China’s great pump and dump of Aussie farmers

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I noticed something quite interesting on Friday when I was looking into the latest declaration of war on Australia by China, in cotton.

Notice that over the past two years there has been an extraordinary boom in exports of foodstuffs to China. It is not clear why this is the case:

  • it predated the FTA though continued afterward;
  • it transpired even as political relations deteriorated from the start of the Sam Dastayari affair;
  • it transpired throughout the ramp-up of the Trump tariff war.
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It could simply be the fruits (if you’ll pardon the pun) of the developing trade relationship and Chinese consumer preferences for good Aussie produce. It might Australians benefitting from the trade war hostilities themselves as China displaced the US with us. It might be entirely innocent.

But little passes in China without some kind of central planning or approval. And I am wondering if we weren’t on the receiving end of economic coercion earlier than we all thought. Was the CCP buying Aussie farmers and food industry hand-over-fist for the past three years of deteriorating relations to split them politically from the Coalition?

Now, the friendly mask has dropped, and the great pump of Aussie farmers and food manufacturers has turned into the great dump. All that sudden largesse is going out again like the tide, very clearly to wedge agribusiness interest from the Coalition with the goal of driving Australia from ANZUS.

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I don’t have the answer on this one. But it does serve as a clear warning to all exporters to China. Your product may be above all a political exchange, of goods in exchange for little bits of freedom, so be very careful about becoming too reliant on a single market that can turn off the tap overnight because your government and fellow Australians refuse to bow down and serve its evil interests.

In the end, that’s the good news. Commodities are fungible and will always find an alternative market, especially as the CCP leaves a supply hole elsewhere as it pivots about looking for like-minded tyrannies to fund.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.