China's stock market volatility does not pose a major risk to Australia's economy or undermine a landmark free-trade deal struck with Beijing that remains on target to be ratified by Canberra before the end of the year, Australian Minister for Trade and Investment Andrew Robb said yesterday. "People have been saying now for months - major commentators - that there will be a correction in China. Well now there's a correction and everyone's flapping around as though the world has stopped," Robb told the South China Morning Post en route to Beijing and Shanghai on a trade mission with 35 Australian CEOs in tow. "The irony is that if there is some uncertainty - as there is, obviously - it is likely to encourage more investment out of China into Australia because we are seen as a safe haven," he added. Two months of mainland stock market turmoil has wiped around US$5 trillion from the value of share prices, sent shock waves around the world, led global policymakers to urge calm and seen Beijing act repeatedly to shore up sentiment and stem the risk of damage being done to the wider economy. Stopping wider economic rot is crucial to Australia as its biggest trading partner is China and its commodity producers are hugely exposed to the massive mainland market for mineral and industrial raw materials. Falling mainland demand growth has helped sink commodity prices to 16-year lows as investor fears of a hard landing have intensified for the world's second-biggest economy and the largest single driver of global economic expansion. Robb said it was clear that the mining boom, driven by massive construction needs in China and other emerging economies, was over. "It will underpin our economy, but the bonus, the big bucks that you get in a boom, have disappeared," he said, adding that the economic cycle was shifting into a second production-driven phase that Australian firms had invested for. "All of that investment led to a lot of our operators being at the bottom of the cost curve. They are still competitive and they are still making good profits in iron ore, coal, LNG (liquefied natural gas), because of the world-class facilities that have been built. They've also got contracts that are going to last 40 or 50 years," Robb said. The shifting demand profile of Australia's trading partners had made it imperative that the nation recalibrate its exports, he said. "We are diversifying into services in a substantial way and we think that services expertise is what the region is going to need," he said of Australia's Asia-Pacific emerging-market trading partners. Around 1 billion people are expected to join the ranks of urban residents across Asia over the coming decade, ramping up demand for consumer-driven services as well as construction materials as cities expand to cope with the influx from rural areas. That shift was also behind Australia's pursuit of free-trade agreements (FTAs) struck with South Korea and Japan as well as work being done to conclude deals with India, the Association of Southeast Asian Nations via its Regional Comprehensive Economic Partnership and, potentially, the Trans Pacific Partnership which Robb said remained within reach despite a current stalemate. Robb described the FTA with China as the biggest done with a developed country and had opened the closely guarded services sector. Robb and his mainland counterpart, Commerce Minister Gao Hucheng, inked the deal in June. It has received vocal opposition in Australia since from unions and other groups who say the agreement will cost Australian jobs by allowing cheap imports of Chinese labour. Some Australian commentators believe the criticism could derail the parliamentary ratification the FTA still needs. "We are still 150 per cent committed to it as a government," Robb said. "We are into our 25th year of uninterrupted economic growth and a lot of that is off the back of what is now a very, very open economy. We have benefited from this very open engagement with the world." Meanwhile, he said, Canberra was keeping Beijing briefed on progress and so far has not had any concern raised about the risk of it failing to be approved by parliament.
