ACBC Chairman’s Column: Enhancing Australia-China relations
ACBC Chairman, Frank Tudor, reflects on the significance of Julia Gillard’s recent trip to China and Australia’s largest investment delegation to ever visit China.
The recent Australia China Economic and Trade Cooperation Forum was a momentous occasion in the 37-year history of Sino-Australian relations for a number of reasons. The first was to gather in Beijing with the largest Australian trade and investment delegation ever to visit China.
Mustering so many companies from the length and breadth of corporate Australia was momentous enough, but it was all the more so to gather in Beijing at a time of great hope and a time of significant challenges against the backdrop of phenomenal growth in Australia’s relationship with China.
With two-way terms of trade between Australia and China at record levels, it is important for Australia to seize the moment and ensure that the bilateral relationship is built on a foundation that will allow it to thrive well into the future. Australia cannot afford to wine and dine forever off high commodity prices in Beijing – Australia needs to deepen its engagement with China on political, economic, cultural and social levels if the relationship is to well and truly prosper into the future.
The multifaceted and wide ranging nature of the recent business delegation proves that this foundation is strong. It proves many things – it proves that Australia is much more than China’s quarry and China’s farm – it proves that our economy is built on a foundation of innovative entrepreneurialism, it proves that Australia is a centre for world class learning and research, it proves that Australian companies are committed to global action on climate change, it proves that in addition to our leading tourist icons, Australia is a land of culture and a land of diversity and ecological wonder – to deploy the language of Brand Australia – it proves we are truly Australia Unlimited.
The energy and natural resources sector is undoubtedly a critical part of our relationship and the representation from the natural resources sector today demonstrates once again to our Chinese friends that Australia is a leading supplier of raw materials and a premier global investment destination. ACBC had been keen to deliver representatives from mid-tier miners as well as large flagship stakeholders to attend the delegation in large numbers. Just some of the resources companies in attendance included:
- Rio Tinto
- BHP Billiton
- Atlas Iron Ore
- Fortescue Metals Group
- Gindalbie Metals Limited
- Karara Mining Limited
- Albidon Limited
- Mayan Iron Corporation
- Queensland Coal Corporation
- Dragon Energy Ltd
- Magnetite Network
- HRL Group of Companies
- Leyshon Resources
Beyond the resources sector, the representation was simply first class – with representatives from areas as wide ranging as science and technology, education and research, urban planning, architecture, information and communications technology, engineering and project management, non-profit and philanthropy, tourism, civil aviation, legal services, accounting services, import/export, trade and investment consulting services.
China’s spectacular growth is now worth more than $100 billion to our economy and continues to play an increasing role in the world’s political and economic architecture, and so, the interest in our recent delegation to China should come as no surprise.
The Chinese Government’s success in maintaining stellar domestic growth in the aftermath of the global financial crisis, as well as its appeal to the international community for countries to reject the parochial mediocrity of protectionism, without doubt, has allowed Australia to keep growing.
China allowed the Pilbara and the Hunter to keep on mining, it gave our oil and gas sector the confidence in market conditions to invest $50 billion in the Gorgon and it has given companies like BHP Billiton the confidence in China’s continued appetite for iron ore to move ahead with a $48 billion expansion in its iron ore operations, and the ongoing injection of Chinese capital has allowed Australia to emerge from the GFC as the envy of the OECD world.
When Gough Whitlam visited Beijing as Leader of the Opposition in 1972, his visit was derided by then Prime Minister Billy McMahon and Whitlam was accused of sympathizing with communist interests and endangering Australia’s relations with its Washington allies. What McMahon and indeed Whitlam could not know was that on the same day as Whitlam’s meetings with the Chinese leadership, US Secretary of State Henry Kissinger was secretly in Beijing preparing for President Nixon’s historic visit to Maoist China.
Nixon’s visit would change the Cold War balance of power and Gough’s preemptive talks with Mao secured Australia’s position as beneficiaries of emerging changes within China’s political and economic power structures. The sod had been turned on a mutually beneficial relationship that would see the landmark Channar iron ore joint venture concluded between the two countries in 1987 – a deal which was China’s largest overseas investment at the time.
Since production commenced in 1990, over 190 million tonnes of iron ore have been extracted from the mine and a further 50 million tonnes in capacity has been added following the conclusion of an historic renegotiation between Rio Tinto and Sinosteel in 2010.
This historic joint venture, coupled with Australia’s track record of constructive cooperation with Chinese counterparts on a variety of projects offers Australia a fascinating blueprint for a new phase of truly global cooperation. Rio Tinto’s multibillion dollar Simandou joint venture with Chinalco is a striking example of what is possible. Existing Chinese investments in Australia are tangible models for genuine global partnerships which combine mining expertise, good governance practice with a commitment to mining communities and social responsibility.
The Australia China Business Council has done significant work in this area by bringing Chinese and Australian parties together to showcase their strengths to governments and indeed the wider community. The Council’s Western Australian Branch held a major event in October 2010 focusing on cooperation between Chinese companies and indigenous Australian communities. The Branch recently held a major event in partnership with Sundance Resources and Rio Tinto in February, which focused on cooperation between Chinese and Australian companies in Africa.
Since the creation of the Channar joint venture in 1987, the composition of the Chinese and Australian economies and the nature of the bilateral relationship have changed dramatically. China is now Australia’s largest trading partner and is the second largest economy in the world. Australia has emerged from decades of deregulation and structural reform as one of the most successful economies in the OECD. We are home to four of the world’s top 12 banks and our capacity to produce first class resources has grown exponentially.
As I said at the outset however, the challenge for Australia lies in deepening its engagement with China to deliver a relationship that will survive the test of time. Stronger government-to-government dialogue and cooperation with industry is a vital part of this process. The Australia China Business Council welcomes the establishment of the China Policy Unit within Treasury as a tangible example of how the Australian Government can enhance its engagement with key Chinese political and economic institutions and complement the ongoing work by Australian companies.
Yet notwithstanding the increased quality of our bilateral engagement process, the challenge exists on both sides to articulate the value of investment and trade to ordinary Chinese and Australian households. Research commissioned by the ACBC and launched in March 2011 shows that trade with China delivers more than $10,500 per year to the kitchen tables of Australian mums and dads.
This is more than simply export earnings. This spectacular growth stems from a higher Australian dollar, stronger imports from a competitive Chinese market, infrastructure and crucially – Chinese investment in Australia. With stock of more than $16 billion, China has emerged as a legitimate stakeholder in 21st century Australia’s economic development – it is part of this country’s narrative – it is part of our ports, part of our rail – it is now an undisputable part of the backbone sustaining the great Australian way of life.
Yet there is a further part of this trade and investment equation that needs effort on both, and I stress both sides – the issue of Australian investment into China. While Australian investment in China now stands at $6.3 billion and this is a three-fold increase compared to 2005 levels – China accounted for only 0.7 percent of Australia’s FDI output in 2009 and this is at woefully low levels by any stretch of the imagination.
There is much the Chinese Government can do in terms of attracting more Australian investment into China. This is fundamentally in China’s interests – if Chinese investment is to be a welcome feature of Australia’s FDI landscape – the Chinese Government can do more in facilitating and promoting Australia’s investment into China.
Outward bound FDI leading to the provision of Australian financial management services, to take but one example, from within China for a growing Chinese middle class serves to not only balance the investment ledger with China but also to diversify and stabilize the Australian economy away from the boom and bust cycle of commodity prices.
The Council also plays an important role in promoting Chinese interests in Australia as well as highlighting the strengths of the PRC as a first class investment destination and as an excellent trading partner. In my time as Chairman we have seen the visits of Xi Jinping and Li Keqiang as well as phenomenal interest in Australia demonstrated by the constant flow of Chinese delegations visiting the Council around the country. ■
* To read more about the ACBC and the Australia China Economic and Trade Cooperation Forum, visit the ACBC website: www.acbc.com.au