Australia and China - A Complementary Partnership for the 21st Century

Address by The Hon Tim Fischer MP, Deputy Prime Minister, Leader of the National Party, Minister for Trade, to the Australia China Business Council, Melbourne, 28 August 1997.

Introduction

I am delighted to be here this evening, and to have the opportunity to address the Council.

It is only nine months since I had the pleasure of launching the newly merged Australia China Business Council at Parliament House in Canberra. That merger has already brought benefits - Australian business has been able to speak with one professional and efficient voice in putting forward its views to the Australian and Chinese Governments.

It will not be news to you - but I think it is worth emphasising - that Australia's relationship with China is of major importance to us. This is something we have highlighted in today's release of the first Foreign and Trade Policy White Paper. China - already a major player in the Asia Pacific region - is set to become one of the three largest economies in the world within 20 years and this will have significant implications for us all.

I will be visiting China in just over a week's time, and I am looking forward to meeting with senior Chinese leaders and to opening the 3rd Australia China Forum in Beijing. It will be especially pleasing to visit Beijing this year because 1997 marks the 25th Anniversary of the establishment of diplomatic relations between Australia and China - a milestone that is significant to both countries.

This evening, I want to speak briefly about the good news in the growing trade and investment links between Australia and China, and the prospects for even better economic ties in the future.

Going From Strength to Strength

Without doubt, the Australian and Chinese economies are undergoing rapid changes, as the economic forces sweeping across the globe - including, of course, globalisation and the onward march of technology - make their indelible mark on the Asia Pacific. I know you would all agree with me that China's economic transformation has been profound and has improved the standard of living for many Chinese. There is now a deep commitment to economic reform in China - reform which has, in fact, developed a dynamic of its own:

. China's growth has averaged just under 10% a year since 1979.

. China's GDP now ranks it as the 7th largest economy in the world. If present trends continue it will be one of the top three by 2000.

. 25 years ago China did not rank in the top 30 traders. Today it is the 10th largest.

In the midst of these historic changes, China's sustained economic growth - and the increasing openness of the Chinese economy - continues to offer unprecedented opportunities for many diverse Australian businesses and enterprises.

The Australia-China economic relationship is substantial. It has developed well beyond its modest beginnings, and each year increases in strength and diversity. Since the early 1970s, two-way trade has grown from A$158 million to over A$8 billion in 1996. Our trade with China has grown twice as fast in the past decade as our trade with any other major trading partner.

Australia is now China's ninth largest trading partner. In turn, China is our 5th largest trading partner. By the year 2000, if recent trends continue, China could be our third largest trading partner after Japan and the United States. Primary product exports still dominate our total exports to China (75 percent of the total in 1996), but manufactures and services show good potential for significant growth.

The recent expansion in our two-way investment links is another unmistakable sign of a maturing economic relationship. In the last four years, investment has expanded from A$800 million to around A$5 billion at the end of last year. China is now Australia's 13th largest source of foreign investment, and Australia is in the same position as a source of foreign direct investment for China.

Australian firms have established a significant and growing presence, in Beijing, Shanghai and Guangzhou, and in other parts of China, and the excellent trade figures are a result of the tireless efforts of dynamic Australian companies like yours. I am pleased to note also that small and medium-sized companies are making considerable gains in the Chinese market.

The return to Chinese sovereignty of Hong Kong on 1 July has undoubtedly enhanced China's global economic position. The Hong Kong Special Administrative Region will retain autonomy over trade and economic matters. Its strategic position as an international financial centre cannot be underestimated.

I had the opportunity yesterday of meeting Hong Kong Financial Secretary Donald Tsang who conveyed to me the welcome message that it is "business as usual" in Hong Kong; a message we are also receiving from Australian business.

The Australia - China relationship had some ups and downs last year. However, the underlying strength of the trade and investment partnership was particularly evident in two highly successful visits this year - Prime Minister John Howard's visit to China in late March, and Vice Premier Zhu Rongji's important visit to Australia in May.

These visits have laid the groundwork for an even stronger, more mutually profitable relationship. They have cleared the path for practical benefits on both sides. For example, on services - the issue of a Beijing branch licence to ANZ; permission for AMP to open a representative office in Beijing; and a Shanghai licence for the law firm - Blake, Dawson and Waldron. From the Chinese perspective, there was confirmed Chinese interest in investing in the Australian iron and steel sector, particularly in `directly reduced iron ' (DRI).

In addition, further visits to China this year are planned by several of my ministerial colleagues. These will undoubtedly advance Australia's interests across a broad range of areas.

An important agreements reached between Prime Minister Howard and Premier Li Peng in April was to reinvigorate the Joint Ministerial Economic Commission (JMEC). This was significant because the JMEC is the peak bilateral mechanism for management of our economic relations. I am pleased to say that this decision has already begun to bear fruit. China has agreed on a process to ensure that the JMEC - and the consultative mechanisms under its umbrella - is fully effective, including in relation to the very important emerging sectors such as information technology, services and infrastructure.

The JMEC Intercessional Meeting held in Canberra last month produced some positive results. China agreed to push ahead negotiations for a model wool contract. China also tabled a revised market access offer in the context of its negotiations for membership of the World Trade Organization.

China's membership of the WTO is a very important issue for both China and Australia, and we have given our strong support for accession on appropriate terms. The revised offer is a positive step forward, particularly in relation to future access for wool.

But further market access improvements in China's offer are necessary - across each of the sectors of trading importance to Australia - agriculture, manufactures and services. I will be focusing on these negotiations as one of my highest priorities when I visit Beijing next month to open the 3rd Australia China Forum.

As many of you know, the Australia China Forum provides an important avenue of contact and understanding for Australian and Chinese organisations that wish to establish and develop trade and investment partnerships. This year's forum will provide a timely opportunity to take stock of all that has been achieved in the economic relationship over the past 25 years, and to look ahead to the future. The forum will focus on four `cutting edge' industries - food and food processing, financial services, transport and distribution, and telecommunications and information technology.

The Future

Looking to the future, Vice Premier Zhu Rongji, during his address to the Australia China Business Council in Sydney in May, spoke of the "huge potential for cooperation" between Australia and China, and the complementarity of our two economies. And Prime Minister Howard - during his China visit earlier this year - also spoke of a new economic "strategic partnership" between Australia and China.

I could not agree more with these sentiments. Australia and China have many economic complementarities which will underpin a sustained expansion in the volume and scope of trade and investment. For example, Australia's reliability as a supplier of commodities can underwrite China's future growth, just as it did for Japan and Korea at an earlier stage in their development.

But there is much more at stake for both countries than more commodity exports or imports. New opportunities for mutual profit are opening up across the board. There is great potential for China to increase its investment in Australia. In turn, China knows that in a wide range of areas Australian investment can bring technology and services to China as advanced and effective as that of any nation in the world.

In fact, if you choose almost any commercial activity, you'll find an Australian pursuing it in China. Australian lawyers, architects, accountants, education consultants and teachers are all active in China.

The Australian Government's `focus sectors' for market development activity in China reflect this new diversity and depth of opportunity - agribusiness, processed food and beverages, building materials and construction services and environment protection services - to name just a few.

Of course, China is not the easiest market place in the world. All the world's big economic players are competing for a slice of the action.

But, when you consider Australia's size, we are more than holding our own.

Australian companies and products are competitive and world-class. With the support and assistance of organisations such as Austrade and other arms of Government, Australian enterprises are meeting the challenge of doing business in China.

More than that, we can boast an increasing pool of talented people who understand the local business environment in China, thanks in large measure to our migration and education programs, and the tireless and indispensable contribution of people like yourselves.

Conclusion

Governments can do a great deal to build relationships and create the right environment for business and enterprise to flourish. Both the Australian and Chinese Governments are strongly committed to further strengthening the bilateral relationship.

But Governments cannot - and should not - do it all. I would encourage the business community to continue to lead the way in maintaining and harnessing the vitality of trade and investment links between Australia and China.

In that respect, I know that the Council is committed to achieving an even more profitable Australia-China partnership in the future, and I can assure you that the Australian Government will continue to cooperate closely with you in pursuit of our shared goals and interests.