Our annual “Invest in Australia” Mission ran from 17th to 22nd of January 2016. Over six days we attended the Asian Financial Forum and other events in Hong Kong and also visited Zhuhai and Macau for a day of business networking, presentations and tours. These were our key learnings from the trip:
1. China is transitioning
At the Asian Financial Forum, former Chairman of the US Federal Reserve, Dr Ben Bernanke, had much to say about the direction of the Chinese economy. The comment that stuck with me most was his explanation of China’s economic slowdown. He made the point that, over the past thirty years, China’s manufacturing and heavy industrial based economy was relatively easy to measure– the output of manufacturing, factory inventories, PMIs, volumes of exports and cargo and so on are all tangible, identifiable and measurable. However, China is now transitioning to a services and consumption based economy which has less tangible outputs to measure. Therefore, we should be careful how we react to China’s growth rate as it is inevitable that their economy is perceived to be ‘slowing’.
2. Zhuhai – not just a tourism destination
Perhaps what struck me most during the trip was the relevance of Zhuhai to Australia. Despite being a ‘small’ Chinese city (population of 2.3 million), it is beginning to play a significant role in the development of China’s southern region. This is largely due to President Xi’s concentration on further opening China’s southern cities – Zhuhai is home to the Hengqin Free Trade Zone (which we visited during our tour) and many local government business departments are actively attracting and engaging foreign companies to set up in Zhuhai. For Australians, competition in Zhuhai is less ferocious and many of its focus industries (tourism and leisure, financial services, education and advanced technology) match with some of Australia’s key strengths. To know more about our time in Zhuhai, please read our last blog post.
3. Preaching to the unconverted
During the Mission, the Austrade office in Hong Kong organised a seminar for our delegation focused on opportunities in the services sector emerging from the China-Australia Free Trade Agreement. Everyone in the room knew about and believed how important China is and was actively engaged with and excited about the opportunities it presents to their businesses and organisations. And back in Australia, there seems to be a weekly conference, seminar or presentation about China with an equally motivated audience. But are all Australians as well informed and passionate about China or are we just preaching to the converted? We have to ensure to engage all Australians, even those sitting far away on the other side of the fence, about the relevance and importance of China.
4. Hong Kong as the launch pad
Hong Kong’s history with Britain and China has resulted in a unique environment that is particularly beneficial for businesses looking to expand into China. Hong Kong is a launching pad for your China business because, over time, it has become home to many Hong Kong locals who have been actively engaged with China, many Chinese mainlanders who have set up in Hong Kong and many expatriates who have dealt closely with Hong Kong and China for many years. Their expert advice and unique insights and experiences are extremely valuable to a company looking to set up in China for the first time. As a result, Hong Kong’s role as the traditional gateway to China (and its emerging role as a platform for outbound Chinese investment) is as relevant today as it always has been.
5. Hong Kong’s role in the ‘Belt and Road’ Initiative
Something that became extremely apparent to me during the AFF was that Hong Kong has pinned its economic and relevance future on China’s ‘Belt and Road’ Initiative. Using its strategic position between China and the rest of South East Asia, Hong Kong will become the facilitator of capital, services and people traveling along the Belt and Road. Utilising its strengths in financial and professional services, Hong Kong has promoted itself as the foreign service provider to countries looking to tap into the opportunities and direct investment in and out of China. As the ‘Belt and Road’ Initiative develops, it will be interesting to watch how Hong Kong grows and develops alongside it.
6. Australia in the Asian Century?
The AFF is one of the world’s largest economic forums, bringing together some of the most influential members of the global financial and business community to discuss developments in the dynamic Asian market. The theme of this year’s forum was: “Asia: Shaping the New Paradigm for Growth” and it was obvious that many Asian countries are seriously planning to work together to develop the Asian market. For example, the Deputy Prime Minister of Russia and Thailand’s Vice Minister of Finance both made opening keynote presentations about their own domestic policies to support the ‘Belt and Road’ Initiative and the greater economic development in Asia. However, Australia was not mentioned in any discussion, presentation or workshop. This was disappointing because Australia can play, and should play, a very important role in the markets of Asia and is already a member of the Asian Infrastructure Investment Bank which is plays a critical role in funding many of ‘Belt and Road’ initiatives.
7. Sustained interest in SIV
Due to the July 2015 changes to Australia’s SIV program, service providers in Hong Kong and China are trying to better understand the new regulations and requirements. The SIV Seminar in Hong Kong, organised by co-mission leader Stacey Martin, drew a crowd of nearly 50 participants from across the migration, fund management and banking industry. Many have argued that the changes to the SIV program will seriously damage its popularity in China and Asia and application numbers are likely to drastically decrease. This is still too early to say. However, the audience engagement at our event was a good indication that interest is still strong.
8. Macau’s golden years are over
As one of the most popular gambling destinations in the world, Macau’s wealth has sky-rocketed over the past decade. From 2009 to 2014, Macau’s compound annual growth rate was 30% due to a combination of economic stimulus programs from China, plenty of funding opportunities from Chinese developers and the large numbers of wealthy Chinese travelling to Macau for gambling and recreational purposes. However, the bubble is now beginning to burst. Macau recorded a 43% fall in revenue in 2015, partly due to China’s own slowdown but also its crackdown on corruption which has stopped many Chinese government officials from going to Macau’s casinos. As Macau adjusts to this ‘new normal’, it will be interesting to see how far-reaching and long-lasting its effects are.