TCA Apr 2014

Regional Focus: CHINA-AUSTRALIA

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In the last quarter of 2013, a new Australian government reignited China-Australia free trade negotiations. Sino-Australian trade continued to grow last year, with the value of total trade between the two nations exceeding USD 136 bn in 2013. Chinese investment in the Australian energy and natural resources sectors continued to rise in 2013.

 

China-Australia Briefing: Tighter relations between the new governments and expanding tourism ties

➢ In March 2014, China signed a USD 31 bn currency swap agreement with Australia. The deal is expected to further promote bilateral trade and investment between the two countries and will allow for the exchange of local currencies between their central banks. The deal is also expected to reduce cost and foreign exchange risk for businesses, as they will be able to settle trade terms in local currency
➢ In March 2014, China signed an organic food deal with Australia worth USD 100 bn, which will allow a Beijing- based organic certification body, Beijing Wuyue Huaxia Management and Technique Centre, to assess local organic operators for export to the Chinese market
➢ Newly-elected Australian Prime Minister Tony Abbott, met the Asia-Pacific Economic Cooperation (APEC) meeting in Bali in October 2013. The meeting reaffirmed the strength with Chinese President Xi Jinping, for the first time during of Chinese-Australian relations, and Prime Minister Abbott’s plans to visit China with a large delegation of business, trade
and government representatives during the first half of 2014
➢ Australia and China have made progress toward finalising a free-trade agreement. After October’s APEC meeting in Bali, statements from both China and Australia’s leadership indicated that the agreement would be finalised by late 2014. Australian and Chinese diplomats met in November and December 2013, which indicates the importance of completing this deal within the stated time frame
➢ China and Australia are also involved in negotiations over another free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP). The RCEP links ASEAN economies with the largest economies of the Asia-Pacific region. The second round of negotiations was held on September 23-27 in Brisbane, Australia. As China is not currently a Trans-Pacific Partnership member state, China is particularly interested in joining the RCEP
➢ The tourism sectors in both Australia and China witnessed significant growth in 2013. The number of Australian tourists to China increased by 6.7%, pumping USD 877 mn into the Chinese economy. The number of Chinese travelling to Australia rose by 17.1% over 2012, which injected an extra USD 4 bn into Australia. These rates are particularly impressive when compared to other developed nations such as the US (0.1%), Britain (3.8%) and Germany (3.5%)

  

China-Australia Trade

Total Trade
➢ China Customs figures demonstrate that China-Australia trade totalled roughly USD 136 bn in 2013, which represents a CAGR growth of 26% from 2003-2013
➢ According to China Customs, China’s exports to Australia shrunk by 0.6% from USD 37.8 bn in 2012 to USD 37.6 bn in 2013, the first decrease since 2009. Australian Bureau of Statistics (ABS) figures showed a decrease of 1.2% from USD 46.0 bn in 2012 to USD 45.5 bn in 2013
➢ Imports from Australia, on the other hand, continued to grow by 16.9% from USD 84.5 bn in 2012 to USD 98.8 bn in 2013. ABS figures showed a 20.5% increase from USD 75.5 bn in 2012 to USD 91.0 bn in 2013
➢ China’s monthly exports to Australia in 2013 peaked in October at USD 3.7 bn according to China Customs, and USD 4.5 bn in November according to ABS. China’s monthly imports from Australia peaked at USD 9.37 bn in November according to China Customs, and USD 8.6 bn in December according to ABS
➢ Total monthly trade peaked at USD 13.0 bn in November according to China Customs and at USD 13.0 bn in October according to ABS

Australia State Watch: Queensland
➢ With a gross state product (GSP) of USD 302.5 bn in 2012-13, Queensland is Australia’s third-largest economy, after New South Wales and Victoria
➢ The state is a net exporter with exports of USD 43.3 bn and imports of USD 40.2 bn in 2013
➢ Main export commodities in Queensland for 2012-2013 were coal, coke and briquettes (USD 19.0 bn, 41.6% of total exports), meat and meat preparations (USD 3.7 bn, 8.1%), non-ferrous metals (USD 3.6 bn, 7.9%), metalliferous ores and metal scrap (USD 3.45 bn, 7.6%), and sugars, sugar preparations and honey (USD 1.4 bn, 3.0%)
➢ Key industries in terms of contribution to Queensland’s GSP are construction (10.0%), mining (9.5%), ownership of dwellings (8.1%), healthcare and social assistance (7.7%), and manufacturing (7.0%)
➢ China was Queensland’s largest trading partner in 2013, with total trade reaching USD 17.0 bn (20.3% of total trade), followed by Japan (USD 12.4 bn, 14.9 %) and South Korea (USD 7.1 bn, 8.5%)
➢ According to ABS, Queensland’s total trade with China reached USD 16.8 bn in 2013, a 22.2% increase y-o-y, with exports to China at USD 11.2 bn, a 38.3% increase y-o-y, and imports from China at USD 5.6 bn, a 0.7% decrease y-o-y
➢ Over 2003-2013, China-Queensland trade accelerated rapidly at a CAGR of 25.6%. Total exports to China grew by a CAGR of 30.5%, while total imports grew by 19.5%

China-Australia Investment

Major Recent Deals
➢ In April 2014, WH Group (previously known as Shuanghui International Holdings), purchased Tabro Meat, one of Victoria’s largest export beef processing businesses. The Tabro Meats business includes two USDA-licenced and Halal- certified Victorian abattoirs, with a combined capacity of around 1,000 head per day. While the terms of the deal were not disclosed, Tabro officials say the purchase price was well above USD 25 mn
➢ In March 2014, Shandong-based Landbridge Group made an unsolicited USD 144.6 mn takeover offer directly to the shareholders of Westside Corp. Landbridge, which owns a port in China along with refinery and real-estate assets, stated it approached Westside, which owns coal seam gas fields in Queensland state, with an offer in February, but was rejected access to the company’s books. The board of Westside is currently reviewing the terms of the offer
➢ In February 2014, Shanghai-based real estate developer, the Greenland Group, signed an MoU for a USD 1 bn residential project in Melbourne, which includes a development near the Flemington Race course
➢ In December 2013, the Federal government approved a USD 3.9 bn proposal by the State Grid Corporation of China (SGCC) for a 19.9% stake in SP AusNet, an Australian energy infrastructure firm. The government also approved SGCC’s bid of an undisclosed amount for a 60% stake in Singapore Power’s energy assets, which are held by SPI (Australia) Assets Pty, controlled by Jemena. The deal is conditional upon at least half of SP AusNet’s and Jemena’s board being Australian citizens that currently reside in Australia
➢ In December 2013, Chinese steelmaker Baosteel increased its stake in Aquila Resources by 4.6%, taking its total stake to almost 20%. Baosteel initially acquired a 15% stake in Aquila Resources in 2009 and is represented by one member in the Aquila board
➢ In December 2013, the Australian government relaxed restrictions on Yanzhou Coal Mining’s ownership of Yancoal Australia by allowing it to maintain its current ownership of 78%, rather than divest to 70% by the end of the year
➢ In December 2013, private Chinese company China Kingho Energy Group, announced a USD 52.6 mn bid for Carabella Resources, an Australian coal exporter. The offer is part of Kingho’s plan to establish a headquarters for their global resources and development business outside of China. Carabella will respond to the offer in early 2014
➢ In December 2013, WesTrac acquired Caterpillar Global Mining’s distribution and support business in northeastern China for USD 130 mn. The acquisition enables Seven Group’s heavy-machinery unit, WesTrac, to sell Caterpillar’s mining products in the country’s northeast provinces, as well as offer support and maintenance services
➢ In December 2013, a Chinese agricultural and food investment company, New Hope Investment Fund, acquired the fourth- largest abattoir in Australia, Kilcoy Pastoral Company (KPC), for an undisclosed amount
➢ In October 2013, Hong Kong-based Noble Group acquired a 21% stake in the Australian coal mining firm, Cockatoo Coal. Noble Group, in collaboration with South Korean firm SK Networks and Indonesian coal miner Harum Energy, contributed USD 113 mn in equity for Cockatoo Coal’s USD 134 mn equity raising. In a separate deal, Noble Group agreed to sell its 51.2% stake in coal explorer, Blackwood Corp, to Cockatoo for USD 19 mn
➢ In October 2013, CNOOC finalised a USD 1.7 bn Heads of Agreement (HOA) with BG Group for the acquisition of portion of the Queensland Curtis LNG project. Under a separate agreement, BG Group will supply CNOOC with an additional 5 mn tonnes of liquefied natural gas per annum
➢ In September 2013, China’s third-largest zinc producer, Zhongjin Lingnan, presented a takeover offer to Perilya for USD 244 mn. The Chinese firm acquired a majority stake in the Perth-based mining company in 2009

 

 

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