When China’s economy speeds up or slows down, Australia feels it quickly. Here’s why the two economies are so closely tied, and what to watch.
China is Australia’s biggest trading partner, and by a wide margin.
It buys roughly a third of Australia’s goods exports, more than any other country. Australia also buys a large share of its imports from China, from electronics and machinery to clothing and household goods.
The heart of the relationship is resources. Iron ore, the key ingredient in steel, is Australia’s most valuable export to China, making up more than half the value of everything Australia sells there. Australia also sends China large amounts of other resources and energy, such as lithium, copper and natural gas, as well as farm products like beef, wine, barley and seafood.
Services matter too. Before the COVID-19 pandemic, China was the biggest source of international students and one of the biggest sources of tourists, and education has long been one of Australia’s largest export industries.
How China’s economy flows through to Australia
Because so much iron ore goes to China, its price is closely tied to China’s steel production, which in turn depends heavily on construction and infrastructure. When China’s property and building sectors slow, demand for steel and iron ore can fall, and the price with it.
That has wide effects in Australia. Iron ore prices drive the profits of major miners such as BHP, Rio Tinto and Fortescue, which are among the biggest companies on the ASX and in many super funds. They also feed into the federal budget, because higher mining profits bring in more company tax and royalties for states such as Western Australia.
The Australian dollar is also sensitive to China. It often rises when Chinese demand and commodity prices are strong, and falls when they weaken, which is why it’s sometimes seen as a proxy for China’s economy.
The relationship has also been tested by politics. Between 2020 and 2024, China placed restrictions and tariffs on a range of Australian goods, including barley, wine, coal and lobster, before most were lifted as relations improved.
Australia has worked to broaden its trade with other markets, including India, Japan, South Korea and Southeast Asia. But China’s size means it remains central to Australia’s economic outlook, and Chinese growth figures, property data and steel output are watched closely in Canberra and on the ASX.
