HONG KONG (Reuters Breakingviews) - A virus test could reveal just how healthy the relationship between China and Australia is. Fortescue’s chairman helped broker a controversial Canberra purchase of 10 million Covid-19 kits from Shenzhen-based genomics giant, BGI. It adds to existing diplomatic tensions. And yet over $150 billion of bilateral trade probably will endure, and maybe even expand.
The strains have been growing. That’s mostly down to accusations of Chinese political meddling Down Under and retorts of Canberra being a U.S. “lapdog”. Australia blocked telecom titan Huawei from supplying its high-speed 5G network because of security concerns. Prime Minister Scott Morrison also has called for an inquiry into the pandemic’s origins, a sore subject in China that sparked threats to boycott Australian goods. Beijing is also threatening to impose steep tariffs on barley shipments from Australia, typically worth over $500 million annually.
Mining tycoon Andrew Forrest is contributing to the mess with a contentious cross-border deal. He recently disclosed that his foundation helped the government secure enough Covid-19 tests from a Chinese company to triple Australia’s daily capacity, at what he claims was a discounted price because of his connections. It can hardly be surprising that Forrest also might want smoother relations with Beijing given $23 billion Fortescue’s interests in the People’s Republic.
Even seemingly benevolent business acts can raise eyebrows in the current climate, however. In this case, the supplier’s links to the Chinese government have attracted scrutiny. The Australian health department told Reuters the purchase was cleared by security agencies and privacy laws ensured that BGI would not have access to patient data. Moreover, in what was widely denounced as a PR coup for Beijing, Forrest brought a Chinese diplomat to speak at a government press conference.
Beyond the fracas, the deal ultimately underscores how commercially aligned the two countries are. China is Australia’s top trading partner, and despite the frosty politics, their bilateral trade jumped by a fifth last year. What’s more, Chinese demand for commodities, including essential steel-making ingredients, is on the rise, benefiting Australian miners including BHP.
In March, iron ore exports surged by a third from the previous month, to nearly $8 billion, helping lift Australia’s trade surplus to a record high. As Beijing and Canberra try to jumpstart growth, they may come to appreciate each other more.
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