China’s chilling new threat for Australia

Beijing’s top economic planning agency has put Australia on notice, throwing the spotlight on trade tensions by announcing China’s intentions to diversify its supply of iron ore.

In its monthly briefing this week, the National Development and Reform Commission (NDRC) recommended Chinese firms boost domestic exploration for the steelmaking input, explore overseas ore resources and widen their sources of imports.

Adding iron ore, Australia’s biggest export earner, to the raft of curbs already in place on commodities like coal and wine could be a risky move, energy research and consultancy firm Wood Mackenzie told Bloomberg – given the near-record prices and China’s dependence on Australia’s high-quality supply for about two-thirds of its imports.

All but one of the biggest exporters of iron ore to China are Australian miners – BHP, Rio Tinto and Fortescue Metals Group.

“While an outright ban would be almost unimaginable, various forms of restrictions, delays or increased administrative burdens on Australian iron ore imports could yet happen,” Wood Mackenzie warned.

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“Political posturing and tensions aside, this is therefore one of the most incredible transfers of wealth between the pockets of the Chinese and Australian governments,” Navigate Commodities’ iron ore analyst, Atilla Widnell, told the South China Morning Post.

But at Tuesday’s briefing, NDRC spokesman, Jin Xiandong, was reported by state media as saying Australia only has itself to blame for damaging its economic and trade co-operation with China – defending the NDRC’s decision to indefinitely suspend its participation in the China-Australia Strategic Economic Dialogue.

“Consequently, we have to make the legitimate and necessary reaction, and Australia should bear full responsibility for such moves,” Mr Jin told the conference.

“We urged the Australian side to treat China-Australian co-operation objectively and reasonably, to treat Chinese companies fairly, end the disruption of bilateral trade and investment co-operation and take actions to bring forward bilateral relations for healthy development.”

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The move from Beijing comes after the Morrison Government last month revoked Victoria’s participation in China’s Belt and Road Initiative.

“We are not going to surrender our sovereignty,” Defence Minister Peter Dutton told Today in late April.

“China and others need to understand that Australia is not going to be bullied.”

Chinese officials swiftly lashed the move as “unreasonable and provocative”, while Chinese state-owned media said Australia would face “serious consequences” and a potential trade conflict.

“We urge Australia to set aside cold war mentality and ideological bias, view the bilateral co-operation in an objective and rational light,” Foreign Ministry spokesman Wang Wenbin said at the time.

“Immediately redress mistakes and change course, refrain from going down the wrong path further, and avoid making the already seriously difficult China-Australia relations worse.”

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A Chinese embassy spokesman echoed the sentiment, warning in a statement it could further derail already soured relations between the two nations.

“We express our strong displeasure and resolute opposition to the Australian Foreign Minister’s announcement on April 21 to cancel the Memorandum of Understanding on Cooperation within the framework of the Belt and Road Initiative and the related Framework Agreement between the Chinese side and Government of Victoria,” the spokesman said.

“This is another unreasonable and provocative move taken by the Australian side against China.

“It further shows that the Australian government has no sincerity in improving China-Australia relations.

“It is bound to bring further damage to bilateral relations, and will only end up hurting itself.”

Analysts have said they expect further retaliation from China if the Morrison government scraps a Chinese company’s 99-year lease on the Port of Darwin as expected.


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