Australian economy has so far not adjusted it enough to weather the headwinds facing from China. Government in its way to reduce budget deficit, have no stimulus left up its sleeve. In this year's budget it has provided tax relief to SMEs, however that is clearly not enough to provide support to its ailing economy and exports.

Australian exports to China rose from just 1 billion/month in 2005 to almost 10 billion/month by 2013. However as Chinese economy headed for rapid slowdown since, Exports to China have dropped almost 35% per month.

Iron ore, which contributes about 20% of Australian exports and 4% to GDP, dropped in terms of price to decade low due to slower steel consumption in China.

Australia is too reliant on China, which concentrates its exporting portfolio risk.

The chart shows how dependent is Australia's exports on China. China clearly stands as the single largest trading partner of Australia.



Every month, almost 30-40% of Australia's export goes to China.



In April, Australia's exports value to China was $5.9 billion. Add another $0.7 billion if Hong Kong and Taiwan is added.



Second, third and fourth positions holders Japan, Korea and US together contributed about $5.5 billion.

As Australian dollar kept outperforming during Chinese commodity boom, reaching as high as 1.1 against dollar, expect it to keep under performing as Chinese economy slows down.

Aussie is currently trading at 0.763 against dollar, looking to break below 0.75 area.

The table below shows, Australia's export exposure to its top trading partners.