Australia and China – natural partners for growth

Australia and China a partnership for growth

From a business perspective, the pace and breadth of China’s economic transformation is thrilling to experience. China offers a wealth of cross-border business opportunities with increasingly accessible markets, a population of 1.38 billion, and more millionaires made each year than any other country.

China’s shift to a consumer-driven economy

China and Australia share a natural affinity for trade, with Australia’s energy and resource abundance and China’s industrialisation remaining a key pillar of our economic activity. However, newly affluent Chinese consumers are also driving demand for world-class brands and the premium goods and services Australia is known for globally. Higher disposable incomes are making imported products more affordable for more consumers.

From Australia’s perspective, Chinese demand has moved from the ‘mining boom’ to ‘dining boom’. The demand for clean, green Australian food and agriculture, coupled with Chinese companies’ marketing and distribution channels, will continue to fuel business prospects for both countries.

As an advisor to Chinese investors, I have personally observed the shift from ‘mining’ to ‘dining’ as more of my Chinese clients look to invest in agribusinesses such as dairy farms. There is no doubt China’s emerging consumer-driving economy represents significant capital raising and investment potential for Australia-China cross-border trade.

Expansion of cross-border e-commerce 

Explosive e-commerce market growth also affords an opportunity to reach markets Asia-wide with increased competitiveness. China’s biggest e-commerce company, Alibaba, opened an Australian office in 2016, signaling the importance of the Australian market and its untapped potential. Both China and Australia have expressed willingness to expand e-commerce trade with each other.

Preferential trade and government grants

In 2016, the Chinese market accounted for approximately one third of Australian exports and two-way trade of $AUD578 billion. To reinforce our trading relationship, the two Governments have signed the China-Australia Free Trade Agreement (ChAFTA), unlocking significant opportunities and creating an environment for real business collaboration.

For China, ChAFTA offers significant trade liberalisation, opening new trading channels and allowing wider access to international investment prospects. Chinese investors are already seizing the opportunity, attracted by Australia’s easy market entry and educated labour force. Another advantage for Chinese companies investing in Australia is the generous Research & Development (R&D) tax offset that Australia offers for innovation-based business activities.

For Australia, ChAFTA’s ‘Most Favoured Nation’ clause provides assurance that Australian companies will receive better trade treatment or equivalent treatment through any other competing country’s future Free Trade Agreement. For Australian companies investing in China, the Australian Government offers the Export Market Development Grant for aspiring and current exporters which reimburses Australian businesses up to AUD$150,000 per application.

Australian industries set to boom

In the past few years, sectors that have experienced significant growth in Chinese investments have been agribusiness, resources, energy and property. Natural synergies for Australia and China also exist in services industries such as financial, transport, education, professional services, and ‘green’ technologies.

These three sectors are expected to experience significant growth in the near future and deliver benefits for both Australian exporters and Chinese investors:

+ Tourism
The number of Chinese visitors to Australia has doubled from what it was five years ago and is expected to boom for years to come. Keeping up with this inflow requires investment in Australia’s tourism infrastructure. There will be significant potential for Australian and Chinese to enter into business partnerships for resort and hotel developments catering to Chinese visitors.

+ Agribusiness and food
Investment growth in Australia’s agribusiness is expected to continue with Australia enjoying a reputation for producing safe, clean and premium food products. Many Australian exporters have established a position as suppliers of meat, dairy products, fresh fruits, seafood and other products while Chinese investors are looking to expand into food and fibre production as well as add value to downstream processing industries.

+ Health and aged care
Australia’s world class scientific institutions and health care are ideally placed to service an ageing population within the Asia region. The demand for high quality health care, especially from the Chinese, is strong. We are seeing growth in merger and acquisition activities and joint ventures in this sector where investors are looking to transfer and replicate the services back to China and increase knowledge sharing. Following the signing of ChAFTA, we are also expecting an increase in investments in new services in hospitals, health and aged care.

If you would like to learn more about accounting, taxation and auditing when expanding into Australia, please contact Steven Zabeti for more information.

By Steven Zabeti, Accru Felsers