News link: http://www.abc.net.au/news/2014-01-20/aussie-dollar-falls-to-its-lowest-level-in-four/5209592 “Aussie dollar falls to its lowest level in four years”

The news revealed that Australia’s exports increased by 6% in 2012 to 2013 which is higher than the average growth rate of 3.5% over the past five years. In the exports, the growth rates of minerals and fuel are the highest and reached to 9.8%, which far higher than the average growth rate of 5.3% in the export category in the past 10 years. On the other hand, the total exports of agricultural products also relatively grew quickly in last year and the economic growth increased to 8.7%. However, the total exports increased in last year while the price decreased 9.9% and this directly leaded the gross export value decreased 4.5% to AU$301.5 billion. The main reason why the gross export value decreased so much even total exports increased is Aussie dollar falls to its lowest level in four years. In the last four years, the highest rate of Aussie dollar exchange rate in China was 7.1 while it is 5.26 now.

In 2012 to 2013, China is still the biggest trade partner to Australia. The total gross export value is almost AU$131.5 billion which is about 21.1% of the Australian total foreign trade. Comparing to Australia, China plays importer role in the relationship between China and Australia. The low exchange rate is more favorable to Chinese companies because they do not need to pay more high price for the commodities. On the contrary, the top five output categories are iron, coal, gold, education services and gas. The low exchange rate can attract more investors to invest their project in Australia and promote local economic development. In addition, as one of the most famous wine country, low exchange rate applies more chance for Chinese customers to choose Australian wine brand in order to expand their brand awareness and against the wine come from Europe and America.

On the other hand, more than two years ago, Chinese government and Australian government discussed about to establish a free trade between these two countries and they are still discussing until now. Prime Minister of Australia expressed that Australia would like to collaborate with China to build free trade as soon as possible in next year. There is no doublet that there are must be more and more collaborations and programs between China and Australia. The total import and export must be increased quickly as well. However, there are also has some disadvantage. For instance, more and more agricultural products will be purchased by Chinese and local agricultural category might be damaged.

If I am a manager in an Australia wine company, I will adjust some policy in order to fit with the new trade policy if the free trade between China and Australia be established. For instance, I will adjust the marketing strategy and market plane because the external factor (free trade) can influence the economic environment. From this news, what I have learned is exchange rate is very important in the international business not only it can influence the number of export or import but also can influence the marketing strategy.

Comment:

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