To summarise the past ten years from an economic and
business perspective, China has become globalised, radically restructured its
economy and achieved unprecedented affluence. Australia has benefited from China’s economic
growth, first through the mining boom, and now increasingly through Chinese
demand for consumer goods and services.
Looking into the future, Australia will continue to benefit
from its solid business relations with China as our largest trading partner, but
the populist turn in the public debate on China is putting strain on the
relationship. Perceptions are important, as Chinese buyers and investors can
turn to Australia’s global competitors.
An economy restructured
In the early 2000’s, China was struggling to be admitted
into the international trade system. Ten years later, China dominates
international trade and has become a net exporter of international investment
capital. The new Silk Road (One belt one road) initiative is China’s distinct regional
approach to globalisation, expanding China’s economic influence into Central
Asia and Southeast Asia, where demand
for Chinese technology and capital is strong.
China’s economic restructuring started under the previous
leadership during the misnamed ‘lost decade’. Widespread privatisation and private
as well as state sector innovation have pushed Chinese manufacturing to the
cutting edge of hi-tech manufacturing across core industries. Going forward, in
anticipation of a coming manufacturing revolution, China is moving away from
dependence on low-cost labour.
Changing social
landscape
Affluence is palpable in China’s cities and developed rural
areas. Public wealth is on display in transport infrastructure and public
amenities. Many residents now own apartments, cars, electronic gadgets and are
able to travel overseas, study overseas, invest overseas and get healthcare
overseas. They display a level of private confidence that has not been seen in
a century.
However, these achievements have come at a price. Pollution,
inequality and well-being are the most visible costs Chinese people have to pay
for their rising living standards. Pollution of air, water and food is
seriously affecting health. The government is no longer measured only by its
ability to grow the economy, but for what it is doing to save the environment
and there is currently a lack of trust in the government’s institutional ability
to create a liveable society any time soon.
Inequality is another cost of growth that is visible and
measurable by the Gini coefficient. Policies directed at solving inequality
between regions and urban and rural areas have not prevented the worsening of
inequality. There is also a growing awareness of a more fundamental inequality,
as China’s former socialist elite morphs into capitalist elite with leading
families controlling large industrial fortunes.
The low level response to surveys about well-being and personal
happiness indicate that many Chinese people are not as satisfied with their
situation as could be expected from the economic achievements their country has
made. Concerns about health, economic insecurity and work well being remain
strong and are motivating many to seek better environments overseas through property
and other investments, travelling and studying in countries such as Australia.
Australia-China
business – a relationship built on trust
Australia has benefitted from the economic rise of China
through the mining boom, which was in fact a China boom, and since then with
the ‘dining boom’ and rising Chinese demand for services. The current populist
run against China in the public media overlooks how solid Australia-Chinese
relations are and how much of the mutual economic benefit has been built on
trust.
Australia is a trusted supplier of essential goods and the
second largest recipient of global Chinese outbound investment. The two are
linked, as growing trade attracts investment and in the current situation,
expansion of trade with China depends on investment that opens up new trade
channels.
Australia is also a trusted partner country for the
education of young Chinese. Australian universities educate hundreds of
thousands of Chinese students. This trust will have long-term consequences when
a generation of people who were trained in Australia return to China to take up
positions of responsibility.
China respects Australia for its institutions and potential
contribution to stability in the region, including multilateral regional
cooperation with China. When the Asian Infrastructure Investment Bank was set
up, China and regional neighbours were keen to make Australia one of the
founding members because of its strong institutions.
The populist debate shows the weaknesses in Australian
perceptions of China. Media reporting and general knowledge about the working of
China’s government and corporate sector are weak. If economic forecasts are based
on financial news analysis that reflects mature Western markets, it is easy to
depict China in a permanent economic crisis.
The road ahead
Where will we be in ten years’ time? Based on current
trends, we will be in a world where mineral resources play less of a role and
where China will have lost much of its international advantage in
manufacturing.
The resulting environment will be much more competitive than
it is now. The advantage that Australia has over Chinese domestic competitors
will be eroded over time when Chinese industries are catching up in markets
such as health care, financial services, agribusiness and education.
As our trade becomes smarter and more service oriented,
there will be more competition from the United States, Europe, Japan and Latin
America. China is already channelling much more investment in services into the
United States than into Australia.
Certainly our integration in global value chains will be
dominated by China as a global producer and consumer market. Australia will
increasingly be a provider of intermediate products and services and therefore
dependent on Chinese markets.
If we manage to preserve a peaceful environment over the
next decade, the likelihood is that Australia will be actively integrated in regional
cooperation and dealing with a dominant China in a collective framework, rather
than on purely bilateral basis.
