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China's strength bodes well for the future of Australia's trading

04 June, 2009

Speaking at the Australia China Business Forum in Sydney recently, Austrade’s Chief Economist Tim Harcourt outlined the continuing promise of the world’s fastest growing major economy for Australian trade and investment.

Harcourt said that despite the global downturn, China’s predicted economic expansion of between six and eight per cent in 2009, coupled with the latest industrial production figures, indicated a return to solid growth, particularly in 2nd and 3rd tier cities in western China.

“Trade and investment links with China and other emerging economies are going to help Australia survive the global credit crisis.

“Australia’s share of goods exports to emerging countries has risen to 53 per cent compared with 43 per cent 10 years ago and China is an important part of that story, with exports to China averaging annual growth of 24.8 per cent over the last 10 years.

“According to research commissioned by the Australia China Business Council, the average Australian household now benefits to the tune of $3400 a year from Australia’s trade with China.

“Investment is also an increasingly important part of the Australia-China relationship. Strong outward FDI flows from China are replacing the traditional trade route as a form of global engagement.

“According to the ABS, China's total foreign investment stock in Australia reached A$6.2 billion in 2007, a 78 per cent increase on the year prior and a 120 per cent increase over five years.

“Current levels, while still relatively modest, indicate the strong potential for China to grow its foreign direct investment position, and given recent FIRB approval trends, we should see a marked increase in China's total FDI investment in Australia in 2008-09.

Harcourt said the recent implementation of significant stimulus measures had been well received in China and bolstered the economy in several areas.

“While there remains a range of challenges to deal with, the general view is that China will continue to make a major contribution to world economic growth in the short and medium term.

“The rapid rate of infrastructure development, the industrialisation of agriculture, and the development of east coast cities will continue, along with the development of China’s western interior.

Harcourt said the trading relationship was also undergoing increasing diversification as the Chinese economy rapidly evolved.

“China is our number one source of foreign students for example, and the Chinese Government is working to improve the intellectual property environment, as well as enhance China’s sustainability, clean energy and environmental credentials,” Harcourt said.

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