Around 35 per cent of Australia’s goods exports go to China. For some commodities – iron ore, infant formula and liquefied natural gas (LNG) – more than half of Australian exports go to China. Others such as wheat only have a small share going to China.
"The risks of a concentrated customer base or supply chain are not only being felt by commodity exporters.”
China has also become dependent on Australia for some commodities such as iron ore.
But Australia is not alone: Japan, South Korea, Indonesia - among many others - also count China as their largest goods customer. Even Germany now counts the nation as its largest export destination.
The risks of a concentrated customer base or supply chain are not only being felt by commodity exporters. Manufacturers with China-based supply chains are now cognisant of these risks.
French Finance Minister Bruno Le Maire stated France has to “decrease [its] dependence on a couple of large powers, in particular China, for the supply of certain products".
The impact is two ways: Chinese businesses understand the risks; Huawei is considering investing EUR200 million in a French production plant.
Australian exporters are now feeling pressure to diversify their markets. New trade agreements with Indonesia, regional agreements such as the Regional Comprehensive Economic Partnership (RCEP) and new bilateral arrangements with India will support diversification.
But reality checks are also needed. Consider Australia’s relationships with the US as the world’s largest economy, the European Union (EU) and India as prospective free trade agreement (FTA) partners, and Indonesia as the region’s largest economy.