10 August 2008, Hilton Hotel, Beijing
Speech to the BCA Financial Services Lunch
Salutation
The Hon Dr Zhuang Xinyi, Vice Chairman of China Securities Regulatory Commission
His Excellency, Dr Geoff Raby, Ambassador of Australia to China
Mr Huang Xianping, Chairman of Securities Association of China
Distinguished guests, ladies and gentlemen
Introduction
It is a pleasure to be invited here today to witness this exciting development in Australia's commercial relationship with China.
The MOU between the Australian Financial Markets Association (AFMA) and the Securities Association of China (SAC) is symbolic of a closer integration of the Australian and Chinese financial sectors.
Opening Gateways
There have been a number of other welcome developments recently, all designed to open the financial gateways between China and Australia:
- the introduction of globally competitive withholding tax rates for overseas investment funds doing business in Australia;
- ratification of a “declaration of mutual recognition” between the Australian Securities and Investments Commission and its counterpart in Hong Kong;
- the China Banking Regulatory Commission recently accepted Australia as an approved investment destination under the Qualified Domestic Institutional Investor (QDII) scheme;
- And last week my Cabinet colleague the Treasurer, Wayne Swan, launched a discussion paper on Australia's Future Tax System that will look at ensuring Australia has an internationally competitive tax system, including taxation arrangements applying to managed investment trusts.
The reforms Australia is introducing to our taxation and financial arrangements are designed to secure Australia's future as a financial services hub which will enhance the export of Australia's financial services.
At a financial services summit held in Australia last week, my colleague Chris Bowen, the Minister for Competition and Consumer Policy announced a number of other measures to secure Australia's future as a financial services hub.
This included the establishment of a dedicated team within the Treasury to assess and implement ideas raised at the summit and to act as a single point of contact for industry.
The Government's Financial Sector Advisory Committee will oversee the work of the Treasury team and provide industry input into recommendations to government.
And the Government will report back with an agenda for action by the end of the year.
The Government will also actively promote Australia's financial services sector by leading a ‘road show' to key Asian economies.
Building the Australia China Financial Services Relationship
Closer cooperation in the financial sector is also one of the major advances Australia has been seeking under the Free Trade Agreement we are negotiating with China.
When Prime Minister Rudd visited Beijing in April, he and Premier Wen Jiabao agreed to unfreeze the FTA negotiations given the important platform that an FTA could create for our economic relationship.
I subsequently agreed with Commerce Minister Chen in April that a high-quality, comprehensive and mutually beneficial FTA would require good outcomes in a number of key areas, including in the services and education sectors.
I indicated to Minister Chen that Australia would pursue positive and early outcomes for financial services, in particular.
And we need to work with you - participants in the financial services sector - to progress this agenda - your input into the process will be crucial in achieving a good outcome.
Achieve an outcome at the Government to Government negotiations requires us to develop further our Government to Business relationship reflecting your experiences with the business to business relationship here in China.
I am also encouraged by Minister Chen's signals on financial services provided at the WTO Ministerial Services Signalling Conference in Geneva in July.
Minister Chen and I worked together extremely well to try and get an outcome to the Doha Round.
While we were not successful on that occasion we did make progress - and neither of us have given up.
Importantly our cooperation augers very well for enhancing the bilateral relationship, including on financial services.
I look forward to meeting with Minister Chen tomorrow to discuss these matters in more detail.
I will also be going on to Guangzhou, on Monday for meetings with key provincial leaders on Australian commercial and trade interests in one of the fastest growing economic regions of the world.
In 2007 southern China took 20 per cent of Australia's exports to China, equivalent to Australia's 9th largest export market.
Also, the Municipality of Shanghai, together with its neighbouring Jiangsu and Zhejiang Provinces, forms China's biggest and most dynamic economic zone.
It offers tremendous opportunities for Australia in the services sector, including financial services, and investment.
Shanghai is also looking to position itself as a financial hub and I discussed their plans in detail with Shanghai officials when I visited there in May.
Australia will also have the opportunity to showcase its financial services capabilities at the Shanghai World Expo in 2010.
The biggest Expo ever held will present a wealth of opportunities for Australian companies to participate in trade missions, business networking events and sectoral promotions, to become corporate sponsors and to take part in the project's procurement process.
Australia's Dynamic Financial Services Sector
Australia punches well above its weight in the financial services sector.
Ours is a dynamic industry encompassing the full spectrum of financial services and one of the largest, fastest growing and most sophisticated in the Asia-Pacific region
Australia has the fourth largest pool of investment fund assets and the seventh largest stock and foreign exchange markets in the world.
The industry manages more than $1.4 trillion in assets, having grown at an annual rate of around 11 per cent since the introduction of the superannuation guarantee levy in 1992.
And there are industry predictions that this figure could rise to more than $2.5 trillion by 2015.
Reflecting these strengths, I believe there are real opportunities for significantly greater two way investment in financial services between Australia and China.
A growing number of Chinese banks have a presence in Australia.
Some, such as the Bank of China, have been there for twenty years.
Others are more recent entrants.
We welcome the introduction of new players, broader service offerings and greater competition that this produces.
From an Australian perspective, the big four Australian retail banks CBA, ANZ, Westpac and NAB all now have a presence in China
Our largest investment bank, Macquarie, has taken a very active approach to building its business in China with a particular focus on corporate advisory, infrastructure and property.
And AMP has led the way in participating in China's QFII scheme.
But I believe there is much more we can do to build on these foundations for cooperation between the financial sectors of our two countries.
The signing of MOUs such as that between AFMA and SAC that we have witnessed today is an important part of this process.
AFMA, the peak industry association, represents over 130 industry participants in Australia's wholesale banking and financial markets, with a turnover of more than $120 trillion in 2006-07.
The SAC has some 300 members, including 109 securities firms, 51 fund management companies, 92 securities investment consulting companies and other companies associated with the financial services industry.
Australia has a service based economy with nearly 80 per cent of value-added in our economy generated by the services sector.
However services only account for 23 per cent of our exports.
There is therefore great potential to improve our export of services, including financial services, particularly to China - our largest trading partner and one of the fastest growing markets in the world.
As I have noted, the Australian Government is pursuing this objective on a number of fronts and to ensure success we need direct input into the process from you - the key players in the field.
And by working together I am confident that we will succeed.
Thank you
Media contact: Mr Crean's Office (02) 6277 7420 - Departmental (02) 6261 1555