China’s dramatic economic ascent over the last 30 years represents the beginning of a new era in the global economy.
The opening up of China at the end of the 1970s has lifted hundreds of millions of people out of poverty and transformed China into the world’s second largest economy.
This growth has transformed Asia and the rest of the world, including Australia.
Our strong commercial relationship with China represents one of the most important events in our own recent economic history.
China is now Australia’s most important trading partner and increasingly a major source of foreign direct investment.
Despite the impact of the devastating natural disasters in Australia and the lasting effects of the Global Financial Crisis, Australia’s economy and people are enjoying a period of prosperity.
The Government’s timely and targeted fiscal stimulus packages and the subsequent benefits that the economic reforms of the 1980s and 1990s produced, has helped the Australian economy weather the crisis better than most.
But another factor has been our steady trade with China, especially in commodities.
In 2009/10 two-way trade between China and Australia was valued at almost A$83 billion, with exports growing by 18 per cent on the previous year.
The mining boom in particular is delivering unprecedented levels of export income and revenue to the Australian economy and our terms of trade are at record highs.
But it is important to note that our commercial ties with China go beyond commodity exports.
As many of you here today would understand, Australian businesses of all types are engaged in the Chinese market, and there is a dynamic, two-way investment relationship.
China had invested an estimated A$9.21 billion in Australia at the end of 2009, while Australian investors have placed A$2.3 billion in China.
At the same time, more than 160,000 Chinese students are enrolled in Australia’s educational institutions, thereby reinforcing the growing cultural and social ties between the two nations.
Education in fact has become Australia’s biggest service export and China our biggest export market for this service.
Hundreds of thousands of people of Chinese descent call Australia home, and Chinese is now the most widely-spoken language in Australia after English.
Official relations between the two nations have broadened and deepened in recent years.
They are propelled along by our closer commercial ties and the significant role Australia has as an educational destination for the next generation of Chinese businesspeople, scientists and leaders.
At the government level, not a quarter goes by without a high level visit.
The rise of China offers great opportunities to Australia, which are part of the broader set of opportunities raised by our engagement with Asia.
Yet engagement with China, and the rest of Asia, also engenders great challenges.
For many years now, the complementarity between our two economies has driven the trade and investment relationship.
China’s need for resources to support the development of its great cities and industries has led to demand for our energy and mineral resources, and the increasing demands to educate its workforce have been met in part by Australian educational institutions.
A new emphasis in China on domestic consumption, clean energy and energy efficiency will lead to new patterns of investment and trade, and there is increasing competition from other educational providers.
Today I’d like to talk about how the Australian Government is endeavouring to help business face up to these challenges.
The Government is seeking to expand the nation’s prosperity and help our businesses compete through a variety of ways, including:
- Advancing our multilateral, regional and bilateral trade agenda
- Implementing domestic economic reforms to increase competitiveness
- And developing initiatives to help Australian business in overseas markets, such as China, especially with the help of our trade and investment promotion network, Austrade.
One of the most effective ways to help exporters and investors is to manage the economy soundly, especially through the types of crises we have seen in recent years.
Australia’s economy was one of the best performers in the OECD during the GFC, but it was sound economic management rather than luck that got us to this point.
Australia avoided a recession altogether and that strong performance has continued. In January, for example, we had our tenth consecutive month of trade surpluses, the best run since the early 1970s.
The IMF last October forecast that the Australian economy would grow by 3 per cent in 2010 and 3.5 per cent in 2011.
The recent floods and other natural disasters, such as cyclone Yasi in North Queensland, will affect GDP in the short term, but the economy is expected to bounce back later in the year.
Taking into consideration the impact of natural disasters, the Reserve Bank still forecasts 3.75 per cent to 4 per cent growth in 2011.
Unemployment is low and the Budget is forecast to be back in surplus by 2012-13.
Australia also has one of the developed world’s lowest levels of government debt, at 7.6 per cent of GDP, whereas the average for the developed world is 72.6 per cent.
As the Institute for Management Development pointed out in its 2010 World Competitiveness Yearbook, Australia is the second most resilient economy in the world.
Trade and Investment
Reducing barriers to trade and investment is another way the Government can help business expand or invest into overseas markets.
The Government is committed to the Doha Round of the World Trade Organization and is working towards its successful conclusion; that is our number one trade objective.
We also recognise the importance of trade to our prosperity and the fact that about two million Australians are employed in trade-related jobs.
The Trade Minister, Craig Emerson, reiterated Australia’s commitment to Doha at the World Economic Forum in Davos in January. Just last week, Prime Minister Julia Gillard visited Washington DC to press the case for the finalisation of the Round with US President Barack Obama.
Australia has taken active measures, along with its major trading partners, to generate the political momentum to finalise the Round and 2011 is seen by the world’s major economies as a critical year to reach an agreement.
We also pursue a vigorous regional and bilateral trade agenda which complements our multilateral agenda at the WTO.
This is reflected by our six existing FTAs with New Zealand, Singapore, Thailand, the United States, Chile and, our latest, with the ASEAN group of nations and New Zealand.
We are also negotiating another eight FTAs, including ones with China, Japan, Korea and the broader Trans Pacific Partnership. Additionally a feasibility study for an FTA with India was recently completed.
Australia and China had their 15th round of discussions in Beijing over the Australia-China FTA last June and they were conducted in a pragmatic and cooperative spirit.
Both nations are committed to a comprehensive, high quality and mutually beneficial FTA and we are working hard to achieve that end.
Australia believes that an open and liberal international trading system leads to greater overall economic prosperity, and we have the same view of the need for an open and liberal foreign investment system.
Chinese investors have taken a great interest in a wide variety of Australian assets in recent years, especially in the resources sector.
Since November 2007, the Australian Government has approved more than 230 Chinese proposals, valued at about $60 billion.
Only six of these have involved any conditions or undertakings.
These figures alone show the growing importance of the investment relationship between our two nations, and the fact that Chinese investors are welcome.
Australia’s Labor Government understands only too well the links between domestic economic reforms and international competitiveness.
After all, it was the Labor governments of the Hawke-Keating era in the 1980s and 1990s which floated the dollar, cut tariffs and opened our economy to the world and wider prosperity.
The Gillard Government also sees the need to continue this process of microeconomic reform as a necessary step on the road to greater efficiency, productivity and prosperity.
One of the key policies to achieve this is the National Broadband Network, a high speed internet network that will revolutionise the business practices and lifestyle of Australians in health, education and e-commerce.
The NBN will provide fibre network to 93 per cent of Australian homes at speed of up to 1 gigabit per second.
The NBN has already started rolling out and the benefits of this $43 billion project will resonate throughout the Australian economy for years to come.
Other key Government policies that will add momentum to the reform process are the ongoing $16.2 billion Building the Education Revolution, the (BER).
The BER plays on the fundamental link between higher educational standards, better skills and higher productivity. Over time the impact of reforming Australia’s educational system will have a positive impact on Australian productivity and economic growth.
Another key reform is the new carbon price, announced by the Government in February.
The carbon price is set to begin on July 1, 2012. It will position Australia on the path to becoming a clean-energy economy and to remain competitive in a world that is increasingly focussed on finding ways to combat climate change.
By getting this start on the transformation of the Australian economy, businesses will gain a key competitive advantage in the development of clean energy goods and services.
As other nations make their own transition to a green economy, they will increasingly demand expertise and products from Australian companies.
Helping business in China
A nation’s overall reputation-- it's brand, if you like--feeds into its reputation as a supplier of goods and services. So having the right national brand is critical to attract and keep international business.
This is why the international launch of the new Australian Brand, Australia Unlimited, at the Shanghai Expo last year was such an important event.
Australia Unlimited re-states the nation’s capability in science, the arts and commerce to a higher level, one more suited to the nation’s real achievements in these areas and less wedded to past imagery.
Austrade was the lead agency on developing the new brand, and Austrade also plays an important role in helping Australian business navigate the China market.
One of the key approaches that Austrade takes in this regard is to find specific markets in China that match Australian industry capability.
This makes for greater commercial efficiency and improves the chances of a business succeeding in a sometimes uncertain marketplace.
Education is one such market, but so are automotive products, infrastructure and construction, food and beverages, health and consumer goods, clean energy and financial services.
Just yesterday, I attended one of the world’s premier education exhibitions, the 2011 China International Education Exhibition Tour (CIEET), which showcases the institutions of nations around the world, including Australia’s.
I saw first-hand the dynamism of the international education sector and the interest Chinese students have in studying in Australia’s high-quality institutions.
Education exports earned Australia $19.1 billion in 2009-10 and Chinese students represented the largest share of foreign student enrolments, at about 27 per cent.
Austrade supports the marketing and promotion efforts of our educational institutions in China by working with education agents, through exhibitions like the China International Education Exhibition Tour, and by providing market intelligence.
Austrade has a dedicated Trade Commissioner for education in Beijing who is supported by locally engaged staff in cities across China.
Austrade also works with other Australian government agencies, such as AusAid, to identify and match regional demand in China with specific Australian capability in a variety of sectors.
Clean energy is an important market in the highly industrialised Guangdong; sustainable urban development in Hubei and Hunan; agribusiness in Yunnan and Anhui, and automotive products in Hubei and Anhui.
Austrade uses a strategic approach which draws on the expertise of its staff in the organisation’s three main offices in Beijing, Shanghai and Guangzhou, and 9 other sub-offices scattered around China.
Tomorrow I will have the pleasure of officially opening Austrade’s new premises in Chengdu. While Austrade has been operating in Chengdu for some time, I have taken the opportunity to officially open the office as it reflects the importance of Austrade’s China network and the importance of the region.
I spoke before about some of the challenges facing Australian business in China, and in conclusion I’d like to mention a few of them briefly.
Since the GFC, China has indicated that it is moving to adopt a different economic model, with a focus on energy efficiency, sustainable development, renewable technologies and domestic consumption.
As Professor Ross Garnaut, a former Australian ambassador to China and a leading economist pointed out, the era of China’s labour-surplus economy is coming to an end.
Thirty years of solid growth have created a situation where real wages are rising steadily for the first time. China is now at a turning point in its economic development that will in all likelihood lead to policy changes in health, education, and welfare.
This does not mean that demand for Australian energy and resources is set to decline. After all, China is still expected to house an additional 300 million people in its cities by 2030.
That development alone will fuel demand for the types of commodities Australia traditionally provides.
What it does mean, however, is that long term changes are underway which will create new markets for Australian businesses if they are flexible enough to adapt.
As China’s middle class grows, they will be looking for financial services to manage their savings; as cities become crowded, sustainable designs will become more important; as energy becomes scarcer, renewable technologies will become paramount.
The Australian Government is helping in this task of adapting to change by providing sound economic management and ongoing reform at home, while pursuing an ambitious trade agenda and strategic market initiatives abroad.
I wish you luck in your China business ventures and it was a pleasure to talk to you today about such an important topic.
- Parliamentary Secretary's Office: (02) 6277 4554
- Departmental Media Liaison: (02) 6261 1555