Last month more than 1,000 Australian federal and state government officials, business leaders, fund managers and banks travelled to China for the second Australia Week in China to meet Chinese companies and state and provincial government representatives. In total almost 2,000 Australian and Chinese delegates were involved.
The Austrade event included 150 separate events across 10 Chinese cities to raise awareness of Australia beyond natural resources and how the China Australia Free Trade Agreement (ChAFTA) will promote further cross-border trade and investment.
It was organised along eight business streams: agribusiness including R&D and technology; financial services; health and aged care; innovation; education; urban sustainability and water management; premium food and beverage; and tourism.
The delegates to the last Australia Week in China in 2014 credited the trip with generating $1 billion of additional export sales and around $3 billion of investment.
Two economies in transition
Two-way trade between Australia and China is worth around $150 billion. It is a mutually beneficial relationship as China has what Australia needs and Australia has what China’s 1.4 billion people need.
Both economies are in transition. Australia is becoming a knowledge-intensive economy with a focus on services while China is shifting towards consumption-led growth. In the March quarter, retail sales were up 9.7% year-on-year and the service sector grew by 7.6%, accounting for 63% of China’s overall economic expansion. The services sector now makes up 51% of China’s total economy (1).
Prime Minister Malcolm Turnbull and other keynote speakers talked of China’s continued economic growth. It is growing at around 6.5% annually off a much larger base than a few years ago. China is Australia’s largest export market, largest source of international students, most valuable tourism market, a major source of foreign direct investment and largest agricultural goods market (2).
Many other opportunities lie ahead, particularly now the ChAFTA is in force. For example, China needs investment into infrastructure to meet the initiatives it has committed to in the One Belt, One Road project, such as developing roads and ports in the region.
Using renminbi to your advantage
Another area where China requires assistance is promotion of the renminbi (RMB). It has already been accepted into the International Monetary Fund’s basket of currencies that make up the Special Drawing Rights. Businesses can no longer ignore the RMB and must partner with organisations like ours to maximise the opportunity.
Australia can help by supporting China’s push for cross-border trade and services settlement in RMB and issuing and investing in RMB-denominated bonds. There is also an opportunity for Australian fund managers to create RMB financial products for middle-class Chinese seeking principal protection.
We have a team dedicated to supporting clients across the corridor and raising awareness and know-how of conducting business with China and in the RMB. That is why the Australia China Business Council and Austrade chose CommBank as their partner to provide the first ever practical guide for corporates in China and those transacting with China to include RMB in their business strategies.
To discuss how we can help you conduct business in China using the RMB contact our RMB and China Solutions Team on RMBSolutions@cba.com.au.