The words “Diversification” and “China” are easy to say, and there’s a lot of people all over the world suggesting that their economies have become too dependent on China, but it’s a lot harder to actually do. The words “closing the gate after the horse has bolted” spring to mind!
Here in Australia, there’s a common view that our trade relationships should be a lot more diversified, with markets like India, Indonesia, Vietnam and other SE Asian countries often mentioned as being good places to start. But, as pointed out in this ACRI article, “even though Australia’s China hawks may fantasise otherwise, the demand comes from China. The diversification argument is undercut by two official Australian government reports:
The 2017 Foreign Policy White Paper calculated where the increase in purchasing power for Australian exports would come from through to 2030. Its conclusion was stark. Page 26 reported that growth in demand from China would be greater than that from the US, Japan, India and Indonesia combined. China’s rapidly expanding middle-class market simply swamps that happening elsewhere”
And the second report, on India’s potential, conducted by Peter Varghese, a former High Commissioner to India and head of the Department of Foreign Affairs and Trade, concluded “by 2035, Australia might export $45 billion worth of products and services to India. That’s good news for an exporting power such as Australia but that $45 billion,15 years off, should be seen in perspective. Only last year we exported more than $160 billion to China”.
Yes, diversification is a good thing, and the “don’t put your eggs in one basket” holds true. But it’s too late for that now. Australia has enjoyed the benefits of being tied to trade with China for the past two decades. Now we have to work very hard to hold on to it!