HSBC has welcomed the signing of a declaration of intent for a free trade Agreement (FTA) between Australia and the People’s Republic of China. The two countries have been in negotiation to conclude a deal since 2005.
“For the last decade, China’s economic momentum has given the Australian economy a heady uplift,” said Tony Cripps, chief executive of HSBC in Australia. “China is Australia’s largest two-way trading partner, our fastest growing source of foreign investment and one of our largest sources of demand for migration, education and tourism.”
Today China is the largest market for Australian exports with most of these concentrated in the mining sector. However, the FTA will remove trade barriers in other key sectors like services and agriculture, with tariff reductions across dairy, meat and wine exports as well as priority access for Australian service companies in China.
Cripps said: “Australia and China already boast a well-developed economic relationship and the FTA is set to further increase the trade and investment opportunities for both nations.
“The reduction in agricultural tariffs and the greater access to the Chinese market will pave the way for a new Australian export story linked to services and agriculture.”
“To fully grasp Australia’s FTA opportunity all you have to do is look across the Tasman. New Zealand was one of the first developed markets to seal an FTA with China. Five years later, China usurped Australia as New Zealand’s largest trading partner.”
HSBC estimates show if Australia’s agricultural exports to China were to rise over the next five years by the same proportion as New Zealand’s did in the past five years, they could account for 2.7% of gross domestic product GDP against the current 0.6%.
The FTA also brings significant investment opportunities as Australia’s Foreign Investment Review Board (FIRB) has lifted the threshold to A$1.087bn (US$950m/£610m) from A$248m.
Cripps said: “With the FTA reducing the foreign investment barriers for China, a greater share of China’s US$1.25 trillion in investment flows will ultimately head to our shores over the next decade. This is a boon for Australia as we rely on offshore capital to grow and China is indeed an active international investor.”
The change is expected to stimulate China’s relatively low overall stock of Australian foreign direct investment (FDI) of 1.3%. “HSBC believes the FTA will build on the already close relationship between our two countries and makes the prospect of continued economic prosperity for Australia more secure,” Cripps added.
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