China-Australia relations: why China's new Australian wool quota is not a 'real improvement' in trade ties
Beijing's decision to raise the import quota for Australian wool next year does not signify a thaw in relations between the two countries, only that China relies on the fibre too much to let it become the "victim of trade tension".
Beijing set its 2022 import quota for Australian wool at 40,203 tonnes, up from 38,288 tonnes a year earlier, according to a statement from the Ministry of Commerce on Wednesday.
It is the second time China has boosted the import allowance for Australian wool since diplomatic ties began deteriorating in early 2020, after Canberra pushed for an independent investigation into the origins of the coronavirus pandemic without consulting Beijing.
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In January, China raised the wool quota to 38,288 tonnes, from 36,465 tonnes last year.
Although a positive sign, the move does not necessarily indicate a turnaround in the frayed relationship between the two countries, as the broader significance is undermined by China's reliance on Australian wool, an agriculture analyst in China said on condition of anonymity.
"China relies on Australian wool too much," the analyst said. "So it would not let wool be the victim of trade tension anyway."
Beijing's move is also in line with commitments under the China-Australia Free Trade Agreement. The deal, which came into effect in December 2015, included a clause that China would raise the duty-free, wool-import quota for Australia by 5 per cent each year, until it reaches 44,324 tonnes in 2024.
Beijing still has unofficial bans on a variety of Australian products such as coal, log timber, lobsters and cotton, and has imposed anti-dumping duties on wine and barley.
"A real improvement in the trade relations between the two countries still depends on products like coal, beef and barley, because China can always choose other sellers over Australia for those products," the analyst said.
China, the world's largest wool processing country, and Australia, the biggest wool exporter, are mutually dependent when it comes to trade of the fibre.
China buys 80 per cent of Australia's exports each year. Meanwhile, imports from Australia account for around 60 per cent of all wool imports to China, customs data shows.
Due to a weaker Australian dollar, the country's wool has become increasingly competitive in the global market, with Chinese textile makers and wool processors leading the way in purchases, according to a note from research group Australian Wool Innovation earlier this month.
"Pre-sale thoughts from the trade pointed to a stronger market, but this was mainly on the back of the weaker $A making wool cheaper in $US," the note said.
"Overseas buyers were looking to lock in some quantity for future delivery as most pre Lunar New Year deliveries have been made."
This article originally appeared on the South China Morning Post (SCMP).
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