China Trade Spat Escalates

AUD plunges after China's National Development and Reform Commission announced an indefinite half of all activities under the China-Australia economic dialogue. AUD/USD down 38 pips at 0.7709. Australia's main export is iron ore accounting for over AUD 70bn (around 4/5ths of Australia's total iron ore exports), though gas, wool, wine, beef and seafood are also important constituents. It remains to be seen where China will find iron ore from in the middle of a massive $500bn infrastructure spending spree.

• Diplomatic relations between Australia and China deteriorated a year ago, after PM Morrison called for an independent investigation into the origins of the Covid-19 pandemic which threatened to challenge Beijing's narrative of the viral outbreak. The Chinese government said Morrison's request was "political manipulation," and since then Australian exports to China have faced growing barriers. Overall Chinese investment in Australia dropped 62% in 2020.