart, minister for commerce Zhong Shan, since the trade sanctions started in May.
In general, diplomatic relations between the two countries have nosedived in the past five years. What occurred in April was triggered by the coronavirus outbreak, but before that, China and Australia had been at loggerheads.
This particularly focused on alleged Chinese foreign interference in Australia, with many people, particularly Chinese Australians in public service, accused of having links to the Chinese Communist Party.
Birtles and Smith left China over fear of being detained after unannounced visits by Chinese state security officers.
Chinese authorities also revealed several of its journalists in Australia had their homes raided in June at the same time the Australian government searched the home and parliamentary office of New South Wales state politician Shaoquett Moselmane in an investigation linked to foreign interference, believed to be from China.
In October, Australian senator Eric Abetz questioned the loyalty of three prominent Chinese-Australians at a parliamentary inquiry and demanded they condemn the Chinese Communist Party. This has triggered a backlash in Australia that politicians are targeting Australians with Chinese backgrounds.
In October, China made another move on Australian coal and cotton, verbally instructing state-owned power stations and steel mills as well as cotton spinning mills not to buy Australian products.
As the requests were verbal, Australia said it would investigate both incidents to confirm if they were true. The two incidents could put China at risk of breaching WTO trading rules for discriminating trade against Australia.
Canberra 'keeping the door open' as questions swirl over coal import ban
In 2018-19, Australia's exports of thermal coal for power stations and coking coal for steelmaking to China reached A$14 billion (US$10.7 billion). Coal is Australia's third largest export to China, after iron ore and natural gas.
So far, as the "block" on coal is not formal, the Australian government is still trying to confirm its existence.
There has, however, been evidence of Chinese buyers turning away Australian iron ore orders including those already at sea, while mining giant BHP confirmed it had received "deferment requests" for its coal shipments.
Like coal, the "block" on cotton exports is also verbal and is still being investigated by the Australian government.
Around 68 per cent of Australia's cotton is sold to China, with exports last year reaching a value of around A$750 million (US$534 million).
There is no guarantee in this tit-for-tat rally between the two countries despite how much they need each other, especially for the supply of iron ore.
A big clue about whether China will target Australian iron ore can be gleaned from the state-run Global Times, which said in June that despite the rapid deterioration of China-Australia relations "some observers believe that Beijing is unlikely to target Australian iron ore exports due to China's heavy dependence on this imported commodity".
Looking for new sources of iron ore is capital-intensive and time consuming. Chinese buyers are now looking at sources of iron ore in Africa, particularly in Guinea, to supplement its needs. The other place it can also look for more iron ore is its second largest supplier, Brazil's Vale.
Analysts such as S&P Global are of the view that Australia will continue to supply most of the iron ore that China needs even if trade tensions between the two countries intensify.
Former Singaporean diplomat Kishore Mahbubani, who studied China in his book Has China Won? The Chinese Challenge to American Primacy, said in an interview with the South China Morning Post in September that he was not fully convinced China would spare Australian iron ore imports.
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This article originally appeared on the South China Morning Post (SCMP).
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