China is trying to create some daylight in the relationship between USA and Australia while annoying USA by increasing Chinese influence in USA's back yard. China is becoming increasingly engaged in all parts of the world in development, finance and trade.
China is using same policy with beef as China lifts ban on Brazilian beef.
This is nothing new and mirrors what Japan did in the 1980s which may have been a factor in the economic malaise Australia suffered from 1980 to 2000.
Australia needs to diversify it's export markets as well.
Manufacturing in Australia is out of the question because it has never been commercially viable because the Australian dollar is bloated by resource export earnings lifting wages and other costs in Australia.
China diversifies resources away from Australia Quote:China will use its growing relationship with Brazil to pressure Australia into running a more independent foreign policy, according to analysts and academics, as Beijing seeks to use its economic muscle for strategic influence.
Chinese Premier Li Keqiang signed $US50 billion ($63.5 billion) worth of deals during a state visit to Brazil last week, including a loan facility to help iron ore miner Vale increase production.
In a sign that Beijing is increasingly looking towards Brazil for food and mineral commodities, China also pledged to lift a ban on Brazilian beef.
"If Australia gets closer to the United States we will see China increase its purchases from Brazil, while reducing its trade with Australia," said Wu Xinbo, Dean of the Institute of International Studies at Fudan University.
"The alliance between Australia and the US is a major constraint on the relationship between China and Australia."
Relations between Washington and Beijing have become increasingly frosty of late as the two super-powers clash over China's handing of territorial disputes in the South China Sea.
The US also angered China last week by accusing six of its citizens of industrial espionage, relating to sensitive wireless technology.
While Australia has largely stayed out of the intellectual property disagreements, Canberra was drawn into the South China Sea dispute after Washington said it planned to station B-1 strategic bombers in Northern Australia to counter Beijing.
China's state media has said this would be highly detrimental to relations between Beijing and Canberra, which had been smooth in recent months.
Li Xingchuan, President of the government-backed China Metallurgical Industry Planning Association, said a country's political relationship with Beijing was the most important factor in determining its economic relationship.
"Brazil has always been a good friend of China's and they run an independent foreign policy," he said.
"The Australian government is good but they always follow the US."
Spectre of trade rivalry
The spectre of greater trade rivalry between Australia and Brazil comes as China seeks to shore up security of supply in food and mineral commodities, while also ensuring it is not overly reliant on any one country.
Australia producers dominate the imported beef market in China and have benefited most from the ban on Brazilian beef since late 2012.
Australia supplied just over half of all the beef imported to China last year, but its market share is expected to decline after Premier Li announced the ban on Brazilian beef would be lifted.
With the financial backing from Beijing, Vale plans to lift its overall production of iron ore to 450 million tonnes by 2018 – from 330 million tonnes this year – a move likely to put further pressure on the already weak iron price.
"This is the kind of thing Japan did in the 1980s - spreading investment around the world to get as much supply as possible which then had an impact on prices," said Mark Beeson, Professor of international politics at the University of Western Australia. "China has been quite heavily influenced in this by Japan.
Despite all the talk of 'globalisation' and competitive pressures, China's part of an East Asian tradition where powerful states still try to shape an economic playing field that is often far from level."
As the iron price halved to below $US60 tonne over the last year Australia's big three miners – BHP Billiton, Rio Tinto and Fortescue Metals Group – increased their market share in China at the expense of local players and Vale.
Australian producers accounted for 59 per cent of China's imported iron ore last year, according to China's Customs Bureau. This is up from 51 per cent in 2013 and compares to just 18 per cent market share for Brazil last year.
Mr Li said it was too early to tell by how much Brazil would increase its iron ore market share in China, but thought it should receive a boost from the deal to increase supply.
"The Australian government needs to work more closely with China. If there are many troubles in the political relationship how can the economic relationship be smooth?" he said.
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China using Brazil resources against Australia (Read 1234 times)
