China update

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

27 November 2020

The Australian Government is aware that some Australian exporters are reporting issues with goods entering Chinese ports. For more information and support, visit Austrade’s critical trade updates page.

Key insights

Testing: Recent announcements by China of enhanced COVID-19 testing for imported cold chain food – including seafood –are causing further uncertainty for exporters from all regions. The latest controls on imported cold chain food are in response to recent reported detections of COVID-19 on the packaging of imported food from several countries.

Economic growth: October data shows China’s recovery remains on track. Industrial production remained strong, growing 6.9% year-on-year, unchanged from September. Investment in fixed assets has improved, led by infrastructure and property construction. Growth in retail sales also picked up, growing 4.3% year-on-year. Consumption is not yet back to normal, but results show that consumers are more willing to increase spending on services, including restaurants. 

Industries

E-commerce

Australian brands: In the first three quarters of 2020 China’s online retail sales were reported to beRMB 8 trillion (A$1.6 trillion), a year-on-year increase of 9.7%. Cross-border e-commerce imports were up year-on-year by 17%. Australian brands are seen as clean, green and manufactured to very high safety standards. 

Singles Day sales: Alibaba’s TMall and JD.com report significant growth in online sales for the November 11 ‘Singles Day’ Shopping Festival. Consumer sentiment towards Australian products during this event remained strong. Australia maintained its number four spot with Alibaba; Japan, the United States and South Korea topped sales. Over 2,000 Australian brands were represented.

Increased regulation: China’s internet companies are reported to be facing increasing government regulation. On November10, China’s State Administration for Market Regulation (SAMR) released draft new anti-monopoly rules that aim to stop anti-competitive practices by China’s major internet companies. 

Sustainable consumption: Chinese consumers are showing an increased interest in sustainable consumption. Alibaba’s Cainiao Smart Logistics Network is encouraging consumers to recycle their own packaging and has established approximately 80,000 recycling stations across China. Almost 100% of the packaging shipped from Cainiao warehouses is biodegradable. 

Energy & Resources

Iron ore: Customs data shows that demand for iron ore remained strong in August. Imports exceeded 100 million tonnes for the third consecutive month, with a slight easing from a record 113 million tonnes in July. August imports were up 5.8% year-on-yearby volume, but down 5.6% year-on-year by value at US$10 billion. China’s iron ore imports for January–August totalled 760 million tonnes, up 7.5% year-on-yearby value at US$70.6 billion. 

Coal: China’s import restrictions continue to constrain coal imports from all countries, and to supress prices. Strict implementation of import quotas saw China’s coal imports in August drop to just 21 million tonnes – down 35% year-on-yearby volume and 47% by value at US$1.4 billion. China’s total coal imports for January–August are now down to 2019 levels of around 221 million tonnes. They are also down 11% by value year-on-year, arguably finding equilibrium after record imports in the first half of 2020. 

Natural gas: China’s natural gas import volumes continue to grow but prices remain low. China imported 9.4 million tonnes of natural gas in August, up 12.4% year-on-yearby volume, but down 26.5% by value at US$2.5 billion. Natural gas imports for January–August totalled 65 million tonnes, up 3.3% year-on-yearby volume, but down 17.8% by value at US$22.7 billion.

Food & Agribusiness

Cherries: Australia exported 1,487 tons of cherries to China last year. This represents a drop of 7% year-on-year from the2018 debut season. Chile is the main competitor in the Chinese market: last season, Chilean exports were over 150 times Australia’s and pricing was lower. The first three weeks of January 2021 are expected to be the peak season for Chilean cherries in China.  

Abalone: Mainland China and Hong Kong remain strong markets for Australian abalone. In 2019 Australia exported over A$143million abalone products to world markets, including live, chilled and frozen abalone. Mainland China accounts for 56% of the total with Hong Kong taking 20%. At the end of July 2020, China had imported 305 metric tonnes of live abalone from Australia, a 33% decline from the same period in 2019.  

Health & Supplements

Wellness goods: Nutritional supplements and health food products have been among the best performing consumer goods through the COVID-19 outbreak. This is because consumers are looking to improve their overall health and well-being. According to the China Chamber of Commerce for Import and Export of Medicines and Health Foods (CCCMHPIE), imports of vitamins and supplements were up 32.1% year-on-year for the first half of the year, reaching A$2.81 billion. 

Australian exports: Australia was China's second largest supplier of nutritional supplements during the pandemic period with imports of A$600 million, up 22%. This means Australia lags only behind the United States, which supplied A$644 million of supplements.  

Technology

Gaming: China’s cloud gaming market is expected to exceed RMB 1 billion, or A$250 million in the next two years, according to 2020 Cloud Game Industry Survey Report released during ChinaJoy 2020. The industry’s annual growth rate is set to exceed 100%, with the rollout of 5G networks a major trigger. In China, many game-support services are still in their initial stages: these include software and hardware support for cloud game solutions; cloud game content creation; and cloud-game platform services. Cloud gaming will likely experience significant growth in the next 3–5 years.

Aviation

Cargo: China Southern has been granted initial approval from the Civil Aviation Administration of China (CAAC) to establisha dedicated cargo subsidiary — China Southern Cargo. The company will operate cargo and mail routes in China and globally.

Property 

Real estate: China’s real estate sales grew substantially in August, reflecting increased property investment in recent months. According to the China Real Estate Information Corp, sales by China’s 100 leading property developers rose 30.7% year-on-year to RMB 976.2 billion (A$195 billion) in August. This represents an increase from 25.7% in July. It also marks the fifth consecutive month of growth after the sector experienced a decline in the first quarter.  

Urbanisation & debt: Depending on the criteria used, real estate and property are estimated to contribute around 14% to GDP. This has increased from 10% five years ago as urbanisation rates have continued to rise. Property investment has also contributed to increased debt levels in recent years. This has forced authorities to implement measures aimed at limiting speculative real estate investment.

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