• Mention of China in Australia companies’ earning call transcripts decline
• Cross-border deal activity falls by 41%

As the trade war between Australia and China rages, mentions of geopolitics and regulations in earnings call transcripts of companies in both the countries showcased double-digit growth in 2020, reveals GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Company Filing Analytics Database reveals that geopolitics and regulations were the top themes in the earnings call transcripts of Australian companies in 2020, up by 97% and 3%, respectively, over 2019. While the mentions of China by Australian companies declined by over 22%, discussions around ‘China Impact’ also slumped in 2020.

Rinaldo Pereira, Senior Business Fundamentals Analyst at GlobalData, says: “The ongoing trade war between the two countries, which seemingly triggered by Australia’s ban on Huawei in participating the national 5G network and later calls for an enquiry to find out the origins of COVID-19, has had a spill over effect on exports and imports.”

Despite the worsening geopolitical tensions, the average sentiment score for Australian companies in Q1 2021 (until 26 March) remains slightly higher than their Chinese counterparts.

Mr Pereira continues: “Mentions of tariffs in the earnings call transcripts of Australian and Chinese companies declined in 2020. In addition, the Chinese government’s tariffs affect only certain sectors and was reflected in the lower number of mentions.”

An analysis of GlobalData’s Deals Database reveals that the number of cross-border deals (merger & acquisition, private equity and venture capital) between Australia and China declined by around 41% in 2020 compared to 2019.

On the other hand, mentions of Australia in Chinese companies’ filings rose by only about 4%. The discussions around Australia account for only a meagre percentage of the total geography mentions compared to other regions or countries. Simultaneously, discussions around geopolitics and regulations rose by 119% and 41%, respectively, in 2020 over 2019.

Mr Pereira concludes: “Chinese investments in Australia continue to be under the scanner of the government post the implementation of China’s tariffs, which impacted the number of deals in late 2020, besides the pandemic’s influence. With relations hanging in balance, Australia is likely to look at other markets such as India and Japan to consolidate its economic situation.”