ssessing the risks from Australia’s economic exposure to China

Abstract

This paper suggests Australia’s economic exposure to China creates three distinct risks: a Chinese growth shock that comes with a ‘hard landing’, a structural shift towards less import and natural resources–intensive Chinese growth, and the Chinese Government disrupting trade ties for coercive purposes. With external demand for Australia’s goods and services largely exogenous, the scope to mitigate these risks by reducing exposure to China, without resorting to costly market intervention, is limited. At the same time, the probability and scale of each risk should not be overstated. Further undercutting the case for an intrusive public policy approach is the fact that effective mitigation mechanisms exist for the Australian economy as a whole, as well as for many businesses.