Chinese tensions put pressure on Australian companies

Chinese tensions put pressure on Australian companies

For thousands of years, Indigenous Australians have relied on the sweet oysters that grow on the east coast of the country as an important source of protein. Now, a start-up supported by a Chinese port owner wants to transform the shellfish into a global luxury food brand for the Asian market.

However, Sydney-based East 33’s grand scheme has been hampered by a growing trade dispute with Beijing that threatens up to A $ 6 billion (US $ 4.3 billion) of Australian exports to China comprising a range of products from Cover lobster to wine.

“The Sydney Rock Oyster should be our native version of French champagne or beluga caviar – it’s about premium, heritage, rarity and provenance,” said James Garton, co-founder of East 33.

Mr. Garton spent three years building the first sales channel for Australian oysters to China. However, geopolitical tensions have forced him to suspend his Chinese efforts on the advice of his partner Xingqi Gao, the founder of Shanghai Changxing Fishing Port, which owns an 8 percent stake in East 33. Instead, the company will initially focus on alternative Asian export markets.

It is very clear that Beijing is ready to punish Australia through the use of trade instruments

China is Australia’s largest trading partner, with two-way trade valued at A $ 252 billion last year. However, a deepening diplomatic dispute following Canberra’s call for an investigation into the Covid-19 outbreak in Wuhan shows the cost of the anger at Beijing – and creating havoc for businesses.

Beijing has imposed punitive tariffs on Australian barley, restricted beef imports and launched an anti-dumping investigation into wine exports. Chinese importers have warned their Australian partners that wine, lobster, wood, sugar, coal and copper could face trade disruption from last Friday. This is based on oral information from the Chinese authorities.

Last week, customs officials at Shanghai Airport withheld a shipment of A $ 2 million lobster while new health and safety checks were carried out. The delay resulted in spoilage and loss of some products.

A single oyster can be sold in China for $ 20. © Courtesy of Sefiani Communications Group

“Not all the rumors that have been floating around have been proven to be true, although there has been widespread talk of total bans on Australian imports, etc.,” said Simon Birmingham, Australian Trade Minister.

“We watched closely and see that the products were still flowing over the weekend.”

Canberra has asked Beijing to clarify new measures, but relations have deteriorated so badly that Mr Birmingham has admitted that his Chinese counterpart is not returning his calls.

Ironically, Beijing’s trade rift with Australia coincided with the China International Import Expo in Shanghai, an event designed to demonstrate the nation’s commitment to opening up its economy.

“It is very clear that Beijing is ready to punish Australia through the use of trade instruments,” said Hugh White, professor of strategic studies at the Australian National University.

“And I think the Chinese are deliberately letting us guess with mixed messages from Beijing. We hear that these bans were imposed through confidential instructions given in private meetings by local officials, but people in Beijing say this has nothing to do with them. You are trying to keep Australia off balance. “

The imminent threat to trade has forced some Australian companies to delay deliveries to China, but longer term analysts said this would force companies to look for alternative markets in Asia.

“Some wine exporters have already started moving shipments to China as they await clarification on rumors and speculation,” said Tony Battaglene, executive director of Australian Grape and Wine, an industry group.

However, it will be difficult for wine producers to find alternative markets. China accounted for A $ 1.2 billion of the country’s wine exports of A $ 3 billion a year while Covid-19 had weighed on global demand, Battaglene said.

Iron ore, by far Australia’s most valuable export to China valued at more than A $ 100 billion a year, was left untouched by the turmoil, due to Beijing’s inability to source the vital ingredients of steelmaking elsewhere. However, analysts warn that China’s plans to build green field iron ore mines in West Africa could reduce its reliance on Australia.

“There are few alternative sources of iron ore supplies in China this year or next. But if we look forward to a decade or two, Beijing has many options,” White said.

The rise in trade tensions came just a month before East 33 was about to list on the ASX and raise A $ 32 million to fund its Asian expansion.

Mr. Garton said the board had followed Mr. Gao’s advice to postpone a launch in China – where oysters can sell for up to A $ 20 apiece – due to “geopolitics” and instead move to Singapore, Japan, Taiwan and South Korea to concentrate. However, he hopes that bilateral relations will stabilize and China will reopen.

“The big story here is about the subtle context of the geopolitical side [fight] between Australia and China. And we don’t want to take part in this game. . . Let’s let the big guys sort out what they’re doing there and we’ll figure it out. ”