CHARTS: Australia is increasingly reliant on China for its own economic prosperity

We’ve all heard the saying “when China sneezes, Australia catches a cold” (or pneumonia in some people’s minds).

It’s in response to the symbiotic relationship that exists between the two nations. China needs Australia to supply it with raw materials to help fuel its huge infrastructure requirements while Australia, as a major commodity exporter, needs the Chinese economy to remain strong in order to maintain its own economic prosperity.

We know the relationship between the two nations is important, and growing, but just how important is it?

UBS, in an excellent research note released overnight, investigated the trade relationship that exists between China and Australia.

It’s large, and increasingly important, particularly for Australia.

In 2014, Australian exports to China totaled $US80.777 billion, down 11.1% on calendar year 2013. Despite the decline, as a share of total Australian exports, it equated to 33.6%.

Expressing the figure in another way, it represented 5.6% of Australian GDP.

With a decline of 11.1%, no wonder Australian economic growth struggled to gain traction last year.

The chart below shows how the export value to GDP ratio of Australia compares to other major nations. It is clear that as a percentage of GDP, Australian exports to China are growing rapidly. In 2014 they equated to 5.6% of Australia’s economy, up from 1.2% only a decade earlier.

At 34%, as a percentage of total exports, the figure for Australia was only overshadowed by Taiwan which sent 39% of its total exports to China.

They’re some big numbers, and clearly Australia is increasingly reliant upon China for its own economic prosperity. Keeping this in mind, the analysts at UBS suggest commodity “exporters should brace themselves for the impact of weakening China demand this year”.

Glenn Stevens and Joe Hockey will be hoping that’s not the case.

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