Friday, July 03, 2009

At last, China really IS our biggest customer


China has won an undeclared war with Japan to cement its place as Australia's biggest export customer.

Little recognised at the time, China overtook Japan in March to take the title, but the figures for April and those for May released yesterday suggest its won it for keeps.

The change was little recognised partly because it's widely believed it happened some time ago. Politicians have been referring to China as "Australia's biggest trading partner" for years.

The shorthand was a sleight-of-hand.

China was the biggest our source of our imports, not the biggest destination for our exports...

...and when exports and imports were added together it only narrowly beat Japan.

No longer.

Our exports to Japan collapsed in the first five months of this year. From more than $6 billion a month in November and December they fell to $3 billion in April and $2.5 billion in May.

Our exports to China, previously earning us $2 billion to $3 billion per month, jumped to a record $4.3 billion in March, and then $3.6 billion and $3 billion.

Unless Japan's economy recovery recovers quickly - and there are scant signs that it will - China will continue to outshine Japan for years.

In May it accounted for one in every four ships leaving Australia.

Austrade's chief economist Tim Harcourt labels the phenomenon "bamboo shoots", to distinguish it from the "green shoots" of economic recovery pundits are searching for worldwide.

He says China's massive fiscal stimulus measures are paying the same sort of dividends there as ours are in Australia, especially in China's second and third-tier cities.

Virtually forced to spend on infrastructure, those cities are buying Australian iron and increasingly Australian coal amidst the realisation that Chinese coal is dirty.

Japan's economy is shrinking rather than growing as is China's, and can't compete.

As well he says Australian small and medium-sized businesses now find it easier to peddle their wares in China than Japan.

"There's still a bit of resistance in the field of financial services, but when it comes to most Australian small businesses, there's no Great Wall of Trade".

Australian exports fell a further 5.2 per cent in May at a time when the Reserve Bank's Australian dollar commodity price index fell 10.7 per cent, suggesting that volumes grew.

Westpac economist Anthony Thompson said the resilience was unlikely to persist. "Brazil's iron ore exports have weakened and iron ore prices have slipped 31 per cent between March to May."

Australian import fell 3.8 per cent in dollar terms, led down by a higher Australian dollar and a 14 per cent slump in imports of capital goods by businesses. Imports of consumer goods slipped a mere 1 per cent despite the dollar, in accordance with retail trade figures showing consumer spending at record highs.

"We're seeing a business recession , not a consumer recession," said TD Securities economist Annette Beacher. "Business investment has ground to a halt. It's yet to be felt in the wider community."

Published in today's SMH and Age

Top 10 export markets

........................ For the month of May ... Change from Oct to May

China ............. $4.012bn ...................... +21.6%

Japan ............. $2.546bn ..................... -56%

India ............... $1.370bn ..................... -7.2%

Korea ............. $1.149bn ..................... -49.1%

US ................. $744m ......................... -45%

New Zealand ... $657m ......................... -21.6%

Taiwan ............ $629m ........................ -33.2%

Singapore ....... $555m ......................... -9.3%

Britain ............ $390m ......................... -65.5%

Indonesia ........ $331m ......................... -28.5%

Total ............... $20.392bn ................... -25.7%

Source: ABS