Made in Australia: a premium brand for China
A number of colleagues – David Chau, Bei Bei Han, Judy Jin – and I were recently in China’s Tea Capital, Hangzhou, with partners from all around our international network to talk about trends in business globally, but also the huge opportunities we’re seeing coming out of China.
For many years Australia has looked to China as an important trading partner, and shifting political alliances and issues – like the US-China trade row – and changing Chinese government policies, means that there are more opportunities than ever for Australia and China to work together. Some of my highlights are below.
The Chinese government has highlighted areas they see the most value in either Chinese companies partnering with international organisations to bring skills and products into China, or for Chinese companies to export their unique skills and products to the rest of the world.
People in Sydney and Melbourne in particular would have noticed an influx of capital investment from China into the real estate market over the last decade. They may have also noticed that this has come off the boil in the last 12 months or so as the focus shifts to a more diversified portfolio of interests – agriculture, education, technology, biotechnology and financial services (like fintech). All of which Australia has a reputation for excellence and innovation in, and in a time zone complimentary to Chinese investment.
Expect to see more deals with Chinese companies in these industries – but also more opportunity for Australian companies in these industries to sell their products directly into the Chinese market.
Did you know that Australia has three people for every square kilometre of land? Or that more than half of our land is used for agriculture? Or even that our farmers are considered amongst the most productive in the world?
For a small nation, we punch above our weight in terms of food production and food quality. And in China, Australian products are at a premium – for quality, freshness and safety. Not only is there an opportunity for our farmers to sell into China, but also to partner with Chinese companies who can help inject capital to expand production, and ensure smooth and preferential access to the Chinese market.
The Australian Made logo is as much a premium here as it is in China. Australian consumers have previously voiced concerns about international investment diluting the value and quality of Australian products. In the case of the Chinese investing in Australian agriculture – they will only invest in products and businesses that fully represent and will maintain the Australian Made brand promise. Chinese consumers want the same quality Australian consumers want – with similar premiums placed on organic, fortified, nutritional and value added products. And increasingly the Chinese have the buying power to pay for what they want. No dilution here.
A large population in need of better social services
Many of our trading partners are getting older – a problem we ourselves share. However, China’s ageing population stems from more than increased life expectancy. The children born during the time of the one child policy are now grown up and having families of their own, with restrictions on the number of children per family eased. However, the cost of living in China continues to escalate in line with spending power, and many Chinese people are deciding not to have children at all as they consider the cost of raising and educating their children to a high standard.
Here, we again see opportunity. China looks to Australia for our “soft skills” – for instance our concept of care for our elderly and excellence in education for our youth. Methodologies, structure, regulation, process, measurement, systemisation and standardisation – these are things we take for granted in Australia, and we as a nation are continuing to improve upon, but are in huge demand from a nation rapidly building new foundations to support all of their people – young and old.
One Belt, One Road
The One Belt, One Road initiative is the modern reinvention of the ancient Silk Road trade routes that linked east to west. Comprised of freight trains, highways, high-speed rail and major ports, China has invested anywhere between US$1 trillion and US$8 trillion and aligned itself to up to 70 countries to create this interlinked trade network. In Oceania, this network extends to the east to Japan and south to Indonesia. It doesn’t physically touch Australia, but Australia can certainly benefit from China’s ambitious plans.
Here our “soft skills” again come to the fore. Professional services – architecture, engineering, design, software developers are what will make the initiative work. Germany hasn’t signed on a partner for One Belt, One Road, but a number of German-based companies – including Siemens, have been awarded contracts on significant packages of work as part of the initiative.
No signs of slowing down
The ‘sleeping dragon’ continues to go from strength to strength and are increasingly opening their borders to international trade. Australia’s long-standing relationship with China, our physical proximity, and our reputation for quality and innovation in many of the areas that China is investing in will stand us in great stead.
Personally, I am very excited by the trends in business we’re seeing in and around China, and our growing China Desk here at Grant Thornton is well positioned to help our clients take advantage of these opportunities.