News Archive

Australia's trade flows with China, heavily skewed towards resources and manufactured goods, could be complemented by increased trade in services, business leaders said today.

Mr Frank Tudor, National Chairman, Australian China Business Council, said the $125 billion in annual two-way trade reflected Australia's exports of $80 billion of resources and $45 billion of imports of manufactured goods.

"This is unbalanced from a value perspective, being concentrated in resources and manufactured goods," he said.

"When we look at the Chinese market, the competitive advantage we have is around services.  However when we think about what it takes to deliver services in-country, there are significant issues to navigate," Mr Tudor said, adding that government rules that were set at a central level were often applied differently at local levels.

Mr Tudor said Australia's foreign investment trends showed the comfort factor of investing in countries with similar cultures to our own, such as the US, UK and Canada.

"In recent years we have been China's biggest destination for foreign direct investment outside of Hong Kong, but we invest less than three per cent of our foreign investment into China.  It is a challenge for us to penetrate the Chinese market," he said.

Mr Tudor spoke of the huge potential that could be realised through an Australia-China Free Trade Agreement (FTA), which is the subject of ongoing negotiations.  "There is also an issue of symbolism.  We have a relationship that extends 40 years.  The symbolism that comes from people resolving the complexities of an FTA cannot be understated."

He said Australia's relationships with China had evolved naturally, starting with China's purchase of commodities, which then underpinned the confidence of Chinese companies to invest in resource projects.

Areas of potential opportunity included working around sensitivities in agricultural trade, and collaborating to develop and commercialise research and development projects.

Mr John Poulsen, Managing Partner, Squire Sanders, said working in Asia required an understanding of the different levels of sophistication in different countries.

"For example, Japan has been a long-term investor in Australia and Western Australia, and they are very sophisticated.  The Japanese are very used to taking minority stakes to secure supply and they have developed that model over the years in areas such as iron ore and Liquefied Natural Gas (LNG)," Mr Poulsen said.

He said China was still very much focussed on retaining control of projects and having close to majority stakes in Australian companies and projects.

However, in recent years China's understanding of due diligence issues and sophistication in investing in projects had grown.

Mr Poulsen said China's companies were under self-scrutiny through current National Development and Reform Commission (NDRC) reviews of significant investments.

The changing investment focus of China, which was increasingly looking at options in technology, renewable energy, consumer brands, wineries and food, created opportunities for Australia, while China-US relations and tensions in the South China Sea posed challenges in determining Australia's position in the relationship.

Ms Tina Zhou, Associate, Squire Sanders, said issues of risk, trust and reputation were important considerations of doing business in China.

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Media references

Sonia Nolan (In The Zone Media Manager)  (+61 4) 01 034 103
Michael Sinclair-Jones (UWA Public Affairs)  (+61 8)  6488 3229  /  (+61 4) 00 700 783