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Introduction

Thank you, Frank, for your introduction.

It is my great pleasure to once again have the opportunity to address the members of the ACBC.

I want to begin by expressing my appreciation for the vital role you play in strengthening one of Australia’s most important economic relationships. 

The trading relationship

China is now Australia’s most significant two-way trading partner. Total trade between Australia and China was valued at A$83 billion during the last financial year, a 30 per cent increase over the previous financial year.

Australia is one of the very few countries globally to enjoy a trade surplus with China. This reflects the strength of Australia’s export performance in the Chinese market, especially in the resources sector.

The value of our trade with China has grown during a period of considerable uncertainty in the global economy.

The Australian economy performed much better than other comparable economies during the global economic downturn.

This was partly due to very successful domestic stimulus measures implemented in both Australia and China.

China stimulus and impact on Australia

I recall discussing at last year’s networking day the considerable efforts being made by China to support its economy through its massive fiscal stimulus package.

The package’s focus on funding infrastructure-related projects and injecting liquidity into the Chinese economy ensured China’s GDP grew last year by 8.7 per cent — this was well beyond the expectations of most analysts.

In this way, China’s stimulus package also played a critical role in supporting Australian exports of raw materials like coal and iron ore into China at a time when other markets for these commodities were weakening.

Our trade with China has remained strong because the Chinese economy has remained strong.

And China’s growth outlook remains very positive.

In January, the IMF released its World Economic Outlook which projected that China will grow by 10 per cent in 2010 before moderating to 9.7 per cent in 2011.

That said, there are still areas of concern for the Chinese economy — such as over-capacity, inflationary pressures and non-performing loans.

China knows it needs to boost domestic consumption, and invest further in social welfare including health care, the national pension and unemployment benefits.

Opportunities in China

Since advancing Australia’s interests with China is an important part of the Government’s agenda, we need to be clear about our opportunities.

As Minister Ferguson has pointed out, the strength of Australia’s trade balance with China lies largely in our competitiveness as a reliable supplier of natural resources.

Our resources trade with China reflects the complementary nature of Australia’s economic relationship with China. Australian resource and energy exports underpin Chinese urbanisation and economic growth.

Both countries benefit from our economic complementarities.

Australia’s non-resource exports are also profiting from China’s economic growth, in particular from the increased spending power of China’s emerging middle class.

This economic growth has been accompanied by rapid urbanisation in China. Currently, about 46 per cent of China’s total population of 1.3 billion live in urban areas. By 2030, another 200-300 million people are expected to migrate from the countryside to the cities, bringing the proportion of China’s population living in urban areas to around 70 per cent.

This means that, over the next 20 years, China will require additional city housing and infrastructure for the equivalent of ten times Australia’s current total population.

This urbanisation trend has already opened up opportunities for Australian exports, not only for raw materials like iron ore and metallurgical coal but also for services, particularly in the areas of green building, education and travel-related services.

As China’s consuming middle class grows and the urbanisation process continues, more opportunities will open up for Australian companies in sectors such as financial services, agribusiness, retailing, urban planning, logistics and infrastructure.

Australia-China FTA

Given these opportunities, it is in Australia’s interest to ensure that the trade relationship with China continues to deepen and become more open.

This is why the Government is pursuing a comprehensive and high quality Free Trade Agreement with China.

The most recent round of FTA negotiations was held in Canberra last month. This was the first round since December 2008, a hiatus of 14 months.

It proved to be a positive re-engagement between the two sides, reflecting the momentum generated by recent high-level discussions, including during Chinese Executive Vice Premier Li Keqiang’s visit to Australia towards the end of last year.

The recent round demonstrates the desire on the part of both countries at the highest levels of leadership to make progress on these negotiations.

Of course, many difficult and sensitive issues remain to be resolved. The negotiations are challenging because China has not previously negotiated an FTA with a country that has such extensive interests in agriculture, resources, services and investment.

Nevertheless, progress was made in discussions on the matters of agriculture, services and investment. We look forward to further positive steps during the next round, scheduled to take place in Beijing towards the middle of the year.

I want discuss the matter of investment in the context of the FTA a little more. Our bilateral commercial relationship with China has a significant two-way investment dimension, which reflects the growing integration between our economies.

China has strong interests in investing in Australia. We have seen that play out over the past two years in a massive increase in investment applications from China, albeit from a low base.

The FTA negotiations provide an opportunity for a new investment framework, one which treats investment as a two way street.

Australia, too, has significant interest in improved investment access in China.

In 2003, the total stock of Australian investment in China was A$1.35 billion. By 2008, this had increased to A$7 billion.

But in spite of the rapid rise, Australian companies still face considerable barriers to investing in China.

Through the FTA negotiations and bilaterally in our discussions with the Chinese Government, we are continuing to push China to open up investment in areas that are currently protected, including mining, telecommunications, and financial, legal and education services. We are looking to China to provide the same open investment regime that foreign investors — including China — enjoy in Australia.

Second track commercial strategy

In addition to the conclusion of an FTA, and Austrade’s ongoing trade and investment promotion program, we are also working to strengthen our commercial ties with China in other areas.

The new second-track commercial strategy offers real and exciting opportunities to Australian industry. The strategy seeks to create trade and investment opportunities for Australian companies in the China market by leveraging our strengths in innovation.

We are looking in particular at opportunities in China’s rapidly developing inland provinces.

In Yunnan province, for example, we have signed an agreement for cooperation on agribusiness. This gives Australia an opportunity to showcase its expertise in a range of areas, including horticulture, dairy, beef and wool.

In December last year, Australia entered into an agreement with the Hubei provincial government to cooperate in the areas of green building and sustainable urban planning, clean energy and automotive and spare parts.

Both agreements resulted from discussions I had with the provincial governments during my visits to China last year.

I will pursue further such opportunities at the provincial level during my planned visit to China in May this year.

I am pleased that DFAT and Austrade are working closely together on the strategy with other Commonwealth and State and Territory partners, including agencies responsible for resources, agriculture and innovation.

There are clear opportunities to advance Australian interests under the strategy, for example in the automotive sector. Though small by world standards, Australia’s automotive industry is world class. We are a recognised global leader in the design and engineering of automotive components, including steering and brake components, engines, transmissions, drive trains and steering and suspension systems.

Australia is also a global leader in LPG and CNG gas conversion technologies and the design and manufacture of interior systems.

Our industry is competitive and we must continue to find ways to integrate into global supply chains and penetrate global markets.

There is no more significant global automotive market right now than in China.

China is now the world’s largest market for new passenger vehicles. According to China Association of Automobile Manufacturers statistics reported by Xinhua News Agency, almost 14 million automotive units were sold in China in 2009.

This was up from 9.4 million units sold in 2008, marking an incredible rise of over 45 per cent in vehicle sales in just one year.

I expect this trend will continue to increase as China’s consuming middle class grows.

Tremendous opportunities exist for increased automotive engagement with China, particularly through component trade and two-way investment. China, as an emerging automotive producer, stands to benefit greatly from Australian technology and capabilities.

Our second track strategy will align Australian interests and capabilities in the automotive sector with Chinese opportunities.

Shanghai Expo

Of course, we are not alone in seeking to bolster our commercial ties with China. The whole world is looking at the opportunities available in China.

This will be most evident during this year’s Shanghai World Expo, which is set to be the largest and most dynamic world expo ever held.

192 countries and 50 international and other organisations have confirmed their participation. Organisers are forecasting between 70 and 80 million visitors over the 6 months of the expo, including 38,000 visitors to the Australian pavilion each day.

Australia's pavilion will provide a unique platform to bolster trade and investment, strengthen institutional and people-to-people ties, and project positive images of contemporary Australia.

You have already heard presentations today about progress on the Australian pavilion and how Australian business can participate in events being held at the pavilion.

I am delighted that the ACBC is an associate partner of the project, and that members have had the opportunity to provide input into the shaping of the business program.

All of the events hosts have been encouraged to invite ACBC members to business program events.

I also understand that the ACBC will be running two events at the Australian pavilion, which is a great opportunity to showcase what ACBC members have to offer to China and to the rest of the world.

Conclusion

Once again, I want to commend you all on the role you are playing in boosting Australia’s tremendously successful economic and trade relationship with China. I want to congratulate the ACBC and its members for the hard work it has done to deepen this relationship.

As the global economic downturn has demonstrated, the importance of our trade and economic relationship with China cannot be overstated.

Government and business together must work to sustain and strengthen this relationship.

I wish you all every success during today’s networking day and in your future endeavours.

Thank you.