1 Introduction

Iron ore is a globally important commodity and crucial to the steel industry. Australia leads the world in iron ore reserves, with China being its main importer. Although China has high iron ore reserves, it relies on imports, with 80% of iron ore coming from overseas. Australia's iron ore exports to China account for over 68% of its total exports, indicating a high degree of economic dependence between the two countries. The Chinese steel industry is affected by fluctuations in imported iron ore prices, and rising costs pose a threat to industrial safety. The Australian iron ore trade promotes domestic manufacturing and economic growth, and enhances international status. The trade of iron ore between China and Australia has a significant impact on the industrial development and economic growth of both countries, but there is controversy surrounding it. This article analyzes the policies, current situation, and trends of iron ore trade between China and Australia, and explores how to promote the steel industry and economic growth of both sides, which is of great significance for improving diplomatic relations and economic globalization.

Analysis of Iron Ore Trade and Its Interdependence between China and Australia

As of 2020, Australia is the main supplier of iron ore to China, accounting for 60% of China's total imports. China has a huge demand for steel, importing 1.07 billion tons of iron ore in 2019, of which 62.61% came from Australia. The domestic supply of iron ore in China cannot meet the demand for steel production. In 2019, the domestic output was 844.356 million tons, with imports accounting for 56% of the total. Australian iron ore has excellent quality, low cost, and high dependence on the Chinese market. In 2019, iron ore exported to China accounted for 82% of its total exports. Australia has abundant mineral resources, with iron ore reserves accounting for 27.9% of the world's total, making it the main source of China's trade surplus. The cooperation in mineral resource trade between China and Australia will help China make up for its shortage of mineral resources.

The impact of iron ore trade on the economy of China and Australia

Detailed analysis of the multifaceted impact of iron ore trade on the Chinese Australian economy. On the Australian side, iron ore trade has driven the growth of manufacturing inputs and outputs, with manufacturing inputs increasing by 0.3% and outputs increasing by 0.3%. China's demand for iron ore has led to an increase in Australia's export price index, especially in 2020. The increase in iron ore demand has driven the growth of Australia's exports, with exports increasing by 6% to reach AUD 30.5 billion. In addition, the increase in iron ore exports has also driven an increase in employment, with the unemployment rate dropping to 6.4%. The rise in iron ore prices has led to a rise in the exchange rate of the Australian dollar against the US dollar, but the Reserve Bank of Australia has taken measures to curb the appreciation of the Australian dollar. The iron ore trade has also driven the formation and development of related industrial chains in Australia, boosting the overall macro economy, especially in Western Australia, where iron ore exports have greatly driven economic growth. However, the rise in iron ore prices may also lead to a dual speed economic phenomenon in the eastern and western regions of Australia, with Western Australia benefiting while the East Coast region is struggling economically. There is controversy within Australia over whether to increase tariffs on iron ore, but it has not yet been put into practice.

Current iron ore trade policies between China and Australia

China's iron ore imports are highly dependent on Australia, but it is seeking diversified sources of imports, including Brazil, India, Russia, Ukraine, and other countries. Chinese companies plan to build infrastructure in the Simandou iron ore project in Guinea, Africa, to increase self-sufficiency in iron ore and enhance bargaining power. China is promoting the transformation and upgrading of the steel industry, improving the utilization of domestic scrap steel resources, and reducing dependence on iron ore. The Australian economy relies on the Chinese market while seeking alternative markets to reduce risks. Australia relies on the United States for political security and takes provocative actions against China, but as an outward oriented economic country, it is also actively participating in multilateral free trade agreement negotiations to maintain economic and trade relations.

How to Utilize China Australia Iron Ore Trade to Improve China Australia Economic and Diplomatic Relations

The trade of iron ore between China and Australia has a significant impact on the economic and diplomatic relations between the two countries. Australia's anxiety about China's rise and questioning of China's development path have led to tension in bilateral relations. China believes that fair and stable market relations are in line with common interests, and iron ore trade is a way to demonstrate win-win cooperation. China's dependence on Australian iron ore will not change in the short term, and the two countries are interdependent in iron ore trade. Australian Prime Minister Morrison expressed willingness to communicate with China, but emphasized that dialogue is not unconditional. The Australian industry has been affected by the deterioration of China Australia relations, and public dissatisfaction with Morrison has increased. Iron ore trade can serve as an opportunity to improve China Australia relations. Signing long-term agreements can help stabilize the market, promote sustainable development of Australia's mining industry, reduce China's import costs, and improve bilateral economic, trade, and diplomatic relations.