Published on March 17, 2014
The Antipodean Silk Road The case for deeper/broader engagement Frank Tudor National Chairman, ACBC
OUTLINE Outline ACBC Political Trade Investment Opportunity Takeaways
THE AUSTRALIA CHINA BUSINESS COUNCIL • The premier organisation dedicated to promoting trade and investment between China and Australia • A peak national body representing the collective interests of 1,000 companies • An independent, membership-based, non-profit organisation • An organisation with relationships at the highest levels of the Chinese and Australian governments • Branches in all mainland Australian states, a National Secretariat and a growing strategic presence in China The Australia China Business Council
POLITICAL The Top 10 Leaders of Global Growth Source: Financial Times
POLITICAL Source: Maddison (2010), Total Economy Database, IMF and Treasury. 0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 China Western Europe India USA Share of world output Share of world output Re-emergence of China
POLITICAL Leadership in China 1949 1976 1992 2003 2012 1st Generation 2nd Generation 3rd Generation 4th Generation Middle income GDP $ 5th Generation • Chjnese Dream • Xi Jinping and Li Keqiang • A resurgent nation mindful of historical victimhood • Doubling China‟s GDP 2010 by 2020 • China – status quo player or........
POLITICAL The four „uns‟ of Wen Jiabao:- Unstable Uncoordinated Unbalanced Unsustainable The Paradox of the Four ‘Uns’
POLITICAL Billions $$ Unbridled Debt Financed Consumption Overall Global Current Account Balances in 2011 -473 122 200 201 133 91 -11 -74 149 -55 -600 -500 -400 -300 -200 -100 0 100 200 300 USA Japan Developing Asia China Middle East Russia EU Italy Germany Spain over-extended Over-heated Chinese economy Source: Professor Dick Vietor, Harvard Business School
POLITICAL -4 0 4 8 12 16 -4 0 4 8 12 16 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Percentage pointsPercentage points Final consumption expenditure Gross capital formation Net exports GDP Forecasts Source: CEIC China Database and Treasury. Contribution to economic growth
POLITICAL Source: IMF, Conference Board, UN and Treasury. -3 0 3 6 9 12 15 -3 0 3 6 9 12 15 1980 1989 1998 2007 2016 2025 Productivity Working age population Per cent contribution to growth Per cent contribution to growth China Growth outlook
POLITICAL Gini Coefficients from the UN Human Development Report
POLITICAL Concentrations of particulate matter and sulfur dioxide Source: Iworld Growth Report, Michael Spence, et al
POLITICAL Development Strategy Implicit or explicit white paper on “Australia in the Asian Century” Essential Role of State International context Public goods Rule of law Organisational structure Mediate strategy Australia’s Five Year Plan for the Economy…
TRADE A simple open economy – trading with china Source: ACBC Household Report
TRADE Australia's top export destinations Source: ACBC Household Report
TRADE Australia’s top ten merchandise exports to China Source: ACBC Household Report
TRADE Australia's top import sources Source: ACBC Household Report
TRADE China in the Australia Household Source: ACBC Household Report
TRADE Chinese students in Australian Universities 130,000 students in 2012/13 Source: ACBC Household Report
TRADE Chinese Visitors to Australia 2000-2010 (‘000) Source: ACBC Household Report
TRADE International Visitors to Australia July 1, 2011 – June 30, 2012 (‘000) Source: ACBC Household Report
INVESTMENT China FDI to Australia
INVESTMENT International Economic Indicators Source: Lowy Institute
INVESTMENT Composition of foreign Assets Source: Lowy Institute
INVESTMENT Top destinations of Chinese OFDI Source: Lowy Institute
INVESTMENT Top OFDI countries in Australia Source: Lowy Institute
INVESTMENT Regulatory Restrictiveness Index 2012 Source: Lowy Institute
INVESTMENT Australia and other countries by sector
INVESTMENT Accumulated Chinese ODI by industry Source: KPMG
INVESTMENT Chinese ODI by industry 2012 Source: KPMG
INVESTMENT Australian OFDI destination Source: Lowy Institute
OPPORTUNITY Case Study – Investing in the Pilbara Australia-China resource partnership no longer relying on trade – now focusing on direct investment in projects Investment moving up stream into projects, and infrastructure Opportunity for the Pilbara –openly encouraging international investment Investing in economic and social infrastructure builds communities, drives down costs and nurtures grassroots goodwill
OPPORTUNITY Energy (From gas to resources, renewables and uranium) China has a low per capita endowment Energy intensity increased post - WTO Reliant on coal and imports Negative externalities focus effort on renewables Australia well placed with presence of 'big three' in various projects
OPPORTUNITY Food Security (From mining boom to dining boom) Global population 9bn by 2050 plus requirement for more protein Australia's understated reputation for 'quality' Need $500 bn to capture $1.7trn opportunity for additional agricultural export Industry structure needs to change - fragmented ownership reliant on high levels of debt to corporatised/aggregated structure. TOP 25% 55% of capital 85% of profit BOTTOM 25% 10% of capital loss making
OPPORTUNITY Regional Initiative Shanghai Zhongfu president Pui Ngai Wu embraces Miriuwung Gajerrong Corporation Chairwoman Edna O'Malley after the announcement. Picture: Courtesy of the ‘West Australian’ Regional Outreach and Relationships (ROAR) ACBC working with regional stakeholders to forge: cooperation in regional development, food security, infrastructure (economic and social) investment and community engagement. ACBC‟s reach across Australia and China, and the breadth/depth of members‟ expertise will assist regional organisations to make connections, identify opportunities, clarify objectives and support activities with China.
OPPORTUNITY Collaboration is key Investment proposals which demonstrate long-term commitment to local, often remote communities and which provide access to new markets breathe life back into rural communities and must surely be welcomed for their immediate benefits and for the positive image created for foreign direct investment. The Australia China Business Council is working with many regional stakeholders as they reach out to Chinese investors.
TAKEAWAYS 1. Globalisation = macro-convergence and micro dislocation 2. High stakes + uncertain future = countries will „hedge‟ 3. Australia a status quo middle power that does need not choose between friends 4. China is transitioning to lower sustainable growth rate(s) 5. Three waves of trade/investment – minerals, agriculture and services 6. Australian has opportunities in energy and agriculture (pull) 7. Australia has opportunities in services and technology (push) 7. „Political, professional and personal‟ all attest to a strong bilateral relationship “May we live in interesting times” 8 Chinese Takeaways
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