Australia’s Cosy Relationship with China is Changing

Dear Reader,

One of the things I remember quite vividly from back when I was in school is an excursion to a recycling factory.

What I had expected would be a dull day looking at other people’s waste turned out to be quite an interesting experience.

We watched as tattered paper which was first sorted, cleaned and then turned to a paste transformed from garbage to brand new paper ready to use.

I mean, this was quite a while ago, so I don’t know if the process is still the same. But what the experience brought home is the importance of a circular economy.

Everything we use is a resource that takes money and effort to produce. If we are not reusing it, we are throwing away valuable resources.

The other piece of information that stayed in my head was the importance of separating materials to be recycled. If it’s not sorted properly, it could ruin the whole batch.

It’s why I was quite perplexed when I came to live in Australia and saw that all recycling is thrown together into one bin.

I found out why after a bit of research. I’ll come back to that in a moment.

Australia’s population has been increasing…and so has our waste.

From 1997–2012 our population increased by 22%, and the waste we generate has grown even quicker during that time, by 145%.

Australia hasn’t needed to recycle

In 2016–17, Australia generated 67 million tonnes of waste. Out of that, 37 million tonnes were recycled…

…but much of our recycled metal, plastic and paper wasn’t recycled here, but exported to China.

It’s why we haven’t had a need to separate our recycling. It all goes over there in bulk.

Up until 2018, China was one of the largest importers and recyclers of scrap metal, plastic and paper.

Not only for Australia, but the US, the European Union and some Asian countries, as you can see below.

Port Phillip Publishing

Source: DW

[Click to open in a new window]

It worked well.

Ships would leave Chinese ports filled with stuff to sell the world and come back full of materials they could recycle to produce more stuff.

But that all came to an end into 2018, with China’s National Sword Policy.

China stepped up their fight against pollution and decided they would be no longer taking ‘yang laji’, or foreign garbage. They banned 24 types of recyclables and solid waste mostly plastic, textiles and paper.

The ban affected 4% of Australia’s recyclable waste, which doesn’t sound like much. But when you dig a bit deeper you realise that it hit about 43% of recycled metal, 70% of recycled plastic and 43% of recycled paper and carboard.

I mean, the whole supermarket plastic bag ban discussion happened in 2018. Do you think that’s a coincidence?

Anyway since China’s ban, some of our waste has ended in landfill or stockpiled. Other countries have boosted their intake of waste, like Malaysia and Thailand. But this is all looking very temporary as they are also tightening restrictions on importing waste.

It’s why Australia is taking some action now. The government has pledged that 100% of Australian packaging will be either recyclable, compostable or reusable by 2025.

They are looking at implementing container schemes, banning waste exports and looking to recover 80% of waste by 2030.

Earlier this month, the government said they will spend $190 million to invest into our own recycling industry here in Australia. But that amount may only be the start, with $1 billion already reserved for the industry.

They are looking to increase jobs, but we will also need to boost recycling if we are looking to manufacture more. Part of the circular economy I mentioned earlier.

You’ll likely be hearing a lot more on this in the media as we bring some manufacturing back on shore.

Our cosy trade relationship with China is changing

As I’ve been writing in the last few weeks, coronavirus has made countries realise how weak our supply chains are. A reversal of globalisation was already starting to happen but the pandemic has expedited things.

China was the manufacturing powerhouse of the world, and our recycling industry shows you how intertwined our relationship with China has been so far. It’s not only iron ore, but students, tourism, milk, barley, recycling and the list goes on…

But our cosy trade relationship is changing…fast.

We are moving away from China and, as editor Greg Canavan says, this ‘divorce’ could be a long and painful process.

As Greg explains in a new report, trade is what boosted China’s growth, but now Australia and other countries around the world are reconsidering those trade ties.

What does this all mean and how can you get ahead of this trend? To answer this pressing question is exactly why Greg has prepared this report. I urge you to read it.

You can access it here.


Selva Freigedo Signature

Selva Freigedo,
For The Rum Rebellion

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

The Rum Rebellion