Australia hostage to China’s confusing coal diplomacy

Shanghai | Diplomats were scrambling around the clock over the weekend to get some answers from China about the restrictions that have been imposed on Australia’s coal. To say there has been frustration at senior levels of the Australian government about the controls, which sparked panic on markets last week and sent the Australian dollar down 1 per cent, is an understatement.

Whether reports of an outright ban on Australian coal in the country’s north-east are true or not, the events of late last week are an uncomfortable reminder of how dependent our economy is on China. An increasingly fragile political relationship is not good news for miners, and the customers in China who are buying our commodities and want to be confident about the security of supply.

The opaque way Beijing manages restrictions on exports to prop up its domestic industries also makes it difficult for the Australian government to get clear answers.

Whether reports of an outright ban on Australian coal in China’s north-east are true or not, the events are an uncomfortable reminder of how dependent our economy is on China. AP

While traders in China are standing by reports that the port of Dalian has stopped accepting coal from Australia while continuing to allow product from Indonesia and Russia in, the motives for doing so remain unclear. Some believe the move is a political backlash, but seasoned diplomats note that the way the restrictions have been managed does not fit this theory and believe the whole thing has been a misunderstanding.

China first imposed the restrictions in late January although they did not become public knowledge until more recently. Despite some push-back around Australia’s ban on Huawei building 5G networks and criticism of Canadians being detained in China, the relationship was relatively smooth at the time.

Normally, if China is upset enough with Australia to start doing things like banning coal then Canberra would have some forewarning. This often comes in the form of angry editorials critical of Australia in state-owned newspapers. Compared to 18 months ago, the rhetoric towards Australia has been reasonably positive of late, with Beijing focused on spats with Canada and New Zealand and resolving the trade war with the United States.

Seasoned observers note reports that China had banned Australia’s coal would have served China’s interests by providing a timely reminder of its economic might. At the same time, China had to officially deny the ban was in place – as it did on Friday – because an officially sanctioned blockade would send the wrong signal to Washington, where China’s representatives are trying to negotiate a truce in the trade war with Donald Trump.

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