Stronger together

Premier Li’s upcoming visit to Australia reflects deepening ties with China in the face of global trade protectionism

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March 20-26, 2017
, XU WEIWEI in Sydney
and MO JINGXI in Beijing

Chinese Premier Li Keqiang’s visit to Australia at the end of this month reflects the deepening economic and strategic ties between the two countries.

The trip comes amid calls by many Australians and some political parties for greater protectionism along with the scaling back of free trade and foreign investment.

According to analysts, the importance of Li’s trip should not be understated as it follows Foreign Minister Wang Yi’s successful visit earlier this month, which saw both countries agreeing to upgrade economic cooperation and diversify trade.

“Li’s (upcoming) visit comes at a time when there is a great deal of noise, not only here (in Australia) but overseas, against globalization and calls for greater protectionism,” said James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology Sydney.

He said Australia and China both agree that there should be “greater openness, not only of the domestic economies but of the global economy as well”.

Laurenceson told China Daily Asia Weekly that there is a protectionist tendency among minor political parties in Australia, “but the two major parties (Labor and the Liberal-National coalition) both share the same view — more openness of the global economy, not less”.

Analysts say the significance of the Australia-China relationship is growing, pointing out that 10 years ago Australia’s exports to China were from the energy and resources sectors. These industries still play a key role in the bilateral economic framework, but China has since become Australia’s biggest market for agricultural products and services.

Su Hao, a professor of Asia-Pacific studies at China Foreign Affairs University, said that closer trade and economic ties have led to mutual benefits for the two countries.

Since the China-Australia Free Trade Agreement (ChAFTA) came into force on Dec 20, 2015, more than 85 percent of Australian exports to China enter duty-free or at preferential rates. And the figure is set to rise in the coming years.

According to data from China’s General Administration of Customs, trade between China and Australia totaled 712.38 billion yuan ($103.52 billion) last year, up 0.9 percent year-on-year.

Han Feng, a researcher at the National Institute of International Strategy in the Chinese Academy of Social Sciences, said both countries have plenty of opportunities to align their industries and strategies.

“China could help to renovate Australia’s out-of-date infrastructure facilities with its leading expertise, while learning from the country’s advanced technologies in transportation, telemedicine and distance education,” he said.

Han noted that Australia’s strategy to develop its north presents opportunities, as does China’s Belt and Road Initiative — an extensive project to build a modern infrastructure network across the ancient Silk Road routes.

Su at China Foreign Affairs University said China and Australia can work with the 10-member Association of Southeast Asian Nations to develop the 21st Century Maritime Silk Road that forms part of the Belt and Road.

“The two countries also share broad common interests in multilateral regional economic mechanisms such as the Regional Comprehensive Economic Partnership,” he said. Su added that this is especially important to boost regional economic integration and to address trade protectionism.

According to Su, regional security is another potential area for bilateral cooperation, as peace and stability in the South China Sea benefits all countries in the region. “Beijing and Canberra can conduct maritime security cooperation, such as rescue and relief operations as well as fighting piracy,” he said.

Rising concerns
But observers said it takes time to overcome the frictions that exist due to a lack of full understanding between the two sides, citing concerns among the public over Chinese investments in Australia.

According to the Ministry of Commerce, China’s outbound direct investment into Australia surged 56.1 percent year-on-year to $3.6 billion in 2016, exceeding the growth rate of the country’s overall ODI.

The investment mainly flowed into sectors including real estate, transportation, and leasing and commercial services.

“Australia’s current economic reform and transition needs large-scale investment from foreign countries. However, the scale of investment from China, the world’s second-largest economy, will inevitably cause concerns,” Han at the Chinese Academy of Social Sciences said.

According to Han, with more and more Chinese enterprises “going global”, they should also learn from other countries’ experiences on how to make their investments more acceptable to the Australian people.

“After a period of adjustment, such cooperation is expected to be smoother in the future,” he said.

A research report in March by the Australia-China Relations Institute said it is a common but inaccurate assumption that Chinese corporate investment in Australia is a threat to national security Down Under.

Wine imported from Australia at a fair in Qiqihar city, Northeast China’s Heilongjiang province. Credit: Wang Yunlong / ImageChina

China is now Australia’s biggest trading partner and 2017 has been designated by both governments as the China-Australia Year of Tourism. China is also the biggest source of overseas students enrolling in Australian universities.

China is also home to 31 Australian Studies Centres, which are attached to many of the country’s leading universities.

Chen Hong, director of the Australian Studies Centre at the East China Normal University in Shanghai, said the importance of the Australia-China relationship cannot be underestimated. Chen, who is also executive vice-president of the National Association of Australia Studies in China, said Li’s upcoming visit highlights the importance China places on Australia.

Doug Ferguson, partner in charge of Asia and international markets and deals advisory at KPMG Australia, agreed. He noted that the upcoming visit by Li, the first by a Chinese premier in at least 25 years, is very significant.

Ferguson said there is a “lot of goodwill” between the two countries. Since ChAFTA came into effect there has been much activity, especially in the services sector. He said the “political noise” coming from US President Donald Trump has created a climate of uncertainty in the region.

Chinese investment in Australia last year was strong despite the imposition of capital controls by China, he added.

‘Rock solid’ relationship
For the past 25 years, Australia’s economy has seen positive growth with much of it built on resources and energy exports, which fueled China’s rapid economic development over the same period.

Julie Bishop, Australia’s foreign minister, described the bilateral relationship recently as “rock solid”. Today Chinese and Australian ministers meet on a regular basis to promote mutual interest, especially in the trade area, following the implementation of ChAFTA.

Han from the Chinese Academy of Social Sciences said the bilateral relationship has greatly improved due to the free trade agreement and the Belt and Road Initiative.

“Both President Xi Jinping and Premier Li proposed increasing areas of collaboration such as infrastructure construction, scientific and technological research, industries such as remote learning and medical care, telecommunication, transport, agricultural and stocking products, and areas of quality control,” he said.

In China, he added, Australian products such as beef, wine and dairy items have been well received since the trade deal was signed.

“There is a lot to explore on how to deepen the relationship between the two countries,” he said.

Han expects areas of discussion during Li’s visit to include the Belt and Road, ChAFTA and regional relations. He said Australia and China are going through “an adjustment period”, because both governments are either making or have already made policy changes.

“For Australia, last year (Malcolm) Turnbull won his election with a narrow majority and he has faced pressures from both within and outside his party,” Han said.

“However, the good thing is that since Turnbull’s election Australia has seen steady economic growth, which is associated with the signing and implementation of the free trade agreement over a year ago.”

China and Australia, in Han’s view, “face similar challenges and opportunities”.

Chen from the Australian Studies Centre said that apart from ongoing trade relations, tourism, education and many other sectors have seen “growing collaboration”. “Between the two countries, Australia always prioritizes the economic and trade relationship but there are other areas we should also be stressing.”

He said instead of just being “comprehensive trade partners”, China and Australia should also become “comprehensive strategic partners”.

“There are a great deal for us to explore together, and also immense possibilities to heighten and deepen the collaborative relationship.”

Chen cited the withdrawal of the US from the Trans-Pacific Partnership trade deal and Australia’s call for China to join the partnership, as an example.

“There have been new issues and challenges that need more proactive communication and interaction between the Australian prime minister and Chinese premier. I think that is why there have been such frequent visits between the two countries,” he said.

“Australia has been cautious about foreign investments. However, it seemed that China was singled out among all those investing countries to be scrutinized.

“So people talk about xenophobia, or rather Sinophobia — the protectionist attitudes towards China,” Chen said.

“What we should be encouraging are more frequent visits and face-to-face talks that can promote better understanding about each other.”

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Shift of focus for Chinese companies Resources and manufacturing give way to trade services as firms like Alibaba and New Hope eye growth in Australia and New Zealand

March 20-26, 2017

A drop of water should be recompensed with a gushing spring.
— Chinese proverb

Jack Ma may not have had that saying in mind when he repaid a favor to his late friend and mentor Ken Morley, but given their history it seems entirely appropriate.

Ma, the founder of Chinese e-commerce giant Alibaba, is a son of the eastern city of Hangzhou, while the Australian Morley hailed from Newcastle, New South Wales.

Last month the Jack Ma Foundation donated $20 million to the University of Newcastle to support disadvantaged students. This is the fruit of a relationship struck up 37 years ago when Morley’s family was on an Australia China Friendship Society tour of China.

The friendship began when Ma, then 16, would cycle around Hangzhou’s celebrated West Lake where he liked to talk to tourists to improve his English.

Over the years Morley, an engineer, became a pillar of support to Ma and is said to have had a role in his first visit to Australia in 1985.

But last month, along with Ma’s generosity that paid homage to his friend who died in 2004, there were other hard-nosed business decisions relating to Australia that needed to be made.

Ma sees Australia and New Zealand as critical to Alibaba’s global expansion plans.

The company launched its Australia and New Zealand headquarters in Melbourne and also signed a memorandum of understanding with Australia Post, which will help hundreds of companies in this region — many of them small and medium-sized — to sell to the world.

More than 1,300 Australian brands and 400 New Zealand brands reach Chinese consumers through Alibaba’s Tmall and Tmall Global e-commerce sites. Many companies have entered the Chinese market this way.

Speaking to China Daily Asia Weekly, James Hudson, director of corporate affairs and marketing for Alibaba in Australia and New Zealand, pointed to the company’s growth plan.

“Our long-term strategic vision for Alibaba is to serve 2 billion consumers and support tens of millions of merchants, small businesses, brands and retailers across the world — and Australia and New Zealand are crucial markets in this respect,” he said.

Alibaba also has further plans in cloud computing, payments, digital entertainment and logistics in the region.

In China, Alibaba is not alone in taking a keen interest in Australia as a staging post for further expansion, said Qu Qiang, a research fellow at the International Monetary Institute of Renmin University of China in Beijing.

“China and Australia could strongly complement each other in economic development, and China has a large market and a huge middle class that is crying out for high-quality, safe products and better services, and Australia offers an abundance of natural resources, a clean environment and great agricultural products.”

China’s outbound direct investment to Australia rose 56 percent year-on-year to A$4.8 billion ($3.6 billion) last year, exceeding the growth rate of the country’s overall ODI of 44 percent, China’s Ministry of Commerce said.

Jack Ma (right), founder of Alibaba, with Australian Prime Minister Malcolm Turnbull at Alibaba’s headquarters in Hangzhou, East China. Credit: ImageChina

China is Australia’s biggest trading partner, and the free trade agreement (FTA) between the two countries established in late 2015 has smoothed the path for trade and investment, Qu said.

Farming focus
Agriculture is a critical element in trade between the two countries.

The People’s Daily recently reported that in the first three quarters of last year, Australia’s abalone and cherry exports to China doubled compared to the previous year. Also during the first three quarters, grape exports rose 600 percent while milk powder exports rose 80 percent, it added.

China is the largest export market for New Zealand — the first developed country to sign an FTA with China.

New Zealand Foreign Minister Murray McCully said that since China and New Zealand signed the deal, which came into force in 2008, bilateral trade has exceeded NZ$23 billion ($16 billion). Both sides expect the amount to surpass NZ$30 billion by 2020, he added.

John McKinnon, New Zealand’s ambassador to China, recently said he expected the two countries to upgrade their FTA.

“One of the most important ways we have been building on the partnership is to look at how to upgrade the free trade agreement.

“Since then, there has been a huge growth in trade between our two countries. And that is continuing and now we are reaching new areas such as services, e-commerce and many other such aspects of trade.”

Qu of Renmin University of China said that many Chinese companies used to invest a lot in mineral resources, but now focus has shifted to a range of different sectors, such as agriculture, services, entertainment and real estate.

Chinese consumers have responded exceptionally well to Australian and New Zealand products, including those for mother and baby, supplements, cosmetics, and food and beverages.

The diversified Chinese conglomerate New Hope Group established its Australian and New Zealand headquarters in Sydney in October, with an aim to increase its investment in the region’s dairy industry, expand its healthcare products business, and scout for new opportunities in food and agriculture.

Chairman Liu Yonghao said Australia is crucial for the company’s globalization. New Hope bought the health product company Australian NaturalCare last year and the Kilcoy Pastoral Company in 2013.

In New Zealand, it bought a big stake in the biggest agricultural services provider, PGG Wrightson. And in China, it sells a milk powder brand called Akara that is produced in its factory in New Zealand.

“Chinese consumers’ demands have risen, and they are looking for more high-quality and safe food,” Liu said. “Australia has plenty of high-quality agricultural products.

“Apart from bringing the best products to Chinese consumers, we also want to learn about the standards and advanced methods of production and to bring them to China.”

Chinese purchases
In 2015, Biostime International Holdings, a Chinese nutrition and baby-care products provider, completed its purchase of the Swisse Wellness Group, Australia’s top provider of vitamins, herbal and mineral supplements products.

And last year, Moon Lake Investments, owned by Chinese businessman Lu Xianfeng, bought the 191-year-old Van Diemen’s Land Co for A$280 million. The acquisition of Australia’s largest dairy farm gives Moon Lake access to 25 dairy farms.

Qu said that while doubts often surround China’s investment in mineral resources and manufacturing, investments in Australia and New Zealand sectors such as agriculture and e-commerce will be more welcome.

These sectors are more environmentally friendly, create jobs and give businesses more channels to sell to the world and help them better understand global consumers, he added.

“In the past, when investing in mineral resources, locals might have wrongly suspected that their environment would be affected or resources would be taken away,” Qu said. “But as investing sectors have become more diverse, the benefits of Chinese investment become much more obvious.”

Hans Hendrischke, professor of Chinese business and management at the University of Sydney Business School, said foreign investment in the Australian resources sector is crucial for the Australian resources boom.

“Concerns about Chinese investment were based on many reasons, but overlooked the fact that the resources boom relied on Chinese demand for Australian resources in the first place and that China was one among larger international investors,” he said.

Similarly, there will be criticism of foreign investment in e-commerce, because the arrival of large-scale operations will inevitably lead to the decline of other businesses which lack competitiveness, he added.

However, in the larger context of current business disruption, e-commerce has the potential to energize the Australian logistics and transport sector, and related service industries.

Coupled with the upgrading of Australian transport and commercial infrastructure, these changes will create smart jobs and make Australian exporters more competitive in global markets, Hendrischke said.

Bob Carr, former Australian foreign minister and director of the Australia-China Relations Institute of the University of Technology Sydney, said the relationship between the two nations is mutually beneficial.

A recent survey by the institute showed that most Australians do not oppose Chinese investment, something that is generally not reflected in media coverage of the issue, he said.

China is more integrated into the global economy and its companies know the world better now, Carr said, so they should learn more about the laws, regulations and culture of overseas markets to strategize accordingly.

Hu Yongqi contributed to this story.
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Making tracks Down Under Australia and New Zealand roll out better services and more flights as high number of Chinese arrivals set to continue

March 20-26, 2017
in Beijing

Australia is top of Zheng Yang’s list as a honeymoon destination. The 30-year-old envisions beautiful sea views along the coastal highways, playing with kangaroos and experiencing the unique local culture.

“Australia is like a combination of many good things that I’m interested in: Beautiful natural scenery, various kinds of plants and animals, and diversified Aboriginal cultures,” she said, adding that she plans to visit soon for a two-week trip.

Down Under is becoming increasingly popular with Chinese tourists. Figures from the China National Tourism Administration show that, in 2016, Chinese made 1.3 million trips to Australia, 28 percent more than the previous year.

A recent report by the Chinese online travel agency Ctrip estimated that Chinese tourists this year will make more than 1.4 million visits to the country and will spend more than 50 billion yuan ($7.2 billion) there.

In 2016, Ctrip served around 70,000 tourists to Australia — 50 percent more than the previous year.

China is set to surpass New Zealand as the biggest source of inbound tourism for Australia. Extensive traveling, tailor-made packages and outdoor trips have become more popular among Chinese tourists than traditional group tours, Ctrip said.

Ge Yujing, general manager of the public affairs department with Chinese online travel agency, noted the change in pattern of Chinese tourists.

He said that while Chinese in the past would visit Australia and New Zealand in one trip, many are now devoting more time to just one place due to rising spending power and a desire for better quality.

Tourists enjoy sunset views of Sydney Harbour Bridge and Opera House. Credit: AFP

In 2016, Chinese visitor spending per person was 35 percent more than the previous year. Moreover, in January and February, when China is in the grips of a cold winter and the air pollution can intensify in some places, people’s desire to take trips Down Under often peaks.

Both Australia and New Zealand have launched initiatives to expand two-way tourism with China. Australia recently began offering 10-year multi-entry visas to Chinese on a trial basis, allowing for up to three months per stay.

And Chinese visitors now no longer need to visit visa centers, thanks to the new Chinese application website.

Also, the number of air routes between the two countries has been increasing. At present, Chinese and Australian airlines have connected 17 Chinese and seven Australian cities.

John O’Sullivan, managing director of Tourism Australia, said that a recent agreement removes all capacity restrictions for both sides’ airlines, and the number of carriers operating between China and Australia is expected to rise by about 30 percent this year.

Australia is now providing more Chinese-speaking tour guides and service operators, and is setting up more Chinese-language tourism websites. It is also improving payment options for Chinese people, by taking into account mobile systems such as Alipay and WeChat Wallet.

Paula Bennett, deputy prime minister of New Zealand, noted recently while meeting with Chinese tourism officials in New Zealand that China is the second-largest source destination for the country’s inbound tourism.

New Zealand has taken steps to amend service standards and security for Chinese tourists.


Facts behind Australia’s property boom Misconceptions abound, but foreign investment has a positive impact on the country’s real estate market

March 20-26, 2017

Foreign investment in real estate has long been a politically and financially contentious issue in Australia — despite bipartisan political support for overseas investment in property.

Analysts say that in the face of widespread doubts to the contrary, foreign investment plays a positive dynamic role and is key to the workings of the local real estate market and the wider economy.

However, misconceptions remain as to the actual impact that foreign — and in particular Chinese — investment has Down Under.

Despite substantive evidence to the contrary, such as the findings of an Australian Treasury report issued late last year, a stubborn perception persists among many Australians that Chinese and other foreign nationals are responsible for the explosive price growth in recent years in the Sydney and Melbourne housing markets.

But at the same time as the blame game over price rises has taken place, Chinese nationals have been courted by Australian policymakers as a way to boost the country’s housing stock. The Treasury report clearly stressed that “foreign investment is being channeled into increasing the property supply as intended”, with Chinese demand singled out as being crucial.

David Rodgers, senior lecturer in architecture, design and planning at the University of Sydney, said that with the positives of foreign investment on clear display, it is of paramount importance that the public is better educated as to not only the benefits of foreign investment in the real estate sector, but also the other factors at play that are causing Australia’s current housing supply and affordability crisis.

Rodgers said the impact of Chinese investment on real estate is minimal and too much emphasis is being placed on looking for “easy answers to complex problems” in the property sector.

“I think an easy answer people have come up with about the housing affordability problem is to say, well, it’s all the Chinese capital,” Rodgers said.

“The housing affordability problem is a very complex problem and the ways that you might address it can be quite confronting to people,” he added.

Reports in The Australian on Jan 30 suggested that billions of dollars in “dodgy” Chinese investment money was making its way to Australian shores.

The newspaper also said that government agency Austrac investigated A$1 billion ($760 million) of “suspicious” transactions involving real estate investments from China.

The story drove a narrative about a perceived threat to Australian housing affordability from China, yet admitted: “These so-called ‘suspicious matter reports’ are not definitive evidence of wrongdoing, but rather indications wrongdoing may have occurred.”

Analysts say stories such as these add fuel to fears regarding foreign investment held by the public. But these incidents comprise a small amount of the value of total real estate, in either new dwellings, which foreign investors can buy, or established dwellings, which they are barred from investing in.

A plot of land, on May 13, 2014, where a home costing more than A$1 million ($760,000) was to be built. Credit: Jason Reed / Reuters

Foreign direct investment in Australia is never going to be infallible, analysts point out. There will always be instances where regulatory guidelines are not correctly followed, or where the Foreign Investment Review Board is required to step in to deny approval.

Gavin Norris, head of Australia for, a leading property website in China, noted that there have been more than 2,000 investigations into real estate investments, with a finding of wrongdoing in a mere 61 sales.

“It’s a quite minuscule problem, I think,” he said.

James Laurenceson, deputy director of the Australia-China Relations Institute, said that not enough stories are being shared about the benefits of foreign investment. He gave the example of Chinese companies such as Greenland and Dalian Wanda building new residential developments across the country and employing locals.

“These companies employ thousands of Australian workers putting up these apartments. These aren’t Chinese workers putting up these apartments. They have jobs that they wouldn’t have had without this kind of investment,” he said.

“And think of all the Australian families who now have a place to live because these apartments were built, thanks to foreign investment.”

The reality of foreign investment in the real estate market in Australia is that the injected capital serves to allay the legislative and economic conditions that have caused the housing affordability crisis in the first place.

Laurenceson said that factors behind the crisis include increased investment in the market by superannuation or pension funds and real estate trusts, which at the domestic level allow for easy access to plentiful financing.

“In Australia we have record low interest rates, so now property speculators can borrow even more than ever before,” he said. “That’s the really big change over the last few years.”

Hans Hendrischke, a professor at the University of Sydney Business School, said that although the part that interest rates play in housing affordability is significant, the government has to do more to rectify the core issues of supply and affordability. And he said this will rightly shift the discussion away from foreign investment.

“What the government is doing is regulating and providing barriers to local and foreign investors to prevent overheating of the market,” Hendrischke said.

“The government is trying to be seen as doing something to increase affordability, but I don’t think minor measures on the fringe do much to the overall economic elements that drive the real estate market.”

Malcolm Turnbull (left), prime minister of Australia, with Gui Guojie, general manager of Chinese developer Shanghai CRED Real Estate. Credit: Aly Song / Reuters

Foreign direct investment can never be eradicated in Australia, because it is crucial for the growth of the country as a whole. But Rodgers from the University of Sydney said measures can be introduced to shape the social impact of investments coming in from overseas.

“What we need is a very nuanced discussion about who these foreign investors are and what they are doing with their capital,” he said.

“It might be that we need a taxation regime put on foreign capital, that is then put into a fund for affordable housing, but that will reduce the appeal of Australian property to foreign investors.

“It’s a complex situation and how you get that capital to produce good social outcomes is a challenge.”

In the meantime, analysts say the reality is that foreign investment in real estate, particularly from China, is not the big, bad wolf as some Australian people have come to believe.

Rather, the consensus of politicians, economists and analysts is that foreign investment in real estate is needed, not only to achieve economic growth and increase housing supply but to establish a partnership with China and Asia for a more fluid global marketplace.

With the world and Australia heading in a globalized direction, Rodgers said he looks forward to a time where the lines between “local” and “foreign” are blurred.

“Australians going to Asia, people from Beijing coming to Sydney, people in Australia going to work in Singapore, this mobility will challenge our ideas about what it is to be local and foreign,” Rodgers said.

“In the future, I don’t think current analyses are fully going to capture the complexity of where the globalization of real estate is going.”

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