China crucial to Australia's post-COVID-19 recovery: economic report

SYDNEY - China has bounced back from the COVID-19 pandemic with deliberate vigour and is poised for a speedy economic recovery, positioning it to help Australia do the same, according to a report posted by the University of Sydney this week.

Australia's lucrative trade relationship with China relies on a hasty return of Chinese consumer demand, which now appears more likely thanks to successful strategies introduced by the Chinese authorities in tackling COVID-19.

Joint authors of the report, Dr Wei Li and Professor Hans Hendrischke from the University's Business School and China Studies Centre, pointed out it would not be the first time China has helped Australia out of a crisis.

According to them, China was crucial for Australia's 2008-09 Global Financial Crisis (GFC) recovery, having become the country's largest two-way trading partner in 2007, accounting for 13 percent, or $39.6 billion, of total trade, largely due to China's demand for Australia's iron ore.

Ten years later, in 2018-19, two-way trade with China had surpassed $157.3 billion, well over double the volume of trade with Australia's second-ranked trading partner, Japan, according to Australian Government figures.

Trade had also diversified to include more small and medium sized Australian businesses, with China's middle-class developing a taste for Australia's food, beauty and health products, as well as service based industries like education and tourism.

"The China trade effect that was concentrated on the resources industry after the GFC is now spread much more widely across Australia's rural and urban industries," the report said.

Those industries rely on the speedy post-COVID-19 recovery of Chinese consumer demand, which the authors say is already showing signs of occurring largely thanks to the country's savvy approach to economic stimulus.

"China has relied on digital technologies and decentralised economic policy to drive up consumption, rather than centralised stimulus payments through direct deposits or debt-financed guarantees as seen in Australia," they wrote.

The authors described stimulus coupons worth $2.7 billion, rolled out through the digital platforms of Alipay, Meituan, Dianping and WeChat as "efficient, flexible, easy to track," and able to be specifically targeted depending on local circumstances.

According to Li and Hendrischke the strong rebound in Chinese consumption, which recorded a 32.1 percent monthly increase in early May, bodes well for the future and for the many Aussie businesses which sell to China.

"Australia is facing a bigger crisis now than it did post-GFC, and it is also more closely interconnected with China," they said.

"This makes the Australia-China economic partnership even more important than it was post-GFC."