Australia, China Sign Trade Pacts Worth $8.8 Billion as Xi Jinping Visits

Australia and China signed new accords worth more than A$10 billion ($8.8 billion), expanding their energy and resources trade ties, Prime Minister Kevin Rudd said during a six-day visit by Vice President Xi Jinping.

“Our relationship stretches back a long time, but we have a strong future as well,” Rudd told an audience of 600 people at the Australia-China Economic and Trade Cooperation Forum in Canberra after holding talks with Xi, a likely successor to President Hu Jintao.

China is Australia’s largest trading partner, with annual two-way commerce worth A$85.1 billion in 2009, up 15.1 percent from a year earlier during the worst global downturn in 75 years, and comprising almost 17 percent of Australia’s total trade, according to the Department of Foreign Affairs and Trade website. Iron ore for China’s steel mills makes up half of the exports.

The accords include an engineering and procurement agreement between Fortescue Metals Group Ltd. and China Gezhouba Group Co. announced by the iron ore miner earlier today and a $1.2 billion agreement between Karara Mining Ltd. and China Development Bank Corp. for rail and port construction in Oakajee, Western Australia.

The development bank also reached an agreement with Aquila Resources Ltd. to expand coal and iron ore projects in the Pilbara in Western Australia. The accords include Telstra Corp., Australia’s largest phone company, becoming the preferred supplier to ZTE Corp. and an $8 billion coal project near Bowen in Queensland state that Rudd said will create A$4 billion in exports every year for 25 years.

Photographer: Ian Waldie/Bloomberg

Chinese Vice President Xi Jinping speaks during the Australia China Trade and Economic Forum lunch at Parliament House, in Canberra, Australia. Close

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Photographer: Ian Waldie/Bloomberg

Chinese Vice President Xi Jinping speaks during the Australia China Trade and Economic Forum lunch at Parliament House, in Canberra, Australia.

Broader Ties

“China still needs Australia,” said Chunlai Chen, a senior lecturer at Canberra-based Australian National University’s Crawford School of Economics and Government. Xi “is potentially very important -- maybe in the next two years he will be number one in China,” he added. “This visit was about providing reassurance, a guarantee, as part of a long-term strategy.”

The agreements were signed as Rudd fights for voter support for his proposed 40 percent levy on resource “super profits.” The levy, set to take effect from 2012 if Rudd wins a national election due by April, is opposed by companies such as BHP Billiton Ltd. and Rio Tinto Group that say it will limit investment and job growth.

Beyond Mining

“Our economic relationship with China is becoming so much more than just trade in resources,” Trade Minister Simon Crean said today. “The upwards trajectory shows no signs of slowing and this year two-way trade may well exceed A$100 billion.”

Xi’s visit follows tension after China rejected Rudd’s criticism of the secretive handling of industrial espionage charges in March against four Rio executives, including Australian iron ore official Stern Hu, who received sentences of between seven and 14 years.

Rudd said at the time China “missed an opportunity” to be transparent and give companies more confidence by trying parts of the case behind closed doors. “The Australian side should respect the result and should stop such irresponsible remarks,” China’s Foreign Ministry spokesman Qin Gang said March 30.

The two countries have “different societies, different systems as well as some differences of view,” Australian Foreign Minister Stephen Smith told the forum in Canberra that included Chen Yuan, chairman of China Development Bank, and Fu Chengyu, president of Cnooc Ltd., China’s biggest offshore energy explorer.

“Australia is committed to managing these in a straightforward and constructive way,” Smith said. The two countries established diplomatic ties in 1972.

Trade Talks

Australia is yet to sign a free trade pact with China, after the countries agreed in April 2005 to begin negotiations under former Prime Minister John Howard.

New Zealand clinched a free trade deal in 2008 and China has since overtaken the U.S. and Japan to become New Zealand’s second-largest trading partner behind Australia.

The next round of Australia’s trade talks is scheduled to be held in Beijing before the end of this month.

To contact the reporter on this story: Marion Rae in Canberra at mrae3@bloomberg.net

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