Australia-China Forum

Speech by theMinister for Trade, Senator Bob McMullan, at the opening of the Australia-China Forum, Shanghai, 19 September 1995

Introduction

Your Excellency, Mayor Xu Kuangdi, Vice-Minister Sun Zhenyu, distinguished guests, ladies and gentlemen. It is a pleasure to be in Shanghai to open the second Australia-China Forum.

Over the next two days, 130 Australian company representatives will meet their counterparts in the fields of:

- Infrastructure
- Building and Design
- Food Technology
- and Packaging and Materials.

At the first Forum held in Beijing in September 1993, we brought 123 Australian company representatives to China, and last year we helped MOFTEC to conduct similarly successful events in Melbourne and Sydney.

I was particularly pleased to see the extent to which businesses were able to use these events to negotiate concrete trade and investment deals, and now, in Shanghai in 1995, we have the second Australia-China Forum and the same ambition.

After all, this is the ultimate purpose of these regular exchanges - the effort and the cost is justified by the extra sales and investment which flow as a consequence of such a Forum.

The opportunities which have brought Australian and Chinese business representatives together are generated by the processes of development and reform.

Shanghai is a powerhouse of development, and a model of reform - already some 50 per cent of Australia's merchandise exports to China pass through this region.

Last September, I was here at the Head of the Dragon Conference organised by Australian Chambers of Commerce in Hong Kong and Shanghai.

Shanghai was already a shining light in the development of East China.

Twelve months later, I am struck by the enormous development that has taken place. Shanghai and the region are flourishing and it is pleasing for me that Australian companies are participating energetically in this growth. Investment in infrastructure development over the past four years was six times the investment in the previous forty years. The next five years will see this investment escalate with major projects to include:

a new international airport in Pudong, continued telecommunications upgrading, a second subway line, improved roads, and large-scale environmental protection projects.

On this basis, it is easy to see why Shanghai - with all its dynamism - was selected as the venue for this Forum.

Australian Economic Developments

Over the past decade, Australia has also undertaken major economic restructuring and the results of the reforms are now plain to see. We have been the fastest growing economy in the Western world, with GDP growing over the past three years by 13 per cent, and the signs suggest that this record of continuous growth can continue, and business investment is growing strongly, recording an increase of 21 per cent last year, while we are continuing to hold the underlying rate of inflation at low levels.

The domestic gains have been matched by strong export performance. Exports of Australian goods and services have grown to over 19 per cent of GDP in 1993/94 - above the average for OECD countries, but in my view still too low.

There has been rapid diversification, with manufactured exports growing at around 13 per cent per year to reach around 30 per cent of merchandise exports. But we are not satisfied with this and we know we have to do better.

Therefore, in June this year, I announced the Winning Markets trade strategy, designed to improve this performance.

Australia's natural resources-based exports - minerals and agriculture - are the core of our export trade and they will remain so. But increasingly we are adding value to these exports and tailoring them to particular markets, and Winning Markets provides a framework to build on this important trend in value-added exports.

Australia and China

Ladies and Gentlemen

The changes in both our countries provide a very sound basis for Australia's rapidly expanding economic relationship with China

Australian exports to China have grown 21 per cent for each of the past four years and there has been a dramatic change in the composition of these exports in the last decade: Increasingly, Australia is engaging in China's economic dynamism. That engagement is rapidly spreading from the three key cities - Guangzhou, Shanghai and Beijing - to encompass emerging markets in other provinces. Australian companies are actively responding to this challenge and our task here at this Forum is to accelerate that engagement.

Austrade has opened local offices in Hangzhou, Nanjing, Xiamen, and Dalian to assist in this process outside of the three key cities.

In terms of Chinese investment in Australia, there are more than 150 Chinese investment projects in Australia worth in excess of A$ 600 million. After Hong Kong, Australia has attracted more Chinese direct investment than any other overseas market, with about half being the investments in Mt Channar iron ore mine and CITIC's share of the Portland Aluminium smelter and investment in the Metro Meats Abattoir project in Adelaide

But actual investment in Australia will be much higher with over 100 Chinese corporations and organisations having representative offices and branches in Australia, and this number is increasing rapidly with substantial investment in a wide range of sectors such as food processing, general trading, wool and leather processing, and textiles.

Australia's investment in China is also expanding, covering a wide range of manufacturing activities and a rapidly growing services sector.

Around A$860 million has already been invested, much of it over the past three years, and at least $A2.5 billion - and probably more - is currently under negotiation, and the profile of Australian companies going to China is also increasingly more diverse.

The China market is emerging as an outstanding opportunity for Australian investors in the services sector. Our economies strongly complement each other in this sector and some excellent projects are coming on line. For example: Australia has been actively seeking opportunities in China. There are areas such as insurance, legal services and banking where we are actively urging China to open up the necessary market access in general, and particularly for Australia.

But the scope for cooperation between Australia and China is not limited to bilateral economic complementarities. There is a broader dimension to relations between our two countries which has a strong bearing on the environment in which businesses do business.

Australia hopes China will play a role in the World Trade Organisation commensurate with its growing status as a global trader, and looks forward to supporting China's membership once a reasonable response to our particular concerns has been agreed. And, at a regional level, we are working closely with China in APEC to realise the trade and investment liberalisation commitments made by all regional leaders in Bogor including Prime Minister Paul Keating and President Jiang Zemin last November.

Australia, China and the Future

Looking to the future of Australia and China's relationship we believe there is great cause for optimism. We look forward to: Looking a little further forward, into the next century, the nature of Australian participation in the Chinese economy will also change. It is likely that Australian manufacturing ventures in China will be producing not just for export but for an increasingly affluent domestic market.

As in other rapidly developing economies, that increase in affluence will change the characteristics of Chinese domestic demand.

For example, I expect to see increased incomes reflected in an increase in demand for processed food. The quantity and nature of food demand are likely to change, and this will create the need for enhanced production and distribution efforts in Australia as well as a changed regulatory regime and modernised wholesale and retail arrangements here in China.

There will undoubtedly be more Australian involvement in the emerging services sector. China's transport and telecommunications infrastructure will be much more highly developed and more able to serve the needs of the economy. Already a number of Australian companies have signed substantial agreements with Chinese entities to provide a range of services including optical fibre cables, digital telephone exchanges, cellular mobile telephone systems and microwave radio equipment.

Demand for housing and office space will continue to drive the construction industry. Australian design and construction companies will be partners in many of these projects.

Australia is well placed to participate in this vision of China's dynamic future. We are a world leader in processing minerals and primary produce, we are recognised as a world-class supplier of infrastructure, buildings, food technology and packaging and materials, and we have high quality education and training and other important services which underpin the development of a vibrant economy.

But to ensure Australia's place in China's future we rely on you - on what you will learn during the next two days about opportunities in Australia and China, and on what you do with this information in the coming weeks and months.

For Australia to realise the full potential of its place in China's future we must have a strong export base and strong investment linkages - investment by Australia in China and investment by China in Australia.

The Australian Government is here to work with business and the Chinese Government to facilitate this. But ultimately it is you, and the companies you represent, who will define the future of the China-Australia business relationship.

I congratulate you on the success of your business ventures to date. I look forward to seeing these continue to expand and hope the Forum will play an important role in realising this goal.

Mayor Xu, Vice Minister Sun,

before concluding, I want to express my deep gratitude to you both personally and to your organisations, MOFTEC and the Shanghai Municipal Government, our partners in this Forum, for your tremendous support.

I now declare this Forum open. Thank you.