Trading with China

Take home message from the ACBC China Trade Report

1. Australian businesses and Australian households are benefitting from two way trade with China.
2. Businesses that are currently trading with China, in the majority, have a positive outlook for ongoing profitability and benefits of that trade.
3. China is recognised as a complex and challenging market but businesses trading successfully with China tend to be more competitive both domestically and in the international market in response to those learnings from those challenges.
4. Many Australian businesses look to China as offering opportunities for business growth both in China and globally.

The price of doing business in China can be high, writes journalist John Garnaut about Australian citizens Charlotte Chou and Matthew Ng being jailed in China for fraud, (Sydney Morning Herald, April 4, 2015). Against this report of foreign businesses in China subjected the Kafkaesque nightmare of Chinese rule of law undermined by corruption and bribery at senior levels, the Australian China Business Council issued the 2014 China Trade Report, found here.

The focus of the report is the benefit of Australia’s trade with China and is the result of a survey with over 200 Australian businesses engaged in business in China, and the opportunities for growth in Australian industries such as agriculture, manufacturing, real estate, tourism, education and financial and other professional services.

Key findings of the report

The benefits to Australia are derived from trade and economic activities including improved terms of trade, contribution to GDP, and employment, as well as ancillary benefits such as share market growth and tax revenue:

• Almost 200,000 jobs were created in 2014 as a result of exports to China including 71,000 in mining, 18,000 in agriculture and 37,000 in tourism.
• Direct trade with China has contributed 5.5% to the Australian GDP – twice as much as agriculture, forestry and fishing.
• Approximately 1 in 58 Australian jobs is sustained by direct export activities to China.
• In 2009 the benefit to Australian households of trade with China was approximately $3,400 which increased to almost $17,000 by 2013.

What is China purchasing from Australia?

• China is the top purchaser of Australian agricultural products, education services and the third largest buyer of Australian manufactured goods. 20% of Australian non-resources exports go to Chinese consumers.
• In 2013 Australian exports in beef to China increased nearly 4 times, oil seeds 5 times, and other meat exports doubled. While dairy export to Greater China (China, Hong Kong and Taiwan) increased 40% in 2013 alone.
• Australian manufacturing export to China was approximately 1,500 million dollars in 2000 and increased to 10,600 million dollars in 2011.
• Australian non-resource exports to China have experienced strong growth as the Chinese economy generates greater demand for consumer goods, high end manufacturing and services. Chinese consumers particularly value clean foods, high value manufactured goods, tourism and education.

Accessing Chinese value and supply chains

Cooperation with Chinese partners has enabled Australian businesses to gain greater access to new value chains or to improve their position in existing supply chains. China is an important link for many international supply chains and can be a significant avenue to global markets for Australian importers. The following points are based on an ACBC Business Survey of 200 businesses that are already engaged in business with China:

• Business with China creates competitive pressures and 90% of the surveyed businesses had international competitors and 73% had domestic competitors dealing with Chinese partners.
• The survey indicated that small businesses feel that their engagement with China improves their domestic and international competitiveness.
• Firms that do well in China have a higher tendency to stay in Australia and expand their Australian workforce.

Looking ahead

• 90% of the Australian businesses trading with China are optimistic about future prospects.
• 49% of the respondents reported increased profitability from China related business activities during 2013.
• 76% of respondents expected the free trade agreement with China which is expected to be introduced within the year, to assist in trade with China.
• Of the 200 businesses surveyed, 90% are optimistic about ongoing business prospects and see China as key to their plans for global expansion with an expectation that the FTA agreement will help with their business.

Changes in Chinese laws, court systems, intellectual property protection and enforcement, and increased penalties for breaches, are all part of the toolkit enabling Australian businesses to trade confidently in China.

This is part two of a series on Intellectual Property in China. The first article of the series can be found here.