China freezes Aussie deal as ties crumble

Beijing has “indefinitely” suspended all activity under a China-Australia strategic economic dialogue, its state economic planner says, 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 a Cold War mindset and ideological discrimination,” the National Development and Reform Commission said. It did not say what specific measures prompted the action.

Foreign ministry spokesman Wang Wenbin said it was a “necessary and legitimate” response to Australia “abusing” the concept of national security to pressure cooperation with China. He added: “Australia must bear full responsibility.”

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

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.

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.”

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. And last month Canberra canceled two Belt and Road cooperation deals struck by the state of Victoria, prompting the Chinese embassy to warn that ties were bound to worsen.

This week Australia added to the row by saying a Chinese company’s controversial 99-year-lease on Darwin Port was also under review and could be scrapped. Darwin is the most important port on Australia’s north coast, the closest to Asia and a base for US Marines who rotate in and out of the country.

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 last year.

In the 12 months to March, Australia exported A$149 billion (HK$893.11 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 will remain ring-fenced,” said Atilla Widnell, managing director at Singapore-based Navigate Commodities. “This is a codependent relationship whereby either party cannot survive without the other.”

Mining giant Rio Tinto said the tension was not hurting its 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 said.

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


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