The Australia-China Resources Relationship
PARLIAMENT HOUSE, CANBERRA
** Check against delivery **
Good afternoon ladies and gentlemen and thank you for the opportunity to speak to you about Australia's resources relationship with China.
There are few topics of greater importance to either country and I welcome the opportunity today presents, especially with so many Australia China Business Council members here.
The Australia China Business Council is leading the way in nurturing Australia's fast-growing and highly valued commercial relationship with China.
The Prime Minister is looking forward to visiting China in April to build on the long and highly valued relationship we enjoy with our fastest growing major trading partner.
China's sudden demand for resources took the world by surprise a few years ago.
Since then, this sustained demand has created enormous flow-on effects in resource-rich countries such as Australia.
Opportunities have arisen for Australian resource companies to make a substantial contribution to China's economic development, with benefits for Australia's own economic growth.
I would like to talk today about the basis of our resources relationship with China:
- China's growing investments in Australian resource projects has contributed to the development of the sector in Australia;
- the important bilateral work going on in the Australia-China Free Trade Agreement negotiations; and
- the close cooperation we have established with China on development opportunities, including cooperation with China on clean energy; improvements in health and safety standards in the Chinese mining sector; and our growing uranium and natural gas trade with China.
Australia is in an ideal position to contribute to China's economic growth both as a reliable source of high-quality raw materials, and as a provider of the many services required to develop the Chinese resources sector.
China is now Australia's largest resources trading partner, and our second largest trading partner after Japan.
Australian exports to China were worth $23.6 billion in 2006-07.
This is 26 per cent above the previous year and almost double the value of our exports to China only three years before.
Much of this increase is due to the unprecedented growth in demand for raw materials by China and the impact this demand has had on commodity prices.
The resources component of our exports to China totalled $13.8 billion.
Let me give you a few examples to indicate the size and scope of this trade.
Iron ore led the way, with exports in 2006-07 worth $8.4 billion. This was more than one-third of the value of our total exports to China.
- Copper ore exports to China were worth $915 million.
- Coal exports were worth over $500 million. Australia's coal exports to China have increased more than six fold since 2000, making us now the largest foreign coal supplier to China.
- Nickel ore exports were $333 million, with nickel metal exports worth an additional $487 million.
China is also growing in importance as a market for uranium and liquefied natural gas (LNG).
These examples show a strong and growing resources trade relationship, built not only on Australia's high-grade resource base, but equally on the reputation of Australian suppliers for efficiency and reliability.
This is not something we can take for granted, however.
As a nation, we must ensure future investment in the infrastructure necessary to maintain and improve the efficiency and reliability of our export supply chains.
Our regulatory frameworks must encourage this investment.
Investment in skills, training and greater workforce participation is the other great challenge facing our resources sector.
It is also a great opportunity for us to advance the social and economic inclusion of Indigenous communities, many of which are located on the doorstep of Australia’s resources industry.
The resources trade is making a substantial contribution to China's industrial development, but it is only one part of our resources relationship with China.
As well as being Australia's major trading partner, China is a significant and growing source of investment for the Australian resources sector.
The Australian Government welcomes foreign investment.
Moreover, this support of foreign investment is longstanding and bipartisan.
Australia’s foreign investment policy assesses investment proposals in a transparent and non-discriminatory way.
To further increase transparency the Treasurer recently released the long-standing guidelines used by the FIRB to assess foreign investment proposals.
Open and transparent trade and investment frameworks are the key to investment confidence in our nation.
I hope that the growing investment flows between Australia and China will continue in a mutually beneficial way to allow the development of our resources sector and to help meet the growing needs of the Chinese economy for our resources.
Improved opportunities for commercial activity across the entire minerals and energy sector are central to the Australia-China Free Trade Agreement negotiations.
Given China's importance as a trading partner and the opportunities open to Australia to contribute to China's growth and development, it is vitally important that we get the FTA right and conclude an agreement that is commercially meaningful, mutually beneficial, and forward looking.
While Australia's negotiations are led by the Department of Foreign Affairs and Trade, the Department of Resources, Energy and Tourism has a key role in developing Australian positions on resources issues.
Australia and China already have a significant bilateral and regional relationship in many areas of the resources sector.
Australia is working closely with China and the other member countries of the Asia-Pacific Partnership on Clean Development and Climate (APP).
One of our great achievements is the Coal Mine Health and Safety project which has led to an MOU between Australia and China and a coal mine safety demonstration project at Xuandong.
This project will showcase world’s best practice in emergency response systems, technology, training and education in risk management and gas monitoring.
APP has also been a great vehicle for clean energy technology sharing.
I am pleased to note that the Australian Government has committed more than $45 million to clean development projects involving China.
This includes four projects in the cement sector – cogeneration from waste heat off the clinker cooler; use of sewerage sludge as a fuel for the cement kiln; trialling hazardous wastes as fuel for the kiln; and the Cement Centre of Excellence.
This relationship is very important given that China accounts for half of the world’s total cement production.
We are also working together on clean coal technologies including the demonstration of post combustion capture at the Gaobeidan power station near Beijing.
Cooperation on developing clean coal technologies acknowledges that Australia and China face similar challenges arising from our reliance on coal-fired power generation.
Our two nations are partners in the fight against pollution and climate change.
In addition to the development of clean coal and renewable technologies, Australia is an increasingly important supplier of clean energy resources such as natural gas and uranium for nuclear power.
Australia already supplies China's only operating LNG terminal, in Guangdong Province, through a landmark deal negotiated between the North West Shelf and the China National Offshore Oil Corporation (CNOOC) in 2002.
Since shipments to Guangdong commenced in 2006, China has become Australia's second largest export market for LNG.
Australia's LNG deal with China will reduce China's emissions by seven million tonnes per year, a very significant contribution to global greenhouse gas abatement.
Australia's LNG trade with China is set to grow in the next decade, with recent announcements of supply deals with PetroChina by Woodside Energy and Shell.
These newdeals point to a very bright future for the Australian LNG industry in which China will play a central role.
As everyone would be aware, Australia is home to around 27 per cent of the world’s economically recoverable uranium.
The Australian Government's uranium policy is that uranium exploration and mining be approved subject to strict environmental, safety and regulatory requirements.
Uranium sales will only be made to countries that are a party to the NNPT and have a bilateral safeguards agreement with Australia.
We are committed to mining uranium with safe hands and supplying it to safe hands.
The bilateral agreement between Australia and China is world’s best practice with respect to nuclear safeguards and it provides a benchmark for future uranium supply agreements.
The Australian Government is very supportive of industry-led initiatives aimed at enabling the further growth of Australia's uranium sector and to meet growing global demand associated with the growth in nuclear power generation internationally.
There are active uranium mine developments and expansions under way in South Australia and the Northern Territory and it is good to see those jurisdictions benefiting from the associated jobs, royalties and export earnings as a result.
Australia is well placed to meet China's uranium requirements in the medium to long term and the two nations will work closely together on non-proliferation safeguards.
The continuing strength of Australia's resources relationship with China is important for the longer-term prosperity of both countries.
The foundation of our future success will be open, transparent markets and regulatory frameworks for trade and investment.
The Australian Government is committed to working in partnership with China to achieve that outcome.
We want to work together to build on our strong relationship and this will be one of the Prime Minister's main objectives during his visit to China next month.
Thank you.