Impacts of the Chinese economy slowdown on Australia’s mining industry

Running head: BUSINESS IN ASIA 1
Business in Asia
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Impacts of the Chinese economy slowdown on Australia’s mining industry
Introduction
Due to economic integration, most countries all over the world come together to sign
agreements that would benefit them not only politically but also economically. China and
Australia share a great relationship as far as business is concerned. There is close linkage
between Chinese and Australian economy because of trade exchanges between these two
countries. Over the past years, china’s growth has been characterized by rapid urbanization
and growth in technology which has created a greater demand of construction equipment and
energy for electric power and other means of transport(Garnaut, Cai & Ligang, 2013).
Demand of raw materials has also been increased in China and this is has placed Australia at
a high stand to supply China with manufacturing raw materials especially in the mining
sector.
Due to these strong linkages between the two economies, it raises many questions of
how a slowdown in the Chinese economy would affect Australia's economy for example in
the mining sector by lowering amount of iron ore exported to China. According to the recent
studies, it has shown that Australia is China's sixth biggest business trading partner all over
the world in terms of exports and imports.
Impacts on Australia’s trade accounts and economic performance (macro)
Thirteen per cent of Australia's exports are thermal coal to china which has made
mining sector in Australia a big sector as far trade linkages are concerned. One of the other
linkages between China and Australia is foreign investment. Since Australia depends heavily
on foreign investment, it has opportunity to China to invest in different sectors like
agriculture, mining and other infrastructural projects (Cai, 2016). On the other side, China

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being a strong place for investment, it has attracted and given room for Australian companies
and organizations to invest in China. In 2013, both the governments of China and Australia
came to a common understanding to establish a diplomatic architecture that would help to
resolve negotiations about Free Trade and come up with ideas that would improve investment
and trade activities in both countries (Lowe, 2018). To maintaina good relationship, these
countries try and maintain laws that govern them.
There have been changes in the Chinese economy which has affected the GDP and
trade channels in Australia's economy. It has been indicated that there has been a decline in
the Chinese GDP growth from 10% in 2011 to 6.6 % in 2018. Due to this reduction in the
GDP, it affects the exportation of commodities to China from Australia hence affecting
Australia's economy. Slowdown in Chinese economy also affects the export of services like
education and food exports. GDP also influences the financial performance where the income
statement, balance sheets and cash flows are affected. This also affects the importation of
commodities in the country because of limited income got from exports. GDP is not only
influenced by the exportation of commodities but also different agreements between the
countries wither politically, socially and economically. GDP also influences inflation rate of
the country because of price fluctuations in the exports. The World Bank provides data from
1960 to 2018 considering Australia's exports and percentage of GDP as shown in the figure
below. The GDP is having a slight increase over the years and this can be maintained if the
Chinese economy does not slow down because Austria’s economy heavily depends on export
market. To maintain this GDP level, financial stability of Australia’s economy should be
managed well.
A graph of Percentage of GDP against years in Australia