Australia is seeking to diversify its trading relations with countries such as India against the backdrop of difficulties in its economic ties with China, Australian trade and investment minister Dan Tehan said on Friday.

A day after India and Australia agreed to reach an interim trade deal on goods and services by December and to conclude talks on a Comprehensive Economic Cooperation Agreement (CECA) by the end of 2022, Tehan said the two sides had also seen a “lot of movement” on cooperation in rare earth minerals.

“Australia currently has some difficulties in our economic relationship with China; they’ve been very well documented. It’s one of the reasons why we’ve been looking to diversify our trade relationships,” Tehan told reporters at a media roundtable at the Australian high commission.

“We obviously want to have a very constructive engagement with China but we also understand, given the difficulties that we are facing at the moment, that there is a need for us to diversify,” he said.

While China remains Australia’s largest trading partner, relations between the two sides have been hit by a trade war. China has imposed stiff tariffs on Australian barley and wine exports and created barriers for products such as Timber and coal.

Tehan said the focus of his discussions with commerce minister Piyush Goyal on Thursday was the economic partnership between Australia and India, and the ambitious interim and final trade agreements. Though both sides were going into the negotiations with a “win-win spirit”, he acknowledged it would be hard for the two sides to pull off an interim trade deal within just three months.

The current level of bilateral trade, which stands at about $25 billion trade, does not represent the capacity of the two economies to grow and work with each other, he said.

Tehan said there has been a “lot of movement” in cooperation with India on rare earth minerals, and a key development was an announcement last week by Prime Minister Scott Morrison about Export Finance Australia establishing an Australian $2 billion critical minerals facility to help with exploration and processing of minerals and development of supply chains for exports to countries such as India.

“This will help us be able to develop that partnership between Australia and India in the critical minerals space. There is also a clean technology agreement that has been agreed between Australia and India, and that also will help in the critical minerals space,” he said.

Even before the Covid-19 crisis, the two countries had been exploring the possibility of cooperation in mining and processing rare earth metals such as lithium, neodymium and dysprosium, of which Australia has the world’s sixth largest reserves.

India, which imports more than 90% of the rare earth metals it needs from China, has been looking to diversify sources. In 2016, imports from China were worth $3.4 million.

Tehan said his discussions with Goyal had also taken in e-commerce, the use of merino wool for manufacturing textiles in India, phyto-sanitary measures for the export and import of fruit and vegetables, and Australian investments in India’s food processing sector.

He said negotiations on e-commerce will have to wait till India passes important legislation on the issue, though it will be part of the final trade agreement.