Expectations that China's leader Xi Jinping will reverse his unofficial ban on Australian coal imports are growing as the country's economic problems continue to mount.
There is no official sign from China's Ministry of Commerce that it will dump the ban, but analysts in China say the mounting cost of coal imported from other countries is hurting both steelmakers and the energy sector.
One Beijing-based analyst who declined to be named due to the political sensitivity of the issue said the high price of imported coking coal was causing huge pain for the country's steel sector.
He said allowing Australian shipments to return would likely lower production costs, although the analyst was unaware of any plans to do so.
Bloomberg earlier reported that a proposal to resume Australian coal imports was being submitted to senior leaders in China, amid fears European restrictions on Russian exports would push up global prices even further.
Australia exported close to $14 billion of coal to China in 2019 — most of that coking coal for steelmaking, but the thermal coal market for electricity generation is also extremely tight.
Reports say China's leadership is worried about a repeat of electricity shortages last year that occurred when high global thermal coal prices made electricity generation unprofitable for many coal-fired power plant operators.
In recent years China has dramatically scaled up its domestic thermal-coal production, with imports only playing a minor role.
Mr Xi's ban on Australian imports, while not the main cause of the electricity shortages, nonetheless played a role in exacerbating the problems last year.
His bans on Australian shipments in late 2020 were never formally announced or confirmed by the Chinese side, and they initially caused huge problems for shipping crews stuck on bulk carriers loaded with Australian coal waiting off Chinese ports.
The bans did not, however, achieve the apparent desired effect of economically coercing the Morrison government to change its approach to China.
China reports worse economic growth figures than expected
The election of the Albanese government, plus high global commodity prices caused by sanctions due to Russia's war on Ukraine, appears to have prompted Beijing to change its approach.
A recent "ice breaker" meeting between Australia's Foreign Minister, Penny Wong, and China's Foreign Minister, Wang Yi, may have set the conditions to allow a walk back of the coal policy.
At that meeting, Mr Wang said China was willing to "recalibrate" its relationship with Australia, although he still set four requirements of the Australian side to improve ties.
Chinese commerce ministry spokesperson Shu Jueting told a regular press briefing on Thursday that it was hoped that Australia would "sum up the past, look to the future" and "uphold the principle of mutual respect" to improve bilateral economic and trade relations.
"The healthy and stable development of China-Australia relations is in line with the fundamental interests and common aspirations of the two peoples, and is also conducive to peace, stability and prosperity in the Asia-Pacific region," Ms Shu said.
The speculation about coal came as China's government reported far worse economic growth figures for the second quarter than expected.
Officially, China's economy grew 0.4 per cent more between April and June compared to the year before, falling short of expectations of about 1 per cent.
But some independent analysts doubt the economy grew at all given China's biggest city, Shanghai, was locked down for some of that time and other cities were plunged into on-again, off-again restrictions for COVID-19 outbreaks.
Domestic consumption is also weak, with imports in June officially only 1 per cent higher than the same time last year.
"Rising unemployment, declining household income and unending COVID lockdowns have squeezed domestic consumption," Beijing-based economist Michael Pettis wrote on Twitter.
"When weak domestic consumer demand is an economy's biggest problem, lower inflation and surging trade surpluses are not indicators of success," he wrote, responding to claims by a government official that China was not battling soaring inflation like Western countries because of its "superior" political system.
Disgruntled buyers refusing to pay mortgages
Over the past few weeks, home buyers have been threatening to not start paying their mortgages again until developers resume construction of pre-sold homes.
Some major Chinese banks say these troubled loans are manageable, but the government is holding crisis talks.
The movement, which appears to be gaining traction, poses a danger to a nascent recovery in the property sector and could trigger government intervention.
"The event will likely spread, and it shows there is still a lot of froth in the real estate market," Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management, said.
"People are worried this may hurt bank loans and affect other, not-in-trouble projects," Steven Leung, executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong, said.
The movement had spread to many Chinese provinces and involved more than 100 property projects, real estate consultancy CRIC said in a comment cautioning against "systemic risks".
ABC/Reuters
