Australia-China ag trade continues to show signs of thaw

With timber imports resuming and discussions over barley tariffs showing promise, there is hope that broader trade barriers will be lifted and that capital inflows can resume.

Speaking publicly at The Australian’s Global Food Forum in Melbourne at the end of last month, Kidder Williams managing director David Williams mentioned the return of Chinese capital to Australian agriculture more than once.

Commenting on where demand for Australian farmland investments was coming from, Williams said: “One of the other bright spots we’re seeing is that the Chinese are back. The door from the Foreign Investment Review Board is slightly ajar [for them], so I think we’re going to see a fair bit more of that in the next six months.”

Williams, a prominent agribusiness corporate adviser in Australia, who has been involved in a string of high-profile transactions over several decades, was not alone in mentioning China. It was a prominent thread at the conference in Melbourne, with a couple of panels dedicated to discussing how best the sector can re-engage with the Chinese market after years of cooler relations.

And the signs are increasingly positive. China has resumed imports of Australian timber, while the government in Canberra recently asked the World Trade Organization to suspend its appeal over China’s imposition of tariffs.

Hope is also growing that wine will be the next sector to open up, after being impacted badly by China’s effective ban on all Australian wine imports.

Nobody will be getting too carried away (even though the ABC declared that Beijing had “raised the white flag” over trade in April, a dubious assertion) especially after several sectors have worked so hard to divert exports into alternative markets, to varying degrees of success. But the Chinese market is too big and too close to Australia to ignore, and the proximity of Australian farmland to the largest markets in Asia (which in practice means primarily China) has always been a factor behind the attractiveness of the asset class to investors.

Albert Tse, founder of private equity firm Wattle Hill Capital, said on a separate panel discussion from Williams that the question of whether Australia-China relations were improving was a “very important topic” for agriculture.

“The underlying issues between the two countries are pretty similar to what they were two years ago, but the actual diplomacy has changed. The megaphones were put down,” he said.

Of course, the ever-present tension over the status of Taiwan remains, with megaphones picked back up again just this week on the Chinese side as defense minister Li Shangfu warned the US and its allies to stay out of its territory following a near-miss between warships in the Taiwan Strait.

Any escalation there would obviously put paid to progress made on the diplomatic front. But the Australian agribusiness community, while having proven it is not reliant on China over the last few years, will hope relations continue grow more cordial.