The Hindu Business Line : Aussies chant the China mantra

NOW-A-DAYS Australians are reading more about Mao Zedong and Deng Xiaoping, trying to master the Chinese language and developing their skills in ping pong.

Wonder, what's the connection between the Great Wall of China and the Sydney Harbour Bridge? Well, these days the Australian Government and trade talk of only one thing. Focus China. Not without reasons.

Coming out from a drought considered the worst in the last 100 years, the Australians would like to ensure they are not lost out in the area of global merchandise trade.

"We export almost two-thirds of what we produce," says Mr Warren Truss, Minister for Agriculture, Fishery and Forestry. With China now seen as the principal mover of the commodities market, Australia wants to see its products lining Beijing's shelves.

The base metals market has seen an over 10 per cent rise. Iron and steel prices, too, are heading north. Wheat, cotton and oilseed prices have also gone up considerably, thanks mainly to China's continuing appetite. "China is the happening thing. We would like to focus there more," says Mr Brian Fisher, chief of the Australian Bureau of Agriculture and Resource Economics (Abare).

The two-day Abare Outlook 2004 conference that concluded here recently had everyone talking of the Chinese demand. Not for nothing. China's imports from Australia during the first half of the fiscal (July 2003-June 2004) was $1.1 billion against $1.2 billion the whole of the previous fiscal. On the other hand, China is set to buy nearly 1.25 million bales (of 240 kg each) of cotton and one million tonne of wheat from Australia. The Chinese are also buying huge quantities of coal and buy 50 per cent of the wool produced by Australia.

China has also pulled off a coup of sorts by signing a 25-year-old deal for iron ore supply this week. In one of the biggest deals, BHP Billiton signed a $9-million contract to sell iron ore to four Chinese steel producers. In turn, the steel producers will have part access to Billiton's mines. The deal is to be reviewed annually taking into account the market benchmark prices. Australia has also begun the process of signing a free trade agreement with China after a study was conducted following the Chinese President, Mr Hu Jintao's visit here last year.

"It will be a comprehensive bilateral treaty, though it will take some time to iron out the protocols. We are keen to move ahead and we don't see major difficulties," Mr Mark Vaile, Australian Trade Minister, told a group of visiting journalists.

Asked why India does not figure in their scheme of things, Mr Fisher of Abare says: "China is an open market, whereas yours is not. China's external trade accounts for 25 per cent of its GDP and India's makes up just 8 per cent. Let India open its markets more, then we'll see.

Does that mean China gets priority over India? "No. We mean nothing against India. We, as colonial cousins, have excellent relationship. And we are keen to improve it," says Mr Vaile.

"India could have the Australians swing their way in a couple of years time. With a growing middle class that has deeper pockets, it is just a matter of time before the focus turns to India," says an Abare analyst.

True, some among the Australian financial analysts have begun to warn about the over-dependence on China. "The US Fed chief has told the senators that China needs to pump more capital into the banking system since non-performing assets account for over 50 per cent of the banks' loans. It's high time to take a closer look at the happenings in China," says Dr Barry Hughes, an economist.

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