Australia-China reaches a new ChAFTA - Morgan Wealth Management Group

June 24, 2015

Australia and China have this month signed the China-Australia Free Trade Agreement (ChAFTA). China is Australia’s largest two-way trading partner in goods and services. Once in force, ChAFTA will result in the removal of tariffs on over 85% of Australian exports, with this figure expected to rise to 95% upon full implementation of the agreement in four years.

The major Australian beneficiaries:

Agriculture, with the progressive elimination of tariffs on dairy, meat and wine.
Resources and energy, with 92% of exports able to enter China duty free and most remaining tariffs to be eliminated within four years.
Services sector, with new or greatly improved market access for education suppliers, Australian banks, insurers, law firms, health care providers and general professional services.

The trade deal has been positively received domestically and both sides may feel they have come off as winners. China needs to meet its future food needs and food security and this deal helps give it the best possible access to one of the largest agricultural producers in Asia. China also needs international expertise to help lift the standard of the country’s service sector and it is in their interest to seek experienced partners to facilitate this.

Concerns around Chinese investment in Australia may be piqued as the threshold for Foreign Investment Review Board screening of Chinese investments in ‘non-sensitive sectors’ (ie. excludes telecoms, defence, agriculture and media) rises from $252m to $1,094m. The granting of additional rights which allow a greater number of temporary migrant workers on local projects with major Chinese investment may also cause concern.

The ChAFTA will come into force once the legal and parliamentary processes have been passed in Australian and China. Both countries will review the agreement in three years. ChaAFTA marks the signing of new free trade agreements with our three major export partners in the region, following the recently settled agreements with Japan and Korea.