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Deputy Consul General Dr. Liu Yutong's Speech at 2014 Mid West Economic and Resources Summit
2014/09/26

Honorable Mr. Carpenter, Mayor of Geraldton,

Ladies and Gentlemen,

Good Morning,

It is my great honor to be invited to this brilliant city of Geraldton to attend 2014 Mid West Economic and Resources Summit and it is such a great pleasure to catch with many old friends. At the request of the organizer of the summit, I'm going to discuss with you about two topics, one is about the process and prospect of China-Australia Free Trade Agreement Negotiations (FTA), the other is my views on the iron ore price slump and the prospect of Australian mining sector.

Deputy Consul General Dr.Liu Yutong addresses 2014 Mid West Economic and Resources Summit

First, China-Australia FTA, the major engine for upgrading bilateral economic and trade cooperation. Many Australian friends have paid much attention to the process of China-Australia FTA Negotiations from the beginning of this year. There have been more than 21 rounds of negotiations since it was launched in 2005. We all look forward to the signing of the agreement at an early date, which will inject new power to China-Australia economic and trade cooperation. It is also my hope that the China-Australia FTA Negotiations could make breakthrough.

I remember that last September, I was present at a lecture at UWA by Minister Bishop who was to take office soon. Due to the intensive election campaigns, she could hardly speak because of sore throat. Speaking of China-Australia FTA Negotiations, She was very emotional, saying that Australia and New Zealand almost started their FTA Negotiations with China at exactly the same time, but New Zealand had reached agreement with China in 2008 and greatly benefits from it. Yet the Australia-China Negotiations are still ongoing but the agreement seemed far beyond reachable. This is hard to accept. Australia must try hard to speed up the Australia-China FTA Negotiations.

I was deeply impressed with what Minister Bishop said. Time flies, one year has passed, how things are going? We noticed quite a few positive signals. After attending China-Australia Strategic Economic Dialogue in China this June, the Minister for Trade and Investment Mr. Andrew Robb expressed that "The conclusion was it was do-able this year, it could be completed and both governments are determined to bring it to completion later this year". When Chinese Foreign Minister Wang Yi attended China-Australia Strategic Economic Dialogue in Australia two weeks ago, he expressed that China and Australia have reached consensus and are willing to speed up the efforts to push forward the FTA Negotiations and it is expected to be signed within this year. What I have learned is that solid progress has been made in many areas in China-Australia FTA negotiations, now the two taskforces are trying to speed up consultations and conclude the negotiations within this year.

Ladies and Gentleman, dear friends,

China is Australia's largest trading partner at present. Half of china's beef and iron ore imports come from Australia. Australia's dairy products, agriculture produce and premium textiles are very popular in China. The total volume of bilateral trade in goods and services surpassed $150bn in the year 2013, accounting for over 20% of Australia's total foreign trade volume. Australia's exports to China was $100bn, its balanced trade surplus was $50bn. Chinese Ambassador to Australia Mr. Ma ZhaoXu pointed out that of every $3 of Australia's exports revenue, $1 comes from China. Australia's balanced trade surplus with China increases $13,400 for each family every year, the price of a car. It could be said that the China-Australia trade relations have reached a historical height.

China-Australia FTA is a big issue in bilateral relations. It has important and far-reaching significance to consolidating and strengthening China-Australia strategic partnership, deepening bilateral economic and trade cooperation for the benefit of our two peoples. If China-Australia FTA negotiations could be concluded smoothly at the end of the year, it will become a main engine for lifting the bilateral economic and trade cooperation and will boost the economic and trade ties of the two countries to a brand new historic period. Apart from working together in the traditional area of energy resources, education, tourism, China and Australia will expand cooperation in agriculture, service industry, finance industry and other more broad areas. There is more space for China-Australia economic and trade cooperation and the future for cooperation is brighter. Let us wish China–Australia FTA negotiations make breakthroughs at an early date.

Second, my views on the consecutive iron ore price slumps

Not long ago, the international iron ore price dropped below $90 per barrel, which caused big concerns of Australian politicians and businessmen. It's true that the Western Australia State government's tax revenue decreased largely due to the reduction of iron ore prices. There may be a new round of shuffling in this sector because of the price decline. In my view, the price drop is not only a wind vane, but also a double-sided sword, the reaction is both positive and negative. I have 3 points of views in this regard:

Firstly, the international iron ore price drop is the normal reaction according to the slowdown of International economy, a demonstration of normalization of iron ore price. Over the past months of this year, the global economy recovers slowly, the growth is sluggish. The major western economies, in particular European economy is generally depressed, the emerging economies are growing slowly as well and the demand in international iron ore market reduces substantially. The iron ore price decline is the normal market reaction from one perspective, but on the other side, it reflects the unreasonable and overvalued high price of iron ore a couple of years ago. I always hold that the long term high price expectation in the mining sector is a fancy dream. It is neither fair nor sustainable for the iron ore price to maintain high level. The big slump this time is largely a result of market demand and oversupply internationally. Yet it is also a sign showing that the price has returned to normal.

Secondly, while the iron ore price suffers great reduction, the capacity of the western Australia's mining economy to recover and adjust itself is quite strong. Big manufacturers such as BHP,RIO TINTO,FMG and others have accurately foreseen the drop tendency of iron ore price and made good preparation for it. By increasing production capacity and controlling cost, those iron ore giants have either elevated or maintained their profits. There is a sign of recovery for China's iron and steel industry. According to the statistics of China Iron and Steel Association, the accumulated losses of China's large and medium sized iron and steel businesses declined by merely 8% over the first half of this year. It is believed that the price slump of iron ore and other raw material is bigger than the price drop of steel and iron. Therefore China's iron and steel industry might narrow the gap of losses. This is a good news for the sustainable development of China-Australia mining cooperation.

Lastly, facing the difficult situation of mining economy slowdown, China and Australia should share weal and woe and work together to overcome the difficulties. Over the past decade, there were a number of Chinese enterprises investing in Australian mining sector during the period of buoyant iron ore price, contributing significantly to Australia's mining boom. However, at present, almost all of them are facing big losses. I suggest that the economic department of WA earnestly pay attention to the difficulty and appeal of Chinese enterprises by providing more efficient support and assistance to their investment. Meanwhile, more actions are needed to fight against the comments and behaviors harming China-Australia economic and trade cooperation and thus to safeguard the cooperation fruits which are not easy to earn.

Dear friends, ladies and Gentlemen,

Mid western region plays a significant role in Australia's mining sector, it is also an important place attracting Chinese business investment. In recent years, the local economic development was restricted by lack of railways and ports or other infrastructure facilities. China and Australia have been looking for solutions.

Over the past year, Premier Barnett paid visits to China several times to push forward OPR railway project, hoping to get active involvement of Chinese businesses. Chinese government and businesses attach great importance to the project. We are willing to keep close communication and coordination with Australia on relevant projects. We also hope the Australian government could prioritize project plan and increase capital and technology input, lead in the effort to strengthen communication and coordination and accomplish the project at an early date on the basis of cooperation and win-win result, breaking the infrastructure bottleneck that restricts the mid-western regional development.

I'm confident that with the continuous enhancement of China Australia strategic partnership, the orderly progressing of FTA Negotiations and the gradual improvement of infrastructure facilities in mid-western region, more Chinese businesses will be interested and investing in this region. China-Australia's future cooperation in this region will be expanded to new energy, science and technology, aquatic products, agriculture, tourism and many other areas. The development prospect for the Mid Western region will be even brighter. I look forward to working together with all of you present here to make greater contribution to promoting mid western regional development and the friendly cooperation between China and Australia. Thank you !

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