Australia and China strengthened their trade ties during a visit by President Hu Jintao yesterday, with China handing Australia a huge gas supply deal and the two nations expected to start exploring a free trade pact.
Resource-rich Australia is seeking to tighten economic ties with China, the world's fastest growing major economy, while China wants to build up its economic relationships in the Asian region to ensure imports of raw materials to feed its growth.
News that Beijing-controlled CNOOC was planning to buy a stake in Australia's Gorgon gas field as part of a record A$30 billion ($21 billion) deal hotted up Hu's visit and the planned signing of a wide-ranging trade and economic framework.
This deal topped a A$25 billion contract awarded to Australia last year to supply China's Guangdong province with 3.3 million tonnes of liquefied natural gas (LNG) a year over 25 years. This was then Australia's largest single export deal.
President Hu said China saw Australia as an important trading partner now and in the future but stressed that dealing with China meant respecting its system and treating it as an equal.
"China and Australia respect each other's sovereignty and territorial integrity, stick to non-interference in each other's internal affairs and enjoy a growing mutual trust in the security field," President Hu told a joint sitting of the national parliament.
While Australia has tightened its ties to the United States in recent years, culminating in a visit by President George W. Bush on Thursday, it has also continued to pursue trade links in Asia which accounts for about 50 per cent of its total trade.
This year Australia, a leading world agricultural and mineral exporter, has sealed free trade deals with Thailand and Singapore and it is eyeing pacts with the United States and China in a move towards bilateral pacts as a global bid to free up trade stalls.
Hu stressed the importance of Sino-Australian trade with the two-way flow almost trebling to A$21 billion since 1996 when conservative Prime Minister John Howard came to power.
China is now Australia's third largest trading partner and fourth largest destination for exports such as iron ore, wool and crude petroleum. Australia is China's ninth biggest trading partner, buying Chinese computers, toys and textiles.
"The potential for Australia/China economic cooperation is immense," said President Hu, the first Asian leader to address Australia's parliament.
"The trade and economic framework between China and Australia that will be signed today will mark the beginning of a great new stage of our trade and economic cooperation."
Trade analysts said the trade framework, which was expected to kickstart a study into a free trade pact, was important politically as it signalled to Chinese businesses that Australian corporates were approved joint venture partners.
"That will further reduce barriers to economic relations between us," said academic economist Ross Garnaut of the Research School of Pacific and Asian studies.