The Commencement of ChAFTA is Around the Corner

The Australian Senate passed the China Australia Free Trade Agreement (ChAFTA) legislation on 9 November 2015, giving it official approval of Australian legislative institution. As long as permission is issued by the Chinese counterpart, the commencement of ChAFTA is around the corner.  In the annual meeting on 21 November 2015, the Chinese Premier Li Keqiang and the Australian Prime Minister Malcolm Turnbull promised the two countries would spare no efforts in bringing ChAFTA into force by the end of this year. Very likely, the agreement will come into effect this December as scheduled. 

 

Australia is the second largest destination for Chinese overseas investment, second only to Hong Kong. Chinese direct investment to Australia increased from USD 587 million in 2005 to USD 3.46 billion in 2013, with an average increase rate of 54.3%. By the end of 2014, various Chinese investment to Australia had accumulated to USD 74.94 billion, including direct investments of USD 19.95 billion. Chinese enterprises have historically invested mainly in resource and energy industries such as mining and oil & gas exploitation, among which investment in mining accounts for two thirds. For Australia, China is not only  the largest trade partner, the largest exporter and importer, but it is also the home of largest number of (largest source of) overseas students in Australia and the largest source of tourist income. Undoubtedly, China has a great influence on Australia's economic and trade growth. 

 

In return, Australia acts as an important first market for Chinese enterprises that are venturing into the preliminary stages of globalization. Besides mining, other key investment areas in Australia include infrastructure, e-commerce, clean food, transportation, telecommunications and finance. Soon after the completion of substantive negotiations of ChAFTA clauses in December 2014, a group of more than 20 prestigious Chinese entrepreneurs visited Australia in search of investment opportunities. The Chinese government encourages domestic companies to participate in Australian construction projects of railways, roads, water conservancy facilities and so on. 

 

Currently, both countries are on the road of economic transformation. Chinese consumption structure is shifting from material-oriented consumption to service-oriented consumption, while foreign trade is changing from the trade of goods to the trade of services. In Australia, the mining trade that was once prosperous is declining due to the falling price of bulk commodities. The government hopes to shift the economic focus from mining to services and stimulate the development of the non-mineral economy.

 

In this context, a comprehensive, quality agreement like ChAFTA that will take effect in the near future would definitely promote Sino-Australian trade to a closer and more favourable level, bringing in more actual benefits to the two countries.

 

Please take a look at our ChAFTA page for information about how Fragomen is supporting these initiatives.