China and Australia inked a landmark free trade agreement (FTA) on Wednesday after a decade of negotiations, opening up fresh business opportunities for the two countries.
The China-Australia FTA (ChAFTA), signed by Chinese Commerce Minister Gao Hucheng and Australian Trade and Investment Minister Andrew Robb, is expected to provide the catalyst for future growth across a range of areas including goods, services and investment.
"The signing of the ChAFTA will provide a better platform and an improved institutional guarantee for the two countries to complement each other with advantages and conduct close win-win cooperation," said Chinese President Xi Jinping in a message to Australian Prime Minister Tony Abbott.
Xi said China will work with Australia to take the opportunity to promote sustainable and stable development of the comprehensive strategic partnership as well as peace and prosperity in the region and the world.
While addressing the signing ceremony, Gao said the ChAFTA has "monumental significance" in bilateral relations and will "boost economic cooperation and provide strong impetus to the economic growth of the two countries."
Of all such agreements involving China, it contains "the highest level of overall trade and investment liberalization", Gao noted.
"The agreement secures better market access for Australia to the world's second largest economy, improves our competitive position in a rapidly growing market, promotes increased two-way investment and reduces import costs," said Robb.
According to the pact, more than 85 percent of goods trade will be tariff-free on day one of the ChAFTA, rising to over 95 percent on full implementation after a transitional period.
Iron ores and concentrates, coal, gold, education-related travel services and copper are China's top five imports from Australia, while clothing, telecom equipment and parts, computers, furniture, toys and sporting goods are the top five exports.
Chinese enterprises and consumers will have greater access to natural resources and finished products like high-quality food. Australians will also benefit from cheaper China-made garments and electronic gadgets.
The ChAFTA is now subject to legal and parliamentary processes in both countries before it becomes active.
The trade deal was reached after decade-long talks that began in 2005. The process was greatly accelerated after Xi paid a state visit to Australia in Nov. 2014 and brought about the signing of the Declaration of Intent.
China inked a similar FTA with the Republic of Korea in the beginning of June.
As far, China has signed 14 FTAs involving 22 countries and regions in the world, including New Zealand, ASEAN countries, Hong Kong and Switzerland.
Tu Xinquan, associate director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing, deemed the long-awaited agreement as a milestone in China's efforts to promote regional integration.
The two countries have enjoyed increasingly closer economic ties after forging diplomatic relations over four decades ago. China is now Australia's largest trading partner, export market and source of imports.
Bilateral trade volume increased to 136.9 billion US dollars last year, 16 times that of the year of 2000. Chinese enterprises had invested nearly 75 billion US dollars in Australia by 2014, making it the second largest investment destination only after Hong Kong.
Mutual opportunities
The ChAFTA will facilitate the flow of capital and benefit industries and consumers in both countries, as well as bring unprecedented opportunities to companies.
"The pact means China will open its vast market to Australian farm produce exporters and services providers, while resource-rich Australia will lower threshold to Chinese investors," Tu said.
The agreement will lift the screening threshold for private Chinese investments in non-sensitive sectors in Australia to facilitate investment from the world's second largest economy.
"The ChAFTA will greatly lower hurdles for Chinese investment," said Li Jian, a foreign trade researcher with the Chinese Ministry of Commerce.
David Liao Yi-chien, president and CEO of HSBC China, expected an increasing number of Chinese private firms to invest based on bonuses provided by the agreement.
"More investment will go to sectors such as services, tourism, agriculture and infrastructure," he said.
The pact will also boost cross-border renminbi settlement by Australian companies. Liao said it will help build Australia into a center for offshore renminbi settlement.
