Chinese Influence in Australia: What Do Financial Markets Tell Us?
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Chinese Influence in Australia: What Do Financial Markets Tell Us? Kerry Liu 1 Received: 18 June 2020 / Accepted: 30 August 2020/ # Springer Nature B.V. 2020
Abstract Australia—China relations, and especially Chinese influence in Australia, have been the subject of heated debate in Australia since 2016. The central issue is, how to balance concerns over Chinese influence in Australia with the economic benefits of Chinese trade and investment? This study—arguably the first of its kind—answers this question using rigorous empirical modelling. First, it uses Google Trends search results to measure Chinese influence in Australia. Second, it connects Chinese influence, as reflected in Google Trends search results, to financial markets, including stock markets, government bond markets and foreign exchange markets. Weekly data for January 2016–December 2019 are entered into an exponential generalised autoregressive conditional heteroskedastic model. The study finds that the effects of concerns over Chinese influence relate mainly to increased volatility of stock market indices and government bond yields, and downward pressure on the share prices of individual firms that are heavily exposed to Chinese markets. However, the overall effects appear to be minor or insignificant. The implications of these results are that China’s economic coercion (if any) may not be effective, and Australia’s responses to Chinese influence and interference (if any) may generate insignificant costs. Finally, this study makes original and significant academic contributions to academia by providing a novel framework for exploring international relations. Keywords Australia-China relations . Chinese influence . COVID-19 . Google trends .
EGARCH JEL Code F5 . G12
* Kerry Liu [email protected]
1
China Studies Centre, University of Sydney, Sydney, Australia
East Asia
Introduction Australia–China relations began to sour in early 2020. On 22 April, Australian Prime Minister Scott Morrison proposed an independent inquiry into the origins of COVID19 [10], the pandemic disease that has caused huge morbidity and mortality and volatility in financial markets worldwide [30, 31]. Chinese ambassador Jingye Cheng warned that such an inquiry could spark a major reduction in Chinese students and tourists visiting Australia, as well as a boycott of agricultural exports such as beef and wine [11]. In response, the Australian Government described these comments as ‘threats of economic coercion’ [3]. Former Australian foreign minister Alexander Downer said that ‘not since the days of the Soviet Union have I seen an ambassador behave in such a reckless, undiplomatic way’ [4]. In May 2020, China slapped a tariff of around 80% on Australian barley exports for the next 5 years [5] and imposed an import ban on four Australian abattoirs [6]. Australia–China relations entered a new period in 2016, when discontent about Chinese influence and interference in Australia began to surface [36]. The catalysts were revelations about Chinese investments in Australian farm
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