China accounts for approximately 30 per cent of Australia's total exports — a concentration that makes the bilateral trade relationship one of the most consequential variables in Australian macroeconomic forecasting. The relationship deteriorated sharply in 2020 following Australia's call for an independent inquiry into the origins of COVID-19, triggering Chinese trade restrictions on a range of Australian goods. The partial restoration of that relationship since 2023 has been a significant positive development for the Australian economy.
What Was Restricted and What Has Returned
Chinese trade restrictions targeted barley, wine, beef, lobster, coal, timber, and cotton — products worth approximately $20 billion in annual export revenue. Australian exporters scrambled to find alternative markets, with varying success. Barley found new buyers in the Middle East; wine struggled to replicate the premium Chinese market; coal and copper recovered strongly as China's economic reopening drove demand. The lifting of restrictions on most categories through 2023 was a significant geopolitical and economic development.
Iron Ore: The Enduring Bedrock
Iron ore — Australia's single largest export, worth approximately $130 billion annually — was never restricted, because Chinese steelmakers have no viable alternative to Australian supply at scale. This dependence runs both ways: China needs Australian iron ore to make steel, and Australia needs China to buy it. The iron ore price, which traded above US$100 per tonne for most of 2024, is the single variable that most affects Australia's terms of trade and, through that channel, federal government revenue.
The Diversification Imperative
The 2020–21 experience exposed the risks of trade concentration. The government has pursued a diversification agenda, investing in trade promotion and supporting exporters to develop relationships in South-East Asia, India, and the Middle East. Progress has been real but slow — trade relationships take years to build, and China's combination of proximity, scale, and purchasing power is difficult to replicate elsewhere. Diversification is a long-term project, not a quick fix.
