Regional Profile: Shandong Province
The northern Chinese coastal province of Shandong presents opportunities for Australian business across a range of sectors write Blaze Puksand and Matthew Warr.
Shandong Province, a peninsula jutting out from the east coast of China between Beijing and Shanghai, is quickly becoming a lucrative hub for Australian business, trade and investment opportunities. Shandong boasts the third largest nominal GDP of all provinces in China, with Australia ranked as its seventh largest trading partner.
Australia enjoys a particularly strong association with Shandong due to a Sister State relationship between Shandong Province and South Australia, established in 1986, and a similar cooperative relationship between Adelaide and Qingdao. Austrade has also recently celebrated the 10th anniversary of the establishment of its office in Qingdao.
With these growing links, it is not surprising that the Australian private and public sectors are beginning to devote more and more time and resources to building a greater Australian presence in Shandong. Similarly, the Shandong Government is looking at how to create long-lasting ties with Australia, best represented by its current work on a White Paper on Shandong-Australia Relations.
Shandong is the first Chinese province to devote this level of resources (with input from Austrade) to a comprehensive review of relations with Australia. The reasons are not surprising. Two-way trade between Shandong and Australia is increasing rapidly. In 2012, Australia’s trade with Shandong alone was worth US$13.99 billion, a year on year increase of 10.1 percent. Australia’s imports from the province in 2012 stood at US$2.83 billion, up 20.9 percent; exports to Shandong amounted to US$ 11.17 billion, up 8.97 percent.
Shandong’s highly diversified economy includes a mix of heavy and light industries as well as domestically and externally-focused sectors. Shandong is also one of the top manufacturing provinces in China, offering interesting opportunities for Australian businesses and potential investors.
The province has a comprehensive transport infrastructure due to the geographic significance of its important trading ports and its intersecting north-south and east-west domestic logistical routes. It is endowed with rich agricultural and marine resources and has developed impressive food processing industries. Shandong has been China’s largest exporter of agricultural products for more than a decade. Major agricultural exports include seafood and marine products, vegetables, fruits, meat and peanut products.
Industries currently contributing to the bilateral trade relationship include mining, coal, machinery and equipment, electrical appliances, textile products, garments, steel products and containers.
Sectors such as building design and construction, mining and environmental services, urban planning, aged care, as well as the beverage and financial service sectors also show great potential. In the cities of Jinan and Qingdao, where service outsourcing is developing vigorously, some Australian companies have achieved notable success.
Since establishing its Qingdao office in 2008, Australian digital agency, Gruden, has designed and won high level recognition for its web design and related services. Commonwealth Bank has a strategic investment in Shandong’s Qilu Bank. Argyle Hotels, currently managing 45 hotel properties in China, has a presence in Qingdao.
Australia’s dairy industry has achieved considerable success, in the form of Murray Goulburn’s plant in Qingdao (with newly expanded production facilities to meet accelerating local demand), manufacturing infant formula and nutrition products. Its high-quality products and active involvement in corporate social responsibility programs have been greatly appreciated by both the Chinese and Australian governments.
With Australia one of Shandong’s top trading partners, Tsingtao Beer and home appliance companies Haier and Hisense have all expanded their markets to Australia. Tsingtao is importing a large percentage of its barley and hops from Australia. Shandong’s investments in the Australian mining and energy sector are of considerable importance.
Yanzhou Coal Mining Company is the major shareholder in Yancoal Australia, which was created through a merger with Gloucester Coal to build Australia’s largest listed coal corporation. Yanzhou Coal is also the single largest Chinese investor in Australia. Australia and Shandong have also cooperated on new energy projects in wind energy and algae biofuels.
Shandong’s agricultural imports continue to rise, particularly imports of soybeans and cotton. Growing domestic demand for agricultural products has also generated investment in Australia’s agricultural industry. In January 2013, textile giant Shandong Ruyi bought 80 percent of Australia’s largest cotton farm Cubbie Station, which is located 500 kilometres west of Brisbane on the Queensland and New South Wales border.
Shandong’s wineries lead the nation, producing almost half the national output. There are currently more than 200 wine producers in the region, with most distributed in the Nanwang Grape Valley and along the Yan-Peng Sightseeing Highway. While Australia traditionally supplied large amounts of bulk wine to major Chinese producers such as Changyu and Great Wall, Austrade has taken initiatives to promote export of quality wines, assisting Tsingtao Beer source Australian wines and holding an Australian Wine Roadshow with more than 40 exhibitors in Qingdao in May 2013.
Business, educational and cultural ties have been boosted by the Shandong-South Australia and Qingdao-Adelaide relationships, the latter elevated to official sister city status in October 2013. Trade and investment from Shandong have been assisted by the South Australian Government’s commercial representative office in Jinan.
The University of Adelaide and School of Management Shandong University are increasing cooperative initiatives, such as their joint Innovation and Entrepreneurial Management Research Centre. 2014 will be a good year for Australian business in Shandong.
Austrade is organising a Seafood and White Wine Festival as well as an Australian Products Week for Qingdao. The Shandong provincial and local governments are planning new links with Australia, including participation as principal guest at OzFest Asia in Adelaide.
We can expect Shandong to assume a rising profile in the Australia-China relationship. ■
Shandong Facts and Figures 2012
*Blaze Puksand and Matthew Warr are interns with Austrade. Austrade works closely with the Australia-China Youth Association (ACYA) in recruiting for its annual summer internship programs, offered at its Shanghai, Beijing, Guangzhou and Chengdu offices. Recruitment periods are generally between April and June each year. For ore information about the ACYA / Austrade internship programme visit – www.acya.org.au.