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29 May 2013

Australia developing ties

Tony Cripps

by Tony Cripps

Chief Executive Officer, Australia, HSBC

Melbourne port

About 650,000 Chinese visited Australia last year, an increase of 16 per cent

The Australian Prime Minister’s recent visit to China cemented the growing relationship between the two countries. Several agreements, such as allowing the Australian dollar to trade directly against the renminbi, and a partnership including annual meetings of leaders and a “strategic economic dialogue”, highlight developing ties.

However, one of the most important factors in the relationship may be economic rather than diplomatic. Minerals such as iron ore and coal dominate the partnership, accounting for about 60 per cent of Australia’s exports to China.

One of the most important factors in the relationship may be economic rather than diplomatic

But the relationship is being aided by two important changes in China. The first is deregulation. Authorities in Beijing have relaxed the rules on both investment and doing business in China. The paperwork and delays in setting up and operating a business in China – and, critically, repatriating the profits – are being streamlined, putting a Chinese subsidiary within reach of many companies.

The second is the rise of Chinese spending power. As China gets richer, it is buying more efficient technology, more sophisticated consumer goods, and more advanced expertise, often as a solution to problems created by its own growth.

Education is another important factor and already one of Australia’s largest foreign exchange earners. More than 100,000 Chinese students are contributing about AUD5 billion to study in Australia. Although there has been a dip in enrolments recently, in the long term the sector is likely to grow as more Chinese are able to afford overseas education.

Tourism numbers should also benefit. About 650,000 Chinese visited Australia last year, an increase of 16 per cent, but numbers are likely to rise with 400 million people expected to travel overseas from China in the next five years.

And there are other, more subtle, growth areas. Australia’s expertise in dryland farming is starting to be recognised in the arid North China Plain – which includes Beijing – where the effects of low rainfall have been exacerbated by a combination of the growing population, increasing industrialisation, and rising recreational use. Beijing is home to more than 100 golf courses, several of which have been designed by Australians, and a dozen ski resorts with man-made snow.

The list goes on: green technology, food, wine, biotechnology, even live music. One government initiative after the release of the Australia in the Asian Century White Paper is the development of strategies for key markets such as China, and the government is engaging both business and the community.

The opportunities in China are increasing and Australia’s thriving relationship should put the nation’s businesses in pole position to capitalise.

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