FTA With China: Two Mining Companies Ready For Non-Mining Business

After nine years of working towards the goal, today Australia will sign a free trade agreement with China. According to the Commonwealth Bank of Australia, Oz is the most China-dependent developed economy in the world, with exports to Australia counting for just over 5 percent of its GDP. With China’s desire for resources and energy, and Australia’s appetite for China’s manufactured products, the FTA should greatly benefit both parties.

 “The free-trade agreement to be announced […] with China will be a game changer,” said Josh Frydenberg, parliamentary secretary to the prime minister. “Opening up the Chinese economy in various sectors, including services and agriculture, to Australian exports, is going to be really beneficial.”

The signing of the FTA this November means that Prime Minister Tony Abbott will accomplish his goal: when he was elected, Abbott committed to reaching this agreement by the end of 2013. Abbott has been busy with foreign policy this year, signing agreements with both Japan and South Korea as well.

China will lower the higher duties it recently assigned to Australian coal exports, and tariffs to beef, most grains and seafood will have their tariffs cut down to zero between this year and 2021. With this focus on agriculture, traditional mining companies are expanding into the industry.

Hancock Prospecting’s Hope Dairies Ltd. Gina Rinehart’s Hope Dairies is planning a half-billion dollar investment to supply infant formula to China. This includes acquiring over 12,000 acres of farmland in Queensland; production is expected to start in the second half of 2016 should everything go as planned.

Fortescue Metals Group Ltd.  Andrew Forrest’s mining company is also looking to expand into food production, understanding the terms with the largest economy in the world have moved away from Fortescue’s traditional revenue maker. Not a lot of details are known about this move, but as Australia adapts to its new free trade agreement, expect more announcements on this front.

Information sourced from Bloomberg.