China’s economy is changing rapidly. It’s no longer Australia’s easy export market
Australian exports to China in three key sectors are all slowing. Businesses will need to meet the challenge.
For several decades, China’s market of 1.4 billion people and remarkable economic growth provided Australian exporters with seemingly endless opportunities. However, China has been rapidly transitioning away from being just a manufacturing hub. By the mid-2010s, China became an innovation powerhouse and established global brands. The notion that Western products and brands would maintain an enduring advantage is now outdated. Australia, once a main beneficiary of China’s growth, now needs a strategy for what comes next.
A key driver of China’s rapid transition is the combination of top-down long-term industrial policy and a fiercely competitive domestic market. The Chinese government provides direction and certainty through top-down policy, focusing on new technologies like renewables, AI, robotics, and medicine. Innovation is primarily driven by private companies that make rapid decisions, compete aggressively, and collaborate across sectors.
China's investment in research and development has surged, surpassing that of the United States in 2024.
For Australia, this transition is already evident in the numbers for its most important export sectors. Iron ore, which accounts for around 15-20% of Australia's total global exports, has been falling from A$127 billion in 2021 to A$104 billion in 2025. China's steel industry is transitioning to low-carbon iron and steel due to stricter regulations and new sources of iron ore.
The iron ore shipped to China currently does not meet quality standards for low-carbon smelting technologies. To ensure long-term exports, Australia will need to invest billions in "green" iron capacity, mainly through renewable energy and processing facilities.
Coal is facing a similar challenge. Australian coal exports to China have fallen by as much as 50% since the post-COVID peak in 2024, driven by China's massive increase in solar and wind energy capacity. While China will continue to use coal, Australian exporters must assume that Chinese coal demand will keep falling even as demand for energy rises.
Additionally, higher education in Australia faces a similar problem, with Chinese students making up about 43% of Australia's fee-paying overseas students in 2024. However, arrivals of new higher-education students from mainland China fell by 18% in 2025-26 due to an ageing Chinese population and fewer benefits from studying in Australia.
This decline has led to a drop in the ranking of Australian universities in global research rankings, with Monash University falling to 113th place from 1st in 2020.
To navigate this changing landscape, Australia needs a strategy that complements China's long-term economic priorities. This includes focusing on green hydrogen, green steel, AI, medicine, and education. Australia also needs to strengthen its policy focus and investment at home, with the federal government's Future Made in Australia strategy serving as a starting point.
Businesses must invest more in innovation, training, and education, while strengthening collaboration between industries, universities, and international borders.
Written by urgent.news from The Conversation AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.