01 September 2020
Author: Amy Noonan
Urban expansion across China, designed developments with holistic relationships and a relaxing of restrictions on foreign investment in key markets are all positive signs for Australian enterprises looking to do business with China. Yet recent engagements with China might suggest otherwise. Here, Professor Ying Zhu, Director of the Australian Centre for Asian Business, shares his insights on business opportunities in China.
The relationship between the Australian and Chinese governments has been publicly frosty in recent months, with both governments issuing travel warnings to their citizens about travel between the two nations, and some anxiety from Australian exporters about future trade certainty. However, Australian expertise in health, aged care and disability, particularly our management systems, stands local businesses in good stead for strong relationships with Chinese focus on the health and wellbeing of its citizens.
Despite all the challenges, UniSA's Professor Ying Zhu, Director of the Australian Centre for Asian Business, says the May 2020 Government Work Report from Li Keqiang, Premier of the State Council, contains many positive signals for Australian business leaders, and even some similarities in the way the two governments are seeking to stimulate their own economies as part of the pandemic recovery process.
“The Chinese government has allocated more budget at essential level and local government level to try and give more stimulation to the local government and encourage business recovery through infrastructure initiatives,” Prof Zhu says.
In fact, there is plenty of rhetoric from China that should inspire confidence in Australian organisations looking to do business with China, from traditional export channels like resources and agriculture, to the commodities of expertise in Australian healthcare, professional services and human services.
Large-scale urban development opportunities for Australian business
Premier Li announced 3.75 trillion yuan ($AUD 764 billion) in special local government bonds, and 600 billion yuan ($AUD 122 billion) for government investment in the central government budget, with priority for new infrastructure, urbanisation and major projects. For Australian businesses, this represents opportunities to be part of this new growth in China, from the ground up.
“Part of this new government agenda for development is to help the economy recover by building more infrastructure such as roads and new urban areas,” Prof Zhu says.
“There’s also another idea to develop small townships in the countryside, all of which need quite substantial infrastructure, and by redeveloping old shanty towns into modern outfits, the government will be helping to alleviate poverty.”
That development relies on Australian commodities such as iron ore, but it also presents an opportunity for Australian businesses to get involved in building a new China from the ground up, especially with the Government Work Report’s commitment to curbing pollution.
“Australia’s experience with design, recycling water and waste treatment will be useful in China’s new developments,” Prof Zhu says. “An architecture company, for example, working together with these elements, could make a comprehensive package for running the development in China.”
Health and aged care management systems in demand
As the world cautiously turns to a recovery phase from the COVID-19 pandemic, Prof Zhu says China will be looking to Australian expertise in the management of health crises as well as an ageing population.
“I see more collaboration in the future in terms of health care and aged care. Given Australia has expertise in these areas, there are many opportunities to share our knowledge and, in particular, our management systems,” Prof Zhu says.
“There is also scope for innovation in both support systems for people with disabilities, and the accessible design of cities.
“Really, it’s all about the wellbeing of citizens.”
Foreign investment restrictions relaxed
Premier Li also announced relaxed restrictions for foreign investment, advancing free trade agreements and paving the way for Australian professional services in the region, including financial services and accounting, legal firms and architecture and design firms. Prof Zhu says this should instil confidence for Australian investment, cutting through the noise of political rhetoric.
Industries like telecommunications, oil and gas, mineral exploration, domestic shipping and even cinemas are now open for foreign investment. For two years running, China has reduced the number of industries on its ‘Negative List’ which defines the industries where foreign investment is restricted or prohibited entirely.
“Now in 2020, the Chinese government wants to reduce the Negative List further, which means giving more opportunities for foreign investment,” Professor Zhu says.
“A number of industries were restricted, making them a monopoly of Chinese Government investments. Telecommunications used to be the monopoly of the state, foreign cargo shipping was banned, and even cinemas were restricted, which in China can be quite a profitable business; all these were controlled by the Chinese Government
“This also means greater opportunities for free trade among the Asia Pacific region, which are all positive moves for Australian business.
“Ultimately, despite all the tensions, business must continue as the trading partnership between Australia and China is too important to be disregarded.”
Prof Zhu says that there is still potential for Australian small and medium enterprises to fare well in China, especially given our bilateral free trade agreement, our membership of the Regional Comprehensive Economic Partnership (RCEP), as well as our complementary economies.
“Despite the very public tensions between our two governments, there is still high demand for Australian products and produce in China,” Prof Zhu says.
“We are in the same region, we are all RCEP members, and sooner or later governments have to find a way to collaborate,” Prof Zhu says.
“At a grassroots level, we want to maintain business engagement. Negativity is not helpful for business.”
Easier shipping into inland areas – previously restricted to coastal cities – will also spark a boom in online trade for Australian SMEs, Prof Zhu says, and we should expect to see foreign goods delivered into new free trade zones, with new warehouses built for fast distribution.
“E-commerce will continue to boom, driven by Chinese students buying and selling things online to China, but also through more Australian companies getting direct into the market. It’s another target for liberalisation,” Prof Zhu says.
And, on a human level, the recent negativity should not spook anyone, including Australians investing in China and Chinese people looking to Australia.
“Australian people are absolutely welcome in China. In terms of personal relationships, they like us, we are an attractive country.
“Plus, Australia is a safe country. Students will continue to want to come to study here; they won’t listen to this nonsense about a threatening environment. They know they are very safe in Australia.
“Fundamentally, even though we’ve recently had a difficult time in terms of bilateral relationships, our grassroots and economic engagement will maintain the momentum for business between Australia and China.”
