Chinese Influence in Australia: What Do Financial Markets Tell Us?

Abstract

Australia-China relations, and especially Chinese influence in Australia, have been the subject of heated debate in Australia since 2016. The central issue is, how to balance concerns over Chinese influence in Australia with the economic benefits of Chinese trade and investment? This study-arguably the first of its kind-answers this question using rigorous empirical modelling. First, it uses Google Trends search results to measure Chinese influence in Australia. Second, it connects Chinese influence, as reflected in Google Trends search results, to financial markets, including stock markets, government bond markets and foreign exchange markets. Weekly data for January 2016-December 2019 are entered into an exponential generalised autoregressive conditional heteroskedastic model. The study finds that the effects of concerns over Chinese influence relate mainly to increased volatility of stock market indices and government bond yields, and downward pressure on the share prices of individual firms that are heavily exposed to Chinese markets. However, the overall effects appear to be minor or insignificant. The implications of these results are that China's economic coercion (if any) may not be effective, and Australia's responses to Chinese influence and interference (if any) may generate insignificant costs. Finally, this study makes original and significant academic contributions to academia by providing a novel framework for exploring international relations.

The Global Times and The China Threat Narrative: An Empirical Analysis

“…The use of Google Trends data as a source of international relations variables in this study is based on [ 40 ]. Google Trends is a Google product that analyses the popularity of Google search queries across various regions and languages.…”

“…Also, considering the need to maximize the number of data items, this study relies on weekly data. Although Google Trends relies on samples of Google searches, rather than analyzing all searchers, this is more than adequate because Google handles hundreds of millions of searches every day [ 40 ]. Geographical regions with the same degree of interest in a term may have vastly different total search volumes, due to differing populations; by normalising results, it is possible to compare proportions of searches across dates and regions.…”

“…Most previous research on the Global Times involved discourse analysis, and most previous studies of the China threat adopted qualitative or conceptual analysis [ 12 , 25 , 53 ] or survey-data-based cross-sectional empirical analysis [ 47 ]. Unlike these studies, this paper is based on high-frequency time series datasets consisting of Google Trends search results; it is an expansion of [ 40 ]’s application of Google Trends data to international relations. Time series models are used as a result.…”

Australia’s interaction with Asian countries in the negotiation for an international agreement for the marine biodiversity of areas beyond national jurisdiction

“…This has prompted Australia’s initiation of a number of trade-related regional initiatives, including the Regional Comprehensive Economic Partnership and Tarns Pacific Partnership (Department of Industry and Science, 2015 ). Australia’s relations with China, however, have deteriorated since April 2020, after Australia demanded an independent inquiry into the origin of the COVID 19 outbreak (Kassam, 2020 ; Liu, 2021 ). This deterioration has also caused decline of exports of goods from Australia to China (Australian Bureau of Statistics, 2020 ).…”

Impact of COVID‐19 pandemic on risk transmission between googling investor’s sentiment, the Chinese stock and bond markets

“…They found that jackpots associated with decreased attention, and, consequently, the stock return co-movements with the market decrease rather than increase. Liu (2021) investigated the Chinese influence on the financial markets in Australia, such as the stock exchanges, the government bond markets and the foreign exchange markets, using Google Trends search results. They find that the effects of concerns over the Chinese influence are related mainly to the increased volatility of the stock market indices and the government bond yields and downward pressure on the stock prices of individual companies with significant exposure to the Chinese markets.…”