China's money changes the landscape in Australia

Sunday - 12/9/2012, 7:08pm EST

By ROD McGUIRK
Associated Press

GUNNEDAH, Australia (AP) - Tony Clift's family has plowed the rich black soil of Australia's Liverpool Plains for six generations. The thought of selling never crossed his mind _ until a Chinese company came to town.

Shenhua Watermark Coal offered to buy farms at unheard-of prices. The decision wasn't easy, Clift says. His pioneer ancestors settled the land in 1832. But farming is a business nowadays, and selling his 6,500 acres (2,600 hectares) made business sense.

"If someone offers you a whole heap of money, you've got to take it," says the 50-year-old father of two, sitting at the kitchen table of the palatial hilltop home he built with the windfall. A sea of yellow stretches out below, canola fields planted on less fertile land he bought 25 miles (40 kilometers) to the north.

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EDITOR'S NOTE _ This story is part of "China's Reach," a project tracking China's influence on its trading partners over three decades and exploring how it is changing business, politics and daily life. Keep up with AP's reporting on China's Reach, and join the conversation about it, using (hash)APChinaReach on Twitter.

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Soaring coal prices fueled by China's economic growth have made mining parts of the Australian landscape far more lucrative than farming it. It's one example of how China's emergence as a global trading power may transform countries in ways never contemplated and not yet fully understood.

The Associated Press analyzed China's trade with other countries as a percentage of their gross domestic product, using an International Monetary Fund database. It found that, on average, trade with China had climbed to 12.4 percent of GDP by 2011. By comparison, the peak reached with the U.S. in the past 30 years was 10 percent in 2001.

In Australia, where trade with China hit 7.7 percent of GDP last year, exports of coal and iron ore have helped Australia fend off recession for 21 years and deliver the largest trade surpluses in 140 years of record-keeping.

China's rapid rise has given Australia its strongest terms of trade since a global wool boom in the 1950s, says economist Peter Robertson at the University of Western Australia. "That boom was fairly short-lived," he wrote in an email response to questions. "This one's length is unknown. It may turn out much bigger depending on China's future growth."

The former British colony's relationship with China is deepening in other ways too:

_ More than 29,000 Chinese became permanent residents in the year ending June 30, 2011, for the first time eclipsing the United Kingdom, the traditional source of migrants. While India topped China in the next 12-month period, that appears to have been a blip.

_ China accounted for nearly two-thirds of the 10,407 business visas in the most recent year _ investors and entrepreneurs either given residency or put on a likely path to it.

"Here we have China not only being out biggest trading partner, it is now the major source of migrants and the major source of international students studying here," says Peter Drysdale, an emeritus professor of economics at Australian National University.

"The study leads to migration leads to investment, leads to the deepening of the economic relationship and the interaction between the communities," he adds. "The scale of it is ... now starting to cover a space that historically the relationship with the United Kingdom covered."

In eastern Australia, the China boom is reawakening the sleepy town of Gunnedah. Construction workers and surveyors in high-visibility, fluorescent green shirts are a common sight, a constant reminder that the plans to mine are the cause of the economic resurgence.

Not everyone is happy. The prospect of mining has divided the town of 12,000, including members of the extended Clift clan. There are fears that coal dust, endless coal trains and damage to the aquifers could forever alter a pastoral way of life, perhaps even make it untenable.

Shenhua spokeswoman Melanie Layton says the land will return to farming after the 30-year life of the mines.

Gunnedah, whose previous heyday came during the 1950s wool boom, may be undergoing one of its biggest transformations since it was settled in 1856, says Adam Marshall, who stepped down as mayor in September. "We did have a mini coal boom in the early 1980s, but nothing on the scale which we're seeing now."

Coal mining has a long history in Australia, but never before has it encroached on such prime farmland as the Liverpool Plains, a 4,800-square-mile (12,400-square-kilometer) flatland bordered by mountain ridges and dotted with volcanic hills about 275 miles north of Sydney.