(Bloomberg) -- Australia’s central bank chief Philip Lowe said his nation and China together can be a force supportive of an open global trading system.
Lowe, in the text of a speech to an audience containing numerous China experts in Sydney Wednesday, addressed the deepening economic ties between the two nations and the risks in the Chinese financial system. He said the relationship had “greatly benefited” Australia, but also China, meaning both sides have a strong interest in managing it well.
Together, the two nations can be “a strong voice for the importance of an open international trading system,” said the Reserve Bank of Australia governor, who has criticized the U.S.’s moves toward protectionist policies. “We will, of course, have differences from time to time, but we will surely be better placed to deal with these if we understand one another well.”
Those differences have come to the fore this week. China issued a fresh rebuke to Australia, saying it’s up to the government to get their relationship back on track. Ties have soured since December, when Prime Minister Malcolm Turnbull said reports of Chinese meddling with media, universities and lawmakers were a catalyst for tougher anti-foreign interference laws.
Lowe, who has called President Donald Trump’s trade tariff proposals “bad policy” and warned they could develop into a “very big shock for the global economy,” signaled the China-Australia relationship could be an area where Canberra and Beijing can stand side-by-side.
The RBA chief set out succinctly what’s at stake for Australia in its ties with China, which buys almost one-third of Australian exports, the vast majority resources. But he also pointed out how quickly other areas were growing:
- Over the past decade, Australia’s service exports to China have grown at an average annual rate of 15%
- Last year, 1.4 million Chinese visited Australia vs 400,000 a decade ago; Chinese visitors account for about 25% of total visitor spending Down Under, well ahead of any other nation
- About 200,000 Chinese students study in Australia, accounting for around one-third of Australia’s total education exports
- Over the past decade, the Chinese-born resident population in Australia has grown at an average rate of around 8% per year; people born in mainland China now account for 2% of the population
The stakes, then, are high. It makes sense for Lowe to seek common ground in the relationship, given Australia is the most China-dependent developed economy.
The governor noted that if a shock were to originate from China in coming years, “its origin is most likely to be in the Chinese financial system.” He went on to praise the steps China has taken to address financial risks, most crucially its preparedness to accept a lower economic growth target -- 6.5 percent in 2018 --to deal with the problem.
“We know from our own experience here in Australia that the journey of financial reform can be a bumpy one,” Lowe said. “We also know that this journey is well worth undertaking, and leaves the financial system stronger, more efficient and better able to serve the needs of the real economy. I look forward to the day when China will be able to reach the same conclusion about its journey.”
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