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KOBUS VAN DER WATH
FOUNDER AND GROUP MANAGING DIRECTOR
THE BEIJING AXIS
When
Experience
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mining
drill & blast
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materials handling
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96 Ewing Street, Welshpool WA 6106
Telephone
08 9351 8488
Fax
08 9351 8477
www.maca.net.au
HEALTHY INCLINE
FROM TRADE TO INVESTMENT
China is no longer satisfied with simply importing raw
materials from Australia’s mining giants; instead, Chinese
companies are now setting up their own mining operations
in Australia. CITIC Pacific’s imminently operational Sino Iron
project in the Pilbara region of Western Australia serves as a
good example of this phenomenon. The ore mined from the open
cast mine, which aims to be the largest magnetite iron ore mine
in the world, will be processed on-site and brought to China on
a fleet of purpose-built container ships. For its part, Australia
will undeniably benefit from this trend through the creation of
thousands of jobs and a steady stream of royalties and taxes.
The broader picture of Chinese investment in Australia’s
mining sector is well documented. In 2010, the mining sector
accounted for more than 70% of Chinese Outbound Foreign
Direct Investment (OFDI) into Australia, making China the
third-largest investor in this sector in Australia, outperforming
such traditionally strong players as Japan, Switzerland and
Canada. Australia is already the biggest supplier of iron ore to
China, which is the world’s largest buyer.
TOO MUCH OF A GOOD THING?
While the deepening relationship has benefited both parties,
some issues and challenges have emerged as well, most notably
within Australia’s economy. With its strong mining sector and
the ongoing commodities boom, Australia’s currency has kept
appreciating relative to other currencies, and this has started
to hurt the competitiveness of its exports. There is also concern
that the mining boom is affecting the development of other
sectors, with low-skilled workers leaving the service sector to
seek mining-related employment due to higher wages, which
is being fuelled by Chinese demand and investment. Although
China’s growing economy is still demanding all sorts of raw
materials, some economists are beginning to ponder if Australia
is becoming too reliant on China. For example, in 2010, 70%
of the exports from Port Hedland – the point through which
resources mined from the interior of Australia are shipped
abroad – were bound for China, up from 45% in 2005.
China’s vastly increasing role in Australia’s mining sector is
a sensitive issue in other quarters. Mining is an energy-intensive
industry and some politicians in Australia have proposed
Kobus van der Wath is the Founder and Group Managing Director
of The Beijing Axis, a China-focused international advisory firm
facilitating Australian and Chinese entities to engage effectively
in four principal areas – Commodities, Capital, Procurement and
Strategy. Here, Kobus provides an informative summary on each
of the major aspects of current Sino-Australian trade relations,
which between them add up to a richly evolving picture.
China and Australia have both profited greatly from a deepening
bilateral trade and investment relationship, illustrating the
evolving synergy between their economies. The volume of trade
and investment, however, has also made the association more
complex, and the challenges this poses will certainly require
careful management. Nevertheless, with a bright future ahead
for bilateral trade and investment, China’s and Australia’s
economies are intimately intertwined.