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China suspends economic dialogue with Australia as relations curdle

EconomyMay 06, 2021 04:56AM ET
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© Reuters. FILE PHOTO: Australian flag flutters in front of the Great Hall of the People during a welcoming ceremony for Australian Prime Minister Malcolm Turnbull (not in picture) in Beijing, China, April 14, 2016. REUTERS/Jason Lee

By Gabriel Crossley and Kirsty Needham

BEIJING/SYDNEY (Reuters) -China "indefinitely" suspended on Thursday all activity under a China-Australia Strategic Economic Dialogue, its state economic planner said, the latest setback for strained relations between the two countries.

"Recently, some Australian Commonwealth Government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination," China's National Development and Reform Commission (NDRC) said in a short statement on the decision.

The commission did not say in the statement what specific measures prompted the action.

China's foreign ministry spokesman, Wang Wenbin, told a daily conference the suspension was a "necessary and legitimate" response to Australia "abusing" the concept of national security to pressure cooperation with China.

"Australia must bear full responsibility," he said.

The Australian dollar fell sharply on the news and was as low as 0.7701 to the U.S. dollar from Wednesday's $0.7747.

Bilateral ties were strained in 2018 when Australia became the first country to publicly ban Chinese tech giant Huawei from its 5G network. Relations worsened last year when Australia called for an independent investigation into the origins of the novel coronavirus, prompting trade reprisals from China.

Australian Trade Minister Dan Tehan said the commission's decision was disappointing because the economic dialogue was "an important forum for Australia and China to work through issues relevant to our economic partnership".

"We remain open to holding the dialogue and engaging at the ministerial level," he said in a statement.

The last meeting was in Beijing in 2017, when Australia's trade minister signed an agreement on cooperation on Belt and Road projects in third-party countries.

Australia has, however, declined to sign agreements on direct participation in China's flagship foreign policy initiative.

In April, Canberra cancelled two Belt and Road cooperation deals struck by the state of Victoria, prompting the Chinese embassy to warn that ties were bound to worsen.

Australia's federal parliament granted veto power over foreign deals by states in December amid the deepening diplomatic dispute with China, which has imposed a series of trade sanctions on Australian exports ranging from wine to coal.

Successive Australian trade ministers have been unable to secure a phone call with Chinese counterparts since diplomatic tensions worsened in 2020.

In the 12 months to March, Australia exported A$149 billion ($115 billion) worth of goods to China, excluding services, of which iron ore was by far the largest product.

Experts expect the bilateral strains would not have a major impact on the iron ore trade, but could have an impact on Chinese investment in Australia.

"We believe the iron ore trading relationship between Australia and China will remain ring-fenced in relation to current political tensions between the two nations," said Atilla Widnell, managing director at Singapore-based Navigate Commodities Ptd Ltd.

"This is a co-dependent relationship whereby either party cannot survive without the other."

Executives of mining giant Rio Tinto (NYSE:RIO) said the tension between Australia and China was not hurting their business.

"We sell more than half of our products into China and we have a good relationship and we are unaffected," Chief Executive Jakob Stausholm told reporters after the company's annual meeting in Perth.

Rio Tinto Chairman Simon Thompson said: "Specifically in relation to iron ore, at the moment there are relatively few alternatives available to China."

But the dispute will continue to have an impact on Australia's commodities sector by discouraging Chinese investment and it indicated that effective bans on Australian imports are set to continue, said Yanting Zhou, senior economist at Wood Mackenzie.

China has effectively banned imports of Australian thermal coal. Since December, copper concentrate imports to China have also slumped.

"We estimate that the volume impacted is around one million tonnes per annum of copper concentrate, which is looking for homes in other Asia-Pacific smelters," said Gillian Moncur, also at Wood Mackenzie.

Matt Bekier, CEO of No.2 Australian casino operator Star Entertainment Group Ltd, which relied on Chinese tourists until Australia closed its borders due to the pandemic, told the Macquarie Australia Conference he was unconcerned about China's suspension of the Strategic Economic Dialogue. "I'm probably a bit more optimistic that people will do what they'll do. That's not to say that (there won't be) a number of months of challenges in the government relations," he said.

($1 = 1.2952 Australian dollars)

China suspends economic dialogue with Australia as relations curdle
 

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Comments (10)
Investing Man
Investing Man May 06, 2021 1:20AM ET
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China needs to stop threatening invasions, leave the oceans in peace, and stop the supreme race hit lery language
David David
David9 May 06, 2021 1:20AM ET
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Give us one example of China invading? I can easily list a boat load of invasions from the others...
Joel Schwartz
Joel Schwartz May 06, 2021 1:20AM ET
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David David uh, Hong Kong? They have a puppet government there.
David David
David9 May 06, 2021 1:20AM ET
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Go read history...Hong Kong will always be China so is Taiwan and also China has ancient map of the South China Sea nine dash lines...
Star Boi
Star Boi May 06, 2021 1:15AM ET
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The subtle messaging here is that China understands the wests Achilles heel is greedy and money. So, over look China's misdeeds, pretend you don't see what's really happening and you will be wealthy, till the real bill comes to be paid. The Nixon experiment is over, 50yrs is long enough.  However, there are some on Wall St only too happy to oblige. The vociferous will be silenced with an iron fist, with ore sourced from Australia.
Roger Miller
Roger Miller May 06, 2021 1:15AM ET
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Australia needs a leader like the team telling Biden what to say. They know how to talk tough while ultimately backing down and doing nothing, thats how the US now deals with both China and Russia.
Jp Perth
Jp Perth May 06, 2021 1:15AM ET
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we want your giant pyramid scheme of *******financials and *******construction work to crumble into dust.
Al Gore
Al Gore May 06, 2021 1:05AM ET
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won't be long before china takes over australia
Roger Miller
Roger Miller May 06, 2021 1:05AM ET
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No doubt now that the US is no longer a deterent with it’s weak leadership.
Jp Perth
Jp Perth May 06, 2021 1:05AM ET
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won't be long until China falls into a rotten nasty mound of dust.
Mark Nathwani
Mark Nathwani May 05, 2021 11:52PM ET
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China is becoming a bully. They need to be stopped, and their communist government needs to be replaced by democracy
David David
David9 May 05, 2021 11:50PM ET
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Austrialia will probably be in a deep recession for years...
Roger Miller
Roger Miller May 05, 2021 11:50PM ET
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Why, is China about to find an alternative to iron ore?
Star Boi
Star Boi May 05, 2021 11:50PM ET
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When did it enter a recession, or are you a protégé of Paul Keating? Are you about to tell Australians this is "a recession you must have"? Somehow, I don't think anyone is listening.
Frank Taylor
Frank Taylor May 05, 2021 11:47PM ET
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good for Australia, on many levels, strengthen their internal infrastructure and build jobs internally. 👍
rene topeka
rene topeka May 05, 2021 11:34PM ET
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hope they figure it out soon, let ego go away and apologize first
Mark Nathwani
Mark Nathwani May 05, 2021 11:34PM ET
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China not wanting international investigations on the source of the Covid Virus tells me they have something to hide.
mike mike
mike mike May 05, 2021 11:30PM ET
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USA is behind this
Mark Nathwani
Mark Nathwani May 05, 2021 11:30PM ET
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LOL. It's always the fault of the worlds greatest country. USA.
danny Levine
danny Levine May 05, 2021 11:11PM ET
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good. global trade only enriches greedy corporations
Mark Nathwani
Mark Nathwani May 05, 2021 11:11PM ET
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Global trade makes everyone better off. Cheating by China hurts everyone.
danny Levine
danny Levine May 05, 2021 11:11PM ET
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nah man. only big corps benefits from trade
Mark Nathwani
Mark Nathwani May 05, 2021 11:11PM ET
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danny Levine   If it wasn't for global trade, the computer you are using would cost 10 times more.
 
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