Australian firms to ramp up China ventures

Craig Emerson

Australian companies are ramping up their investments in China as they express renewed confidence about the nation’s economic growth while also warning of tougher competition from Chinese rivals.

Almost three quarters of the Australian firms already operating in China are likely to expand their operations in the wake of the country’s leadership transition late last year, according to a government report on the $77 billion export market.

Trade Minister Craig Emerson said the message to others was to follow the leading companies into Asian markets to take advantage of the region’s growth.

The report comes as Chinese authorities forecast a rebound in the year ahead after the economy grew 7.9 per cent in the last quarter of 2012.

Profits at Chinese industrial companies rose 17.3 per cent in December compared with the same month a year earlier while the head of China’s sovereign wealth fund, Lou Jiwei, said at the weekend China would grow by more than 8 per cent this year.

The new survey, conducted for Austrade and the Australian chambers of commerce in China, found that 24 per cent were “extremely likely” to expand their physical presence there while a further 29 per cent were “very likely” and 21 per cent were “moderately likely” to do the same.

The report found 69 per cent of executives polled were optimistic about the Chinese economy and only 7 per cent were “not likely at all” to expand their operations.

While Guangdong and Shanghai were named as the most likely destinations for expansion, the Australian companies also named Beijing, Sichuan, Chongqing, Zhejiang, Jiangsu, Shandong and other locations in that order.

The report, to be published by Austrade today, found that 39 per cent of the companies said they were more profitable than a year ago, while 8 per cent were “much more profitable” and 31 per cent were about the same.

Some of their biggest challenges were competition from Chinese companies, access to skilled labour, wage pressures, other cost pressures, licensing requirements and a lack of transparency.

Australia exported goods worth $77bn to China last financial year, up from $8.8bn a decade before. Services exports were worth a further $6bn. Imports from China have grown more slowly to $43bn.

Dr Emerson said Australian businesses should “follow the flagship companies”.

“We’ve got very successful companies operating in China because they’ve invested the time, effort and money to develop a presence in that country,” he said.

Dr Emerson returns this week after attending the World Economic Forum in Switzerland, where he talked about trade and the Asian Century white paper.

He plans to attend the Boao Forum in China in April.

“The general reaction is very positive, not the least because of the very existence of the white paper,” Dr Emerson said.

“Countries across the region identify Australia as the first Western country to prepare a white paper on its relations with Asia, and they see that as pioneering work and are very impressed by that.”

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