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Australia and China - Tapping our Great Potential

Speech by The Hon Mark Vaile MP at the opening of the Australia-China Trade and Investment Summit

Grand Hyatt Hotel Melbourne, 7 September 1999

Thank you Bill.

Ministers, representatives of the diplomatic corps, senior representatives of the Australian and Chinese business communities, ladies and gentlemen.

It's a great pleasure to welcome you, and particularly our distinguished guests from the People's Republic of China, to the Australia-China Trade and Investment Summit. I'm honoured to chair the Summit an event that signifies the rapid expansion of economic linkages between our two countries. We are also extremely honoured that we will be joined at lunch today by President Jiang Zemin. Today will be a great opportunity for us to exchange views on our trade relationship and its great potential; to renew old acquaintances and to make new friendships; and to expand our commercial ties. I want to take a close look at our trade ties, including the significant promise of some particular industry sectors. Before I do, I think it is worth reminding ourselves about the long history of economic interaction between Australia and China.

Australia-China economic ties - long and fruitful

Economic and trade linkages between Australia and China have a fascinating history. There's a strong argument for tracing economic ties between Australia and China back to traditional trade in a rather strange creature - the sea cucumber or trepang. In Chinese it's known as hai shen. As early as the 1670s according to written history, and perhaps many centuries earlier, Chinese-owned fishing boats based in what is now Sulewesi in Indonesia headed south in the summer to look for this Chinese food delicacy in the tropical waters of Australia's north. The humble sea slug was actually Australia's first processed food export. You see, Chinese customers preferred their trepang to be red.

Fishermen spent several months collecting and processing the trepang using a particular species of mangrove for dyeing the trepang red. Chinese merchants purchased the delicacy from the fishermen in Sulewesi, then "re-exported" them back to China. The arrival of European settlers in Australia led to the further development of trade routes with China. In fact, that was one of the arguments put forward in favour of establishing a British colony in Australia, since new trade routed south would reinforce the East India Company's trade with the Orient. As the Australian colonies expanded, so too did their exports to China. For example, seal skins and sandalwood became lucrative exports. Even in the area of tourism and services, passengers on ships travelling between the Australian colonies and Britain in the 19th Century called into Southern China for supplies, much like today's 747s stop over for refuelling and some "duty free" shopping. Australia also owes much to early Chinese businessmen who braved harsh conditions to make a new life for themselves here. The first we know of was Guangzhou-born, Mark O Pong, who arrived in Sydney in 1817 aged 19. Four years later, Pong became part of the landed gentry after being allocated 30 hectares of land by Governor Macquarie. The lure of gold, of course, significantly boosted the Chinese presence in Australia. News in the early 1850's of a "New Gold Mountain" in Australia - in contrast with the "Old Gold Mountain" of California attracted prospectors from China, especially southern provinces. Between 1852 and the end of 1856, there were 25,000 Chinese working in Victoria - 4.6% of Victoria's population. Many came to Australia for only a few years in the hope of making a fortune, and like prospectors all around the world - most returned home with little to show for their years of work. But they helped build Sydney and Melbourne and scores of regional centres around Australia.

In many ways, the gold rush was the beginning of a process that forged a nation in 1901 and made Australia one of the richest countries percapita in the world by the turn of the century. And when the new nation of Australia established its first three overseas trade missions in 1935, one of them was in China. That decision stands as a testament to the vision of our forefathers and their early recognition of China asa key trading partner for Australia.

Our modern trade ties

We have come along way since the days of the trepang and the gold rush. But the mutual benefit we gain from trade remains as strong as ever. Australia and China established formal diplomatic relations in 1972. But the true expansion of economic and trade ties between our two countries began with China's decision to open its economy to the world in 1978. The last two decades have seen extraordinary trade growth across all sectors. Today, two-way trade has topped A$10 billion, about 20 times (inconstant price terms) the levels of 1972-73. Primary Products are at the core of Australia's exports to China accounting for around 60% of our total exports. China is Australia's largest market for wool and an important destination for Australian wheat and other food exports. Earlier this year, Australia and China agreed on a Model Wool Contract designed to streamline procedures and provide both Chinese buyers and Australian sellers with greater confidence and certainty. Nevertheless, there is room for further improvement in the administration of many of our agri-business exports. I look forward to hearing the outcome of discussions on these issues in the Summits agri-business sector discussions later today. Resources and energy are another pillar of the trading and investment relationship.

Despite cyclical ups and downs, we can expect our traditional trade inproducts like iron ore, copper, alumina and coal to remain strong. But there is enormous potential here for our trading relations to broaden into areas like LNG (liquid natural gas) and directly reduced iron or hot briquetted iron. Our investment links in both resources and energy will continue to beimportant. While primary products and resources will remain the foundation of Australia's exports to China for the foreseeable future, the growth in trade in other sectors has been dramatic. Trade in manufactured goods has been dominated by Chinese exports to Australia. Labour intensive manufactures such as clothing, toys and footwear have figured prominently. But other products like machinery and technical equipment are growing in importance. Australian services exports have expanded rapidly in recent years, growing at an average annual rate of 10.6% over the last decade.

Education services are a good example. Over 5,000 Chinese students were enrolled in tertiary institutions in Australia in 1998.

Financial and legal services are another exciting new frontier in our economic relationship. Australian banks, accounting firms, insurance companies and legal practices are now on the ground in Chinese cities. China is now Australia's third largest legal services market after the US and the UK. There is enormous untapped potential in the financial and legal area. It's very encouraging that the Chinese Government has just relaxed some limitations on foreign banks. I urge China to continue this kind of liberalisation.

Tourism services have also grown dramatically. Professor Colin Mackerras has estimated that only 1000 Australians had visited the People's Republic prior to 1972. By 1984, Australians made up the third largest group of visitors to China after the US and Japan, with over 72,000 Australian visitors that year. By 1997 that number had grown to 156,000.

Following the conclusion of Approved Destination Status negotiations in April this year, we expect tourism links between our two countries to expand further, with more Chinese tourists visiting Australia. Two-way investment between Australia and China is another important part of the bilateral economic relationship. The many complementarities between our economies make us ideal investment partners. Even so, investment levels remain comparatively modest. According to Australian statistics, at the end of June 1998 China had investments here worth A$2.35 billion, while Australian investment in China was valued at A$1.24 billion. The key to unlocking opportunities for Australian and Chinese investors is continued reform in our respective economies. Restructuring and reform is never an easy process. But the current strength of Australia's own economy owes much to the continuing commitment of our Government to economic reform. Australian companies watch China's reform process with interest. We appreciate China's efforts to improve the business environment for foreign investors and traders. We recognise that enormous progress has been made over the last 20 years but also that many challenges lie ahead.

Trade negotiations also have an important role to play in expanding economic and trade linkages. In May this year, my predecessor as Trade Minister, Tim Fischer, concluded an in-principle agreement on bilateral market access related to China's accession to the World Trade Organization (WTO). This is a particularly significant achievement in our bilateral relationship this year. China's membership of the WTO will bring great benefits to Australian exporters and will also greatly assist China. Our Government very much looks forward to China's membership of the WTO and hopes that this can be finalised as soon as possible.

About the Trade and Investment Summit

Before concluding, I'd like to thank the Commonwealth Government's partners, the Victorian Government and the Australia China Business Council, who helped get this high-profile event off the ground. On the Chinese side, I would especially like to thank Vice-Minister, Sun and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), for their assistance in this endeavour. I would also like to acknowledge the support of the Summit's corporate sponsors: CITIC Australia, Airsys ATM, Allens Arthur Robinson, AMP, ANZ, Colonial Mutual and Rio Tinto.

Of course, the keynote address by His Excellency, President Jiang Zemin, will be the highlight of the Summit. As well, our program includes five separate Executive Sessions, that will focus on energy and resources, financial and legal services, agri-business, information technology and telecommunications, and infrastructure. Those sessions are the real core of today's Summit, and I urge you all to participate fully in the discussions there.

Conclusion - tapping our great potential

Coinciding as it does with President Jiang's historic visit to Australia the first ever by a Chinese Head of State - this Summit is an important milestone in our bilateral relations. Never before have so many senior business and government leaders from Australia and China come together to discuss our commercial future. It's a wonderful opportunity to discuss contemporary issues in our trade and investment relationship, to strengthen old personal and institutional ties, and to forge new ones. Let us explore all possible avenues of commercial cooperation, so that the next 20 years brings another 20-fold increase in two-way trade, and levels of investment to match.

I wish you all well in your deliberations today.

ENDS