Australia Owes Its Recent Prosperity to China
Australia owes its prosperity of the past decade to its pivotal role as the primary source of the raw materials fuelling China's development.
Households now earn about a third more than they did a decade ago, after accounting for inflation, whereas there has been virtually no change in other advanced nations.
This gain has been won by the leverage Australia exerts as the richest and most desirable source of minerals and energy for China.
Not only are our reserves high-quality and low-cost, but Australia offers China the security of a stable political environment and a direct shipping route.
China's need for resources to supply its industrial revolution has raised Australia's export volumes, the prices it receives and the level of business investment.
The benefits do not end there. The growing wealth of the Chinese middle class is delivering fresh growth to the tourist industry and, until the government over-reached in a crackdown on student visas, was sustaining the tertiary education industry as well.
Consumers have been winners. China has based much of its industrialisation on high volume and low-cost manufactured goods which have been made all the cheaper in our markets because of the rise in the Australian dollar.
Australian travellers abroad are enjoying the fruit of our special relationship with China as they use the strong dollar to shop in London and Paris.
China was a minor trading partner until 2000, ranking sixth among export markets alongside Singapore and less than a quarter the size of Japan. It overtook Japan as our biggest trading partner in 2008 and now takes 27 per cent of all exports.
China takes a larger share of Australia's exports than it does from any other economy, with the exception of Taiwan.
China's has become the world's largest steel producer, accounting for almost half the world's output, as it builds megalopolis cities like Chengdu and Chongqing, lays out vast infrastructure, including 10,000km of a very fast train network and feeds its rapidly growing industrial production.
China has turned to Australia for about 40 per cent of its iron ore imports. Australia has also been its main external source of both coking coal for its steel mills and for steaming coal for power stations. In future, Australia will also be China's biggest source of liquefied natural gas.
China has, like other trading partners, sought to build its direct investment in Australia. It has felt frustrated by the tighter scrutiny Australia's Foreign Investment Review Board applies to proposals from state-owned companies.
Although there are dozens of Chinese mining businesses operating in Australia, the combined Chinese stake in the country of just under $20 billion is less than half that of Dutch investors. Australian investment in China is only $12bn, which is less than the stake of Australian companies in Denmark.
However, the flow of people is increasingly important, with China last year becoming our biggest source of foreign tourism.
China is also the largest source of foreign students. In 2010, as the Rudd government faced a backlash over its embrace of a 36 million population target, it tightened visa rules on foreign students, including a requirement for heavy up-front financial commitments for students from China and India.