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 DevelopingAsia
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
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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