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Speaker 1: Welcome to ask fear and greed when we answer questions

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Speaker 1: about business, investing, economics, politics and more. I'm Michael Thompson

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Speaker 1: and Hello, Sean Aylmer.

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Speaker 2: Hello Michael.

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Speaker 1: Sean this question today, I'm just jumping straight into it,

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Speaker 1: no preamble, nothing else. It's got a bit to it.

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Speaker 1: Why are we so tied to the Chinese economy? So

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Speaker 1: I'm talking the Australian economy. I'm talking Australian companies, kind

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Speaker 1: of resource companies, all of these ones that seem to

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Speaker 1: be so heavily reliant on what happens in China. Whenever

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Speaker 1: there's any data that comes out of China, we pay

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Speaker 1: a lot of attention to it. Why are we so

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Speaker 1: tired to the Chinese economy?

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Speaker 2: So, I mean, I suppose, now that you've asked the

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Speaker 2: way you're asking this question, I'm thinking, I mean, it's

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Speaker 2: sort of obvious why we are in one sense, But

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Speaker 2: then I'm thinking maybe we overdo it because China's about

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Speaker 2: a third of our exports, and iron ore and gas

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Speaker 2: are the big two, and you know it's like two

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Speaker 2: hundred billion, more than two hundred billion a year that

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Speaker 2: we send over there. So thirty two percent is a

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Speaker 2: big amount. And say, if the Chinese economy i't always

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Speaker 2: used to make steel, if China's not building roads and

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Speaker 2: bridges and they're not building new homes that need roads

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Speaker 2: and bridges, that feeds through to Australia, and that's exactly

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Speaker 2: what's happened in the last little bit. That's why iron

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Speaker 2: ore prices are about ninety three dollars a ton rather

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Speaker 2: than one hundred and ten dollars a ton. So that's

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Speaker 2: we sell a lot. But there's actually a lot of

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Speaker 2: other countries that we sell a lot of stuff too.

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Speaker 2: So Japan it's twelve percent of our experts sports. We

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Speaker 2: have a free trade deal with Japan like we do

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Speaker 2: with China. Coal is what we sell mostly to Japan.

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Speaker 2: That's pretty significant. Korea in the US sort of six

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Speaker 2: percent of our exports. So you know, if you if

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Speaker 2: you put Japan, Korea, United States, India in there, you're

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Speaker 2: not that far behind what we sell to China. Now,

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Speaker 2: some of these economies like India are really interesting because

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Speaker 2: it's not necessarily hard commodities. It's more like education services.

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Speaker 1: Okay, so.

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Speaker 2: It's a really important you know, iron or coal, natural gas, gold, beef,

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Speaker 2: all those things we know about to a lesser extent, wheat, copper, aluminum,

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Speaker 2: that sort of stuff right up there, those education services,

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Speaker 2: So all those kids that come to Australia and study here,

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Speaker 2: that's actually an export that we are that's counted as

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Speaker 2: an export. So all those foreign students. So I'm going

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Speaker 2: around in circles here. But China is all important, takes

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Speaker 2: thirty two percent of our exports, but we sort of

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Speaker 2: probably overstate it in a way because India is super important,

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Speaker 2: Korea is super important, Japan super important.

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Speaker 1: Okay. Is it also the fact that we perhaps over

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Speaker 1: state China because they are so vital to the rest

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Speaker 1: of the world as well in terms of their role

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Speaker 1: in exporting, exporting manufactured goods, etc. In that country, and

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Speaker 1: so we are very much dependent on what's happening within

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Speaker 1: the country output from factories, et cetera, that that really

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Speaker 1: matters to the rest of the global economy.

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Speaker 2: Yeah, definitely, So places like even if we just stay

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Speaker 2: in our region, if China suffers, countries like Korea, even

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Speaker 2: Japan to some extent sort of Singapore is a big

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Speaker 2: export partner of ours, Indonesia, New Zealand, they all struggle,

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Speaker 2: and so if they're struggling, they're not going to buy

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Speaker 2: as much from US as well, So there's that indirect

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Speaker 2: effect from China. But having said that, the US is

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Speaker 2: a very big player and that India is a very

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Speaker 2: big player as well. But it's a fair point.

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Speaker 1: And so just then in terms of the companies I

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Speaker 1: suppose that are so directly tied to the Chinese economy,

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Speaker 1: you're really looking at the big miners, right, like BHP Rio.

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Speaker 1: These are the ones that are exporting all the iron

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Speaker 1: ore over there. They are the ones that are going

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Speaker 1: to be hit hardest by a downturn in China, right Yeah.

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Speaker 2: And BHP Rio fortesqu Medals they're the company. So BHP

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Speaker 2: share price is down about twelve percent over the last

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Speaker 2: over the last year or so, ford Skew's down thirty

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Speaker 2: two percent, okay, and then Rea is off about ten

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Speaker 2: nine or ten percent. I think they're the stocks that

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Speaker 2: really depend on iron ore primarily. That's why Fordes Skew's

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Speaker 2: off so much, because it is an iron ore company.

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Speaker 2: At least BHP and REO have other stuff that they

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Speaker 2: send over to China and around the world. So yeah,

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Speaker 2: the big miners are the ones who have certainly been

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Speaker 2: hit hardest.

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Speaker 1: Okay, that's a fascinating space to consider, and I suspect

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Speaker 1: you could break down any one of those elements to

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Speaker 1: look at further in terms of the resource companies or

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Speaker 1: the property sector over there, because there's there's plenty in it.

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Speaker 1: I think we've done enough for today, and I think

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Speaker 1: we've answered some version of the question that I asked.

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Speaker 1: I don't know if we as we actually answered the

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Speaker 1: specific questions, but we've answered something, Sean, and that today

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Speaker 1: will be enough. Thanks very much, Sean.

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Speaker 2: Thank you, Michael.

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Speaker 1: us to well and truly mangle, and please send it

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Speaker 1: on through to us and we will get to it

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Speaker 1: very very soon. I'm Michael Thompson and this is Ask

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Speaker 1: Fear and Greet