China’s manufactured exports to Australia are soaring
19 Mar 2024|

While China was imposing punitive barriers against Australian exports, its own sales to Australia were rising rapidly, with growth led by motor vehicles, electric machinery and wind towers. 

China’s annual sales of manufactured goods (excluding refined petroleum) to Australia rose 39% to $106 billion in the three years from 2019-20 to 2022-23, according to trade tables compiled by the Department of Foreign Affairs. 

Australia’s annual imports of Chinese motor vehicles have soared from $415 million to $6.2 billion since 2019-20, while purchases of electric machinery are up 88% to $3.1 billion and steel structures, which include wind-towers, are up 71% to $2.3 billion. 

There has also been massive growth in imports of Chinese trucks and semi-trailers, forklifts, civil engineering equipment and electricity transformers.  Australia’s imports of Chinese whitegoods, clothing and sporting goods have all been rising at a rate of 10% or more a year. 

A surge of China’s exports of manufactured goods, as Chinese companies seek to compensate for the softness in their domestic economy, is raising hackles in the United States, Europe and in many emerging nations. 

The European Union is preparing to impose tariffs on Chinese electric vehicles, saying their manufacture is being subsidised, and it is also under pressure to launch a similar anti-subsidy investigation on behalf of wind turbine and solar power manufacturers. 

China has retaliated by launching an anti-subsidy investigation into its French brandy imports, while German car makers Mercedes-Benz and Volkswagen are trying to halt the European tariffs on electric vehicles, fearful of curbs on their sales in China. 

The Biden administration has retained tariffs on Chinese goods imposed under the former Trump administration and has flagged that a forthcoming review of its trade agreement with Mexico and Canada will seek to stop Chinese car manufacturers gaining entry to the US market through setting up factories based in Mexico.  

Brazil’s steelmakers are seeking tariffs on Chinese steel of between 9.6% and 25% after imports soared from US$700 million in 2020 to $2.7 billion last year. The Financial Times reports that Brazilian tariff investigations are also under way in chemicals and tyres. The Thai government has accused Chinese companies of avoiding anti-dumping duties, while Vietnam has launched investigations into the dumping of wind towers and steel products. A New York Times report noted that pushback against Chinese manufactured goods was also evident in India and Turkey.  

Analysis of newly released OECD data by IMD Business School’s Richard Baldwin shows China is now the unrivalled global manufacturing superpower.  While China accounts for 15% of global GDP, it provides an astonishing 35% of world manufacturing output.  That exceeds the combined output of the next nine largest manufacturers: the United States, Japan, Germany, India, South Korea, Italy, France, Taiwan and Mexico. 

China’s share of global manufactured exports is lower, reflecting its outsized share in its domestic market, but is likely higher than the 20% share shown in the latest OECD data, which runs only to 2020.  A paper by the US Council of Foreign Relations shows China’s trade surplus in manufactured goods is now equivalent to 1.7% of global GDP and has largely been won at the expense of the United States, whose global manufacturing deficit is now equivalent to 1.3% of the world economy. 

Excluding refined petroleum, China’s share of Australia’s manufactured imports is 33%, which is significantly greater than China’s global market share. 

Australia has low tariffs, but it is one of the most energetic users of anti-dumping measures, particularly against China, a matter that China has raised during negotiations to remove its anti-dumping duties from Australian wine and barley.  The Australian Anti-Dumping Commission lists seven Chinese products subject to anti-dumping action and a further nine that are under review. 

The commission late last year suspended anti-dumping duties from Chinese wind-towers not because of pressure to offer a quid-pro-quo to China but because there had been no Australian-made wind-towers since 2020, when the Victorian government stopped offering subsidies for local content. 

Manufacturing has a smaller presence in the Australian economy than in almost any other nation. The World Bank’s measure of manufacturing as a share of the economy ranks Australia 150th, behind Botswana, Cyprus and Azerbaijan, with output equivalent to 5.6% of the economy.  

While Australia has some individual highly competitive manufacturers, the sector overall has suffered over the past two decades as both capital and skilled labour have favoured the resources and services sectors. 

Total Australian manufacturing production has dropped 3.6% over the last 10 years and 5.3% over 20 years. The total value of the capital stock of Australia’s manufacturing industry has fallen by $20 billion over the past 10 years, with new investment failing to keep up with the depreciation and shutdown of existing plant. 

Australia’s appetite for manufactured goods has kept growing but has been satisfied by imports. The 39% growth in manufactured imports from China since 2019-20 is only slightly ahead of the growth in manufactured imports from other sources, which have risen 34%. 

There are few signs of Australian importers seeking to diversify their suppliers away from China during the years that China was flouting the WTO’s global trade rules with its discriminatory barriers against Australian goods. 

Mobile phones and telecommunication equipment, which are Australia’s biggest import category from China, are a possible exception. China’s sales in Australia have risen by only 4.7% to $9.9 billion since 2019-20, while imports from other suppliers have risen by 33.7% to $7.8 billion. The ban on Huawei’s participation in Australia’s 5G network and the difficulty Huawei and other Chinese mobile phone makers have had competing in the face of US technology-export controls may have had an impact. 

Refined petroleum, which has been excluded from the above analysis because of the volatility of imports, is another possible exception. Australia’s total purchases of refined petroleum have soared almost three-fold from $18.7 billion in 2019-20 to $49.0 billion in 2022-23, following the closure of domestic refineries and possibly also reflecting increased domestic storage requirements. 

Australia spent $3.1 billion on Chinese refined petroleum in 2019-20 but by 2021-22 imports had dropped to $850 million.  That may have been because of concern about the breakdown in Australia’s relations with China or simply reflected purchasing decisions.  Refined petroleum imports from China were back to $3 billion in 2022-23. 

The only other import sectors where China has lost market share over the last three years are textiles, where there is competition from such countries as Bangladesh. 

Across a wide variety of sectors, China still accounts for more than half Australia’s imports. It provides almost 80% of Australia’s light fittings and more than 70% of its electronic circuits, semi-trailers, shipping containers, steel and aluminium structures, furniture, mattresses, sporting goods and toys. 

China’s sales of semi-trailers and containers have more than doubled since 2019-20 to $1.8 billion. Imports of Chinese trucks are rising rapidly from a low base, increasing from $140 million to $930 million in the past three years.  

Australia’s imports of Chinese civil engineering equipment are also growing rapidly, rising from $600 million to $1.5 billion over the period that China was imposing bans on Australian exports. 

As well as wind-towers and solar panels, Chinese firms are gaining business across the electricity grid, with a 60% rise in electric power machinery and a 50% rise in cable and insulating materials.  Imports of mechanical handling equipment, which includes forklifts and conveyor belts, have increased 96% over three years to $1.6 billion in 2022-23.