In the endless election cycle that Australian politics has become, Malcolm Turnbull is facing a greater threat to his legacy than the citizenship ruckus, Tony Abbott white-anting, and Labor’s party polling strength combined: the global economy.

The threats are largely from Australia’ greatest “friends” — trade paramour China, and joined at the hip strategic bedfellow the United States — and therefore unmanageable from Canberra. After five years in power, China’s Xi Jinping finally has the internal clout to enact reforms on China’s bloated industrial sector and to open up its financial sector as rising debt threatens to tip the economy into possible decades of stagnation.

This is both good and bad news for Australia. In the long term, China’s continuing economic heath is essential for the Australian and global economies; in the short term, the country will continue to try and deleverage corporate debt — specifically the steel-making industry, where Australia’s iron ore, its number one export, heads — as well as reducing its dependency on coal, Australia’s number two export.

The expected fall in commodities prices will be exacerbated by Trump’s proposed tariffs on steel and aluminium imports, which is aimed at halting China’s serial dumping of excess capacity, further fast-tracking the shut down of its steel-making capacity. At the same time, falling student visa numbers among Chinese students, highlighted by Crikey, will hit Australia’s major international education industry.

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[Are declining Chinese student numbers a casualty of diplomacy or just poor branding?]

The prospect of a larger trade war — the Trump administration expected to announce more measures against China — has already hit global markets, lowering corporate values and therefore the incentive and ability to make capital investments.

The only good news, that the resultant lower Australian dollar means the agricultural sector which will gain in competitiveness for a growing list of Asian customers, is still a piss in the ocean compared to the decline of resources and the education sector.

What China does next will mean much for Australia. In a paper for the Foreign Policy Research Institute, long-time China watcher Professor June Teuful Dreyer, notes that China needs to move quickly to avoid conditions that will make the “inevitable collapse” of its debt more severe: “Worrisomely high levels of debt continue to exist, both at local and central levels, much of it due to earlier stimulus measures. China’s debt-to-GDP ratio is estimated to be an unacceptably high 260%,” she says. 

China has already made moves to rein-in spree-happy companies. In February, the government seized Anbang Insurance Group, whose prior purchasing splurge had included acquiring New York’s iconic Waldorf Astoria Hotel. Many other Chinese companies are on shaky ground. Hainan Airlines’ (HNA) regulatory filings revealed that it is billions in debt, one third of which is due in 2018. HNA is currently trying to divest billions of dollars of assets, as is the Dalian Wanda Group. Both HNA — which also has a stake in Virgin Australia — and Dalian Wanda are in the process of shedding major Australian property investments

Canberra’s continued flip-flopping ambivalence to China fits right in with what Teufel Dreyer notes as the concerns of foreign governments and companies about “indebtedness and territorial disputes [being] outweighed by desires to capture some of Beijing’s promised largesse”.

Be prepared for that to come into starker relief as all things China start hitting the economy and next year’s election looms.