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Australia's dependence on China fades as global trade shifts

CBA economists say structural shifts in China and changing global supply chains are pushing Australian exporters to diversify.

28 January 2026

The first ship of the new direct route from Australia slowly berthed at Qingdao Port in Qingdao, Shandong Province, China on January 4, 2026. (Photo by CFOTO/Sipa USA)

Key points

  • Global trade is being reshaped by declining trust between governments
  • Reliance on China’s export supply chain has halved since 2018.
  • “The West” now accounts for a larger share of Australian exports than China.

A turning point in the trade relationship

Australia’s export landscape is undergoing a significant reset as geopolitical tensions and shifting global supply chains reshape where Australian goods are sold. CBA economists say declining trust between major governments (especially since the pandemic) has accelerated a long running shift away from concentrated reliance on China.

"These geoeconomic pressures are pushing many countries, including Australia, to rethink their dependencies,” Joseph Capurso, Head of Foreign Exchange, International & Geoeconomics, said. "Australia’s dependence on Chinese demand is still significant, but it is clearly trending downwards."

Capurso said the new modelling provides a clearer picture of real exposure by distinguishing between exports that meet China’s domestic needs and goods that are ultimately reexported from China to other markets.

What’s driving the change

China’s slowing economic momentum, rising debt, property sector challenges and a rapidly ageing population are expected to further soften demand for many Australian exports. Much of Australia’s recent growth in export exposure had been linked to Chinese investment in housing, factories and infrastructure - all areas now under structural pressure.

At the same time, global manufacturers are gradually shifting production out of China and into Southeast Asia and Mexico to reduce exposure to US tariffs. That change is reducing the flow of Australian inputs that previously moved through China before reaching other markets.

"Manufacturing diversification is not just a geopolitical story, it’s fast becoming a commercial necessity for firms responding to tariff risk and supply chain resilience,” Capurso said. "That creates opportunities for Australian exporters in other parts of Asia."

Australia’s new export mix

While reliance on China has eased, Australia’s overall dependence on foreign demand continues to rise, just with a broader spread. Demand from Europe, North America, South Asia and Southeast Asia now absorbs a larger share of Australian production, with Asia excluding China accounting for more than 8 per cent.

CBA economists expect this rebalancing to continue as exporters seek out deeper relationships with high trust markets. China’s past use of trade restrictions remains a key reminder of the risks associated with overreliance on a single partner.

Read Joseph Capurso’s full report here.

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The information presented is an extract of a Global Economic and Markets Research (GEMR) Economic Insights report. GEMR is a business unit of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.



This extract provides only a summary of the named report. Please use the link provided to access the full report, and view all relevant disclosures, analyst certifications and the independence statement.



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