Australia's trade and investment links with China make a vital contribution to our national prosperity, helping underpin the 23 consecutive years of economic growth that Australia experience prior to the COVID-19 pandemic. Strong trade and investment links with China are also an important contributor to the economic recovery from COVID-19.
Key information
China
World's second largest economy in purchasing power parity terms (2014) and the fastest growing major economy.
Historic rebalancing of economy towards consumption and services underway.
Urbanisation and middle-class expansion continues.
Growth outlook is moderating but still strong.
China-Australia FTA
The FTA will enhance and protect Australia's competitiveness with our largest trading partner, while also attracting growth-enhancing investment.
It will deepen Australia's integration with a key player in global value chains.
China's economic transition and outlook
The evolution of the Chinese economy will continue to have important implications for Australia:
China is rebalancing from an investment, manufacturing and export-intensive model of growth, towards a more consumption and services-oriented economy as it looks to sustain economic growth over coming years.
While China's extraordinary growth rates of recent decades have moderated and been impacted by the COVID pandemic, the economic outlook remains comparatively strong: the IMF is forecasting 8.0 per cent growth in 2021 as the Chinese economy recovers from COVID.
Key trends in China's economic development continue. It continues to urbanise rapidly – building cities, infrastructure and amenities. The middle class continues to expand, with increasing demand for a variety of foods, and high-value manufactures, as well as services.
In addition to being the world's largest exporter and manufacturer, China's share of outbound foreign direct investment is rising, providing the benefits of increased productive capacity, higher incomes, more jobs and exports to destination countries. Its share of flows of global outward investment reached seven per cent in 2013.
The FTA harnesses the opportunities of China's changing economy
As China's economy evolves, the China-Australia Free Trade Agreement (ChAFTA) lays an historic foundation for the next phase of our successful economic relationship. It will bring about increased and more diverse trade in goods, growth in two-way investment, and greater trade in services and knowledge-based industries as China's economy transforms to achieve a more balanced sustained growth.
The FTA secures improved access. This protects and advances our competitive position, especially where some trading partners, including ASEAN, Chile and New Zealand, already enjoy favourable access.
FTA outcomes reflect the diversity of the Australian economy:
Agriculture – tariff reduction commitments will position Australia to meet high value food demand.
Resources – tariff savings will increase profitability in the face of softening resource prices.
Manufactures – the FTA will deliver improved integration with a key player in global value chains.
Services – the best possible positioning to take full advantage of emerging opportunities stemming from middle class expansion.
Investment – the FTA will attract new capital for more jobs and enhance productive capacity.
The FTA will allow Australian businesses to be better placed to respond to the changing goods and services demands of Chinese producers and consumers.
As Australia removes remaining tariffs progressively, Australian businesses will also benefit from lower cost imported inputs and consumers will enjoy lower prices.
In recognition of China's continuing economic reform, a "built-in agenda" will provide a flexible and responsive framework for the FTA to deliver deeper benefits over time.