China-Australia free trade agreementto create a big market for Chinese auto parts companies

On June 17, the long-awaited formal agreement was signed by Australia's Trade Minister Andrew Robb and China's Commerce Minister GaoHucheng Wednesday at a ceremony in Canberra.

The FTA means that up to 85 percent of all Australian exports will enter China tariff-free. Within four years, the number will increase to 93 percent while, within a decade, more than 95 percent of goods will be without a charge.

Therefore, Chinese auto industry will benefit a lot from the FTA, like many other industries both in China and Australia. The most obvious perk is that the 5% tariff will be lifted off according to the FTA, raising Chinese cars’ competitiveness in price in Australian automotive market. But the truth is that Chines automotive brands don’t enjoy much development room in the Australian car market, which relied much on import. Official statistics shows that China hasn’t witnessed a relatively high whole car trade volume in Australia.

The reasons for that are: first, Australia, as an advanced economy, has a more saturated automotive market; and second, Australia has compulsory car quality certification Australian Design Rules, which is said even stricter than Europe’s.

On the other hand, China-Australia trade volume of last year approached $ 137 billion, with Australia becoming the eighth trade partner of China and China maintaining the biggest import and export country of Australia for the fifth consecutive year. Besides, 97 percent of what Australia has imported from China is industrial products. And the FTA will promote the growth in bilateral automobile parts trade. According to official statistics, the number ofroadmotor vehiclesper1000inhabitants is 600 units, indicating a high need in automotive parts and car maintenance. Therefore, the FTA will create a big profitable market for Chinese auto parts.