China update

On 18 December, the Australia-China Business Council hosted a National Briefing with Australian Ambassador to China, Graham Fletcher

01 April 2021

The Australian Government is aware of reports that trade disruptions have affected some goods entering China from Australia. For more information and support, visit Austrade’s Critical trade updates page.

Key insights

Trade – On March 26, China’s Ministry of Commerce (MofCom) confirmed anti-dumping duties ranging from 116% to 218% on imports of Australian wine for a period of five years, to commence on March 28 (BJ569333L). Punitive duties have already hit Australian winemakers hard. Wine exports sank to less than $1 million in January, from a peak of $164 million last October – before the tariffs were introduced.

Resources Customs data shows that China’s iron ore imports from Australia increased 59% (by value, year on year), to US$15 billion in the first two months of 2021. Volumes were down 1% to 105 million tonnes. Australian iron ore accounted for 57% of China’s total iron ore imports by value, followed by Brazilian iron ore with 24% and South African with 4% market share respectively. Iron ore accounted for 73% of China’s total imports from Australia in Jan-Feb 2021, which were up 9% y-o-y to US$21 billion. This masks a 42% drop in imports of Australian goods other than iron ore.

Economy – According to forecasts released by the World Bank, China is expected to lead the recovery of East Asian and Pacific economies this year. The World Bank’s recent East Asia and Pacific Economic Update predicts China’s economy will grow by 8.1% this year, compared with 2.3% in 2020, stimulating a 7.4% region-wide expansion.

Retail sales – Sales of consumer goods in January-February increased 33.8% year on year, according to the National Bureau of Statistics. The rise mostly reflects a rebound from January-February 2020, when the country was impacted by lockdown measures. The 2021 sales data represents a 6.4% increase on sales for January-February 2019.

Market Opportunities and Challenges

Food & agriculture

  • According to data from China Customs (GACC), China’s imports of Australian beef in January-February declined 49% by value (from A$462 million to A$235.66 million) and 52% by volume (from 57,133 tonnes to 27,348 tonnes), year on year. Lower beef imports from Australia are partly attributed to supply-side issues in Australia, China’s total imports of beef increased 10% in Jan-Feb 2021, year on year. This increase is largely due to increased beef imports from Brazil, whose market share rose from 24% of market supply in 2019 to 40% in 2020. Austrade contacts in market continue to report keen interest in sourcing Australian beef, especially fresh/chilled premium cuts.
  • In January-February, China’s imports of Australian sheep and goat meat fell 45% by value (from A$211 million to A$116.5 million) and 40% by volume (from 30,480 tonnes to 18,264 tonnes), year on year. Australian supply constraints are a factor. Australia is a significant source of China’s sheep and goat meat imports, contributing 35% of total imports (NZ holds a majority 59% of market share). China’s overall imports of sheep/goat meat fell 27% in the Jan-Feb period, year on year.
  • Greater China is Australia’s largest dairy export market (according to Dairy Australia) accounting for 32% of Australia’s total dairy exports by volume in 2019-2020. According to World Trade Atlas data, from January-December 2020, China dairy imports from the world increased 13% by value and 12% by volume. China imported nearly A$900 million of Australian dairy products, an increase of 14% by value year on year. Australia held a market share of 9%, ranking second after New Zealand (with a market share of 54%). 
  • A report released by the USDA Foreign Agricultural Service indicates that dairy products that have immune-boosting properties or reduced sugar content are becoming increasingly popular among Chinese consumers.
  • During 2020, China imported A$7 billion of infant formula, a small decrease of 1.5% by value year on year. Of that, A$320 million came from Australia, a decrease of nearly 4.5% by value year on year. Australian infant milk formula has 4% market share in China, ranking sixth with the Netherlands (35%) and New Zealand (26%) being the two largest sources imports. Infant milk formula imports are at least partially reliant on the ‘daigou’ trade (personal shoppers transporting the product) and therefore directly impacted by COVID related movement restrictions. A shift by some Australian exporters to more traditional export channels largely offset the reduced daigou trade.

Seafood

  • The volume of Australian seafood imports to China increased by around 6% in 2020, according to China Customs data. Meanwhile the value of Australian seafood exports declined. Australian fresh/chilled, frozen and live seafood import volumes to China all increased, whereas the volume of shell-fish (abalone, crabs, prawns, rock lobster and scallops) imports to China declined.
  • Meanwhile the total value of Australian seafood imports to China in 2020 dropped to A$618 million, according to World Trade Atlas – a decline of 35% compared to 2019. Key export varieties include: rock lobster (-33%), shrimp and prawn (-92%), crab (+11%), live and chilled abalone (-10%), frozen abalone (-46%) scallop (-40%), salmon (+36%), and bluefin tuna (-43%).

Technology & e-commerce

  • China’s market regulator introduced a set of new e-commerce laws in mid-March that impact livestreamed sales, user data privacy, and forced exclusivity. The new rules address innovations in China’s e-commerce industry and complement the e-commerce law that came into effect in 2019.
    • The platforms have to gain user consent for the collection and utilisation of personal information including biometric data, medical and health information, and financial accounts.
    • The new rules will ban services that engage in misleading practices such as falsifying selling volume and audience numbers, or promoting favourable reviews over others.
  • Australian brands and products associated with platforms which sell via social e-commerce and livestream e-commerce, as well as merchants on these platforms, will need to comply with these new regulations.
  • China’s online shopping population grew by over 72 million in the 12 months to March 2021, to reach 782 million. According to China’s Ministry of Commerce, China retained its position as the world’s largest online retail market for the eighth consecutive year in 2020, with online retail sales increasing 14.8% year on year. The largest platforms were TMALL, JD.com and Pinduoduo.
  • Subsectors achieving high growth in online sales in the year to March 2021 were: food, 31%; apparel and footwear, 6%; and non-food consumer products, 16%. The online groceries market is expected to double to about RMB 820 billion (A$160 billion) by 2023, according to iResearch.
  • The amount of goods sold on digital storefronts accessed via instant messaging app WeChat doubled in 2020 as the mega social platform became an increasingly popular entry point for online shopping in China.
  • The use of fintech to purchase fresh produce during live-streaming is evolving – including on mobile platforms. It is being used to pay for goods and services from fashion to healthcare. People watching e-commerce livestreams grew 123 million to 388 million in December, and approximately two thirds of livestream users have made a purchase while watching livestreams.
  • The State Council has called for increased private investment to develop modern farming techniques and empower villages via advanced technologies. In Fujian, Alibaba has provided chicken farmers with smart bracelets that track the health of their poultry.
  • China has opened over 2,000 km of road to trial autonomous vehicles and issued over 400 trial permits. Sales in China of new energy vehicles (NEVs) – which include battery electric, plug-in hybrid and hydrogen fuel-cell cars – are expected to grow 30–40% to around 1.8 million units in 2021, according to the China Association of Automobile Manufacturers.

Energy & Resources

  • Coal’s share of China’s energy mix continues to decline, but coal usage is up overall. According to China’s National Bureau of Statistics data, coal’s share of energy consumption fell to 57% in 2020 from 58% in 2019, but coal consumption rose 1% in absolute terms as energy consumption grew by 2%. China’s State Council said it will strictly control construction of new coal-fired power capacity.
  • According to the National Energy Administration, China added 52GW of new coal-fired power capacity in 2020 to reach 1,095GW. However, coal’s share of total installed capacity dropped below 50% thanks to increased investment in renewable energy (particularly wind and solar). The share of non-fossil fuel in energy consumption (hydro, wind, solar and nuclear) rose to 16% in 2020.

Industry

  • China’s crude steel output increased by 5% to a record 1.1 billion tons in 2020 according to data from the Chinese National Bureau of Statistics. Production of finished steel products rose by 8% to a record 1.3 billion tons, while pig iron output rose to 888 million tons in 2020. Strong demand saw steel imports rise 64% year on year to 20 million tons – the highest level since 2005.
  • China’s steel production capacity and output is forecast to continue to increase in 2021, supporting continued strong demand for iron ore and metallurgical coal. Sales revenue of Chinese steel companies rose by 11% in 2020, according to the China Iron and Steel Association (CISA).

Infrastructure

  • Investment in water conservancy facilities hit a record RMB 769.5 billion (A$150.8 billion) in 2020, according to the Chinese Ministry of Water Resources. A$29.6 billion of special local government bonds were used to finance water conservancy projects in 2020, almost six times the amount in 2019. The increased investment and range of funding sources may provide new opportunities for Australian firms as more new projects come to market.

Health & beauty

  • Under the national Healthy China 2030 strategy, the healthcare services industry will become one of the nation’s key future industries. Key areas for long term development include: medical services in high-end and specialty medical institutions; the use of internet technologies to bridge health services gaps and support communities; and medical services for the elderly.
  • The National Health Commission has set guidelines for the management of public hospitals that emphasise the importance of quality over quantity in service delivery. Modernisation presents opportunities for Australian training providers that specialise in hospital management. Until now, providers have generally targeted China’s private hospitals when pursuing training opportunities.
  • The Chinese government has stated that it is attaching greater importance to private medical institutions. This presents opportunities for Australian healthcare providers and support services. Chinese government support for private medical services has focused on nursing, mental health, rehabilitation and other allied health fields.
  • On March 22, Premier Li Keqiang said China would welcome foreign aged care products and services. There are over 260 million people in China aged over 60. China's aged care industry is regarded as a significant ‘sunrise industry’. A trend in recent years has seen industry players increasingly partnering with China’s insurance sector as a means of packaging and marketing products to senior citizens
  • The COVID-19 pandemic has resulted in growth in China’s medical devices industry, according to the China Association for Medical Devices Industry. The number of enterprises, products and patents have all risen substantially. Demand for medical devices in China will continue to offer opportunities for Australian companies.
  • Famous Weibo influencer, Grace Chow, has released a new brand of reasonably priced, ‘clean’ cosmetics. This appears to reflect demand for a healthier lifestyle, including sustainable products with a low environmental impact. The idea of ‘clean cosmetics’ is still nascent in China and this provides an opportunity for Australian brands to leverage their position in the Chinese consumer zeitgeist.

Freeports

  • Regulations to expand market access for foreign investment in Hainan Free Trade Port have entered into force. This creates openings in value-added telecommunications, education, mining and exploration for rare earths, radioactive materials and tungsten.
  • The Free Trade Port offers a preferential 15% corporate income tax rate in numerous industries, including tourism, exhibition services, quality inspection technology services, shipping-related financial services and new energy vehicle manufacturing.