Australia’s wool industry has urged caution as politicians seek to steer exporters away from an over-reliance on China.

A parliamentary committee is holding hearings on Tuesday and Wednesday as it examines how to diversify Australia’s trade and investment profile.

There is a growing impression in government ranks that long-term dependence on China for exports is risky, especially as Beijing seeks greater political and strategic influence in the region.

Wool Producers Australia said in a submission to the inquiry 98 per cent of wool is sold into overseas markets, with China taking in 78 per cent of greasy wool exports by volume worth $3.2 billion.

“Many take the view that the Australian wool industry is over-reliant on China,” the peak industry council said.

“What must be appreciated is that the Australian wool industry’s relationship with the Chinese wool textile industry has been built and strengthened over several decades.

“The relationship should be viewed as a case study of how industry can form its own links to strengthen its trade connections without government intervention, but with government supporting through the negotiation of beneficial free trade agreements and other mechanisms, such as industry memorandums of understanding.”

The council said while Australia needed China to buy wool, China needed the high quality of wool Australia produced.

“China’s growing middle class is becoming increasingly affluent. With wool being viewed as a niche product, so are the items produced from it.

“We have witnessed increasing domestic consumption of wool garments and products within China and as this grows, so does the opportunity to sell more wool. ”

While diversifying markets was important, the new markets would need the infrastructure required for processing and the ability to afford it, which was the case with China.