Cold war mindset, China says, as it shuts economic dialogue

China’s key economic planning department has suspended a diplomatic channel for economic discussions with Australia, although the impact could be minimal.

It’s the latest escalation of the trade and economic dispute between Australia and its biggest export market, with an ongoing series of tariffs and other restrictions levied by the Asian giant last year.

In recent weeks, the federal government has used new powers to shred treaties by the Victorian government with China.

Today, China’s National Economic Development and Reform Commission said it would indefinitely suspend all activities under the China-Australia Strategic Economic Dialogue, a mechanism through which ministers meet for trade and investment talks.

“Recently, some Australian Commonwealth government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination,” the commission said in a proclamation released today.

The dialogue would be suspended, the commission said.

But the economic impact looks to be limited.

"The Strategic and Economic Dialogue with China has not been held since 2017,” Perth USAsia Centre research director Jeffrey Wilson said.

“Therefore, moving from a de facto to a de jure suspension makes no material difference to bilateral communications.”

Consultancy Wood Mackenzie senior economist Yanting Zhou said there were no projects related to the natural resources sector under the framework.

“However, China’s announcement to suspend activities under this framework indicates an escalation of the China-Australia political dispute,” Ms Zhou said.

The dispute would continue to impact Australian commodities, she said, through discouraging Chinese investment, and continuing import restrictions.

But WA’s $92 billion a year iron ore shipments to China should be largely unscathed.

“China is unlikely to ban imports of Australian commodities which they rely heavily on as it will impact the domestic economy,” Ms Zhou said. 

“Iron ore is one example. 

“The government is more likely to raise the administrative cost for importing commodities from Australia if they want to take action.”

Nonetheless, China would stay strong.

“Given the strong position that the Chinese government is demonstrating and the Chinese economy’s manageable reliance on Australian supply, it is unlikely to back down before the Australian government does,” Ms Zhou said.