Australian companies in China remain positive about growth opportunities but wary of atmospherics

Doug Ferguson, Partner in Charge, Asia & International Markets

AustCham China, The University of Melbourne and KPMG yesterday launched the inaugural Doing Business in China 2017 report.

Based on a detailed survey of 100 Australian large and SME companies which are operating and investing in China, this report provides fresh, quantitative information at a sensitive time in Australia-China relations.

The surveys were completed in mid-2017 and comprehensively show that Australian companies were largely profitable, executives bullish on increased trade and sales into China and committed to making further investment and employment.

China is easily Australia’s largest trading partner in terms of exports and imports. Yet Australia is also China’s 6th largest trading partner. Coal and iron ore exports have been the prime drivers in the past. More recently agri-business and LNG are also important, while there are increasing trade flows of services for which ChAFTA has been instrumental.

Yet China remains a difficult market to do business for many companies across multiple sectors and executives remain concerned about the Chinese economy, increasing protectionism and rising employment and operating costs.

The rising Chinese middle class, Belt & Road Initiative and growth in the domestic economy are still viewed as very positive growth drivers.

ChaFTA is seen as a very positive and important trade and investment platform with addressing non-tariff barriers both a concern and a priority.

Ninety one percent of respondents agreed that positive bilateral relations between Australia and China were important to business growth in China, so atmospherics do matter.

The report concludes with ten key tips and 10 key questions for Australian boards to ask in relation to doing business in China.

Drawing on the key findings from the 2017 Doing Business in China Survey, our top tips are:

  1. Recognise that China is the big show: no other market compares now or in the future.
  2. Understand that China is not an “easy”market: it is a complex, fast changing and highly competitive.
  3. Develop a compelling China strategy: not based on “over-quoted” macro statistics about China’s economy or demography, but very niche and independently tested growth strategies about markets, customers and positioning.
  4. Localise: foreign companies need to consider what unique contribution they can make to China’s social and economic development priorities and align their value proposition and business strategies appropriately.
  5. Be prepared for frequent regulatory changes: implement processes to ensure your company considers the implications of all new laws, regulations and practices affecting your business and makes timely changes to ensure full compliance.
  6. Build understanding and support: especially with your Board and shareholders and avoid setting overly optimistic expectations too early.
  7. Understand that atmospherics really matter: the impact of ChaFTA has been overwhelmingly positive in creating opportunities, but positive bilateral relations are also seen as important for trade and business growth.
  8. Utilise communities of Australians to help each other: leverage the information, connectivity and support provided by AustCham, the Australia China Business Council, government-led delegations and various other networking and knowledge sharing platforms.

Read the full report: Doing Business in China

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