Most Australian importers and exporters believe that when negotiating trade and finance issues with Chinese buyers and suppliers, the Chinese are in the stronger negotiating position, according to the quarterly Citi Australian Trade Finance Index.
Five out of six exporters and importers believe that the balance of power in trade and finance negotiations lay with China.
The research showed that of the more than half of respondents, 83% believe China had the upper hand when negotiating on trade, while 17% said it lay with Australia. There was no statistical variance in the result from importers and exporters.
The Australia-China bilateral trade relationship was worth US$120 billion in 2011-2012, comprising US$77 billion in exports and US$43 billion in imports according to the Department of Foreign Affairs and Trade. China supplanted Japan as Australia’s biggest trading partner in 2007, and bilateral Australia-China trade broke through the US$100 billion barrier for the first time in 2011.
The Citi Australian Trade Finance Index is a quarterly survey of importer and exporter sentiment. This survey was conducted in January 2013 with CFOs, group treasurers and trade officers from over 864 Australian companies with turnovers ranging from A$25 million to over A$500 million.
Ashley Bakes, Citi’s senior vice president of treasury and trade solutions in Australia, said that the results clearly showed China’s power as a price maker when both buying and selling.
“It comes as no surprise that our exporters are highly reliant on Chinese demand in areas such as resources and agriculture and China is setting the price," says Bakes.
"Our importers, however, are also price takers. Chinese manufacturing now dominates areas such as electronics, computers, clothes and furniture because they are competitively priced. Without competition from other countries we are becoming increasingly dependent on China and this has shifted perceptions on the balance of power.”
The report also finds that engagement with the Chinese currency CNY continues to gather momentum. Respondents expected their CNY volumes to growth 18.0% in the next quarter, compared with a 15.9% rise in the first round.
The CNY results compare with an 8.3% forecast increase in the USD, compared with 7.1% in round one.
The Asia-Pacific region continues to be the focus for Australian exporters, with respondents expecting greater volumes to all of the regional markets – India, South Korea, the Rest of Asia, China and NZ/Oceania – while the scores for Africa, United States, Eastern Europe and Western Europe all fell.
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