Address to the Australia China Business Council
I am so pleased to attend my first Australia‑China business event as Minister for Trade and Investment.
I'm also honoured to take over the portfolio from Andrew Robb, who has made an outstanding contribution to the Australia-China economic relationship.
Those of you here today know well the great opportunities for both Australia and China, which we are building through greater trade, investment and business links.
You also know China remains a significant contributor to Australia's economy and future growth.
China is the world's second-largest economy and our largest two-way trading partner.
In 2014/15, China bought $90 billion of Australian exports – more than a quarter of our total exports.
China is our top overseas market for agriculture, for resources, and for services.
And Chinese investment in Australia had reached almost $65 billion by the end of 2014.
So for Australia – just as for the rest of the world – China is big business.
But, ladies and gentlemen, we live in times of uncertainty.
The challenge for us – governments, businesses, and investors – is to prepare for, and if we can, be ahead of the curve on future trends.
Indeed, this is one of the key themes of today's discussions: the strategic direction of China's economic policies, and how they will affect its economy to 2020.
Now, I'm not here today to make detailed predictions about possible future Chinese economic policies.
I'll leave that to commentators and those of you here today with vast expertise in this area.
The obvious question for us in Government, and for you in business, is what predictions for the Chinese economy mean for Australia.
And, more importantly, how we ensure the Australian economy benefits.
So what I will talk about today, before I answer some of your questions, is how we ensure Australia is in the best possible position to take advantage of the opportunities we are likely to see stem from China's continuing growth over the next five years.
I'll also provide an update on how we're tracking with the Chinese-Australian Free Trade Agreement, or ChAFTA: the historic trade agreement to which Andrew committed so much effort.
It is unlikely China will continue to experience the kind of growth it has seen in the past.
The IMF predicts China's annual average growth is likely to be around 6.2 per cent over 2016-2020, down from 7.8 per cent in the first half of this decade – but still an impressive figure when compared to the world average [3.8 per cent].
And we shouldn't forget the growth China experienced in the three decades before the current economic slowdown.
Today's growth is from a much larger base: China's 2015 growth of around 7 per cent is equivalent to growth of fourteen per cent just eight years ago.
By the end of 2015, China had about USD $4 trillion in foreign exchange reserves. Most recent data suggests China's reserves are still well above USD $3 trillion, and still the world's largest.
It was also one of the fastest-growing sources of outward direct investment, and the largest-scale manufacturing country in the world.
It is the largest merchandise trading partner of multiple countries in southeast and south Asia: Australia's own region.
But, like the rest of the world, China has experienced a slowing in economic growth.
It faces domestic challenges to future growth too.
The size of China's population means it has significant needs for infrastructure, public amenities, transport, energy and housing.
These will be only become greater as more Chinese travel to urban centres to take up jobs, to meet the growing demands of China's booming middle class.
China's ageing population, climate change and domestic and international security are just some of the challenges which will need government attention and potentially hamper economic growth.
But this 'new normal' – China's current model of slower but hopefully more sustainable growth – is not cause for alarm.
Indeed, with an unrivalled consumer base in terms of sheer numbers, China's economic transition is towards stronger domestic drivers of consumption.
The Coalition Government is strategically positioning the Australian economy to transition into non-mining business growth alongside China's own rebalancing.
McKinsey reports estimate more than three-quarters of China's urban households will approach middle-class status on a purchasing-power-parity basis, before this decade is out.
By 2022, more than 75 percent of China's urban consumers will earn USD $9,000 to $34,000 a year, which, in purchasing-power-parity terms, puts those Chinese consumers on par with the average incomes of Brazil and Italy.
For Australia, this means a booming middle class, more able than ever before to afford goods and services – our goods and services.
It also marks a change in opportunity in terms of the way we trade with China.
China's strengths as a growing market of increasingly educated and wealthy consumers become ever more important.
We should continue to adapt to these changes.
There are obvious opportunities for us to increase our exports to China, particularly where we already excel - education, tourism, agriculture, and the provision of services on the ground in China.
Indeed, if we continue to expand in these areas, ANZ predicts that our exports to China could almost double by 2030!
Australia is a world leader in agriculture, in commodities, in high‑end manufacturing, science and research.
We can tap into a growing Chinese market in these sectors too.
There are opportunities for collaboration on innovative new projects.
Only last week, Delisi Group in China signed a strategic cooperation agreement with Yankuang Group in Sydney on building a cross-border e-business platform, to provide high-quality Australian products to Chinese consumers.
The age of internet shopping is very much here – why should our international trade deals be any different?
Our determination to ensure Australia is ready to take advantage of shifts in China's economy is why the Government entered into an historic free trade agreement with China late last year.
ChAFTA was the next, significant step, in an already successful commercial relationship between our two countries.
It creates a myriad of new opportunities for exporters, services suppliers and investors from both countries.
Already we're hearing positive results for Australian businesses.
In agriculture, the benefits to Australian beef and dairy industries are already taking effect.
For example, tariffs as high as 25 per cent have been cut twice since December, and they are heading to zero in as little as eight more years.
Our wine exporters will see similar gains. Tariffs have already been reduced from the 14 per cent most of the world pays to 9.6 per cent now, and are heading to zero by January 2019.
In resources, ChAFTA has already completely eliminated the Most Favoured Nation tariff rate of 3 per cent on coking coal, providing us with an edge over our major competitors in this market.
At a time of low prices, combined with our efficient sector, this will be crucial for the health of an important industry.
Similarly, ChAFTA has seen the tariff rate on steaming coal cut from the previous 6 per cent to 2 per cent already, and it will be gone completely from the end of this year. This means we are competing on a close-to-level playing field with our Indonesian competitors into the giant Chinese market.
ChAFTA also locked in zero tariffs on major Australian exports such as iron ore, gold and LNG, and has already eliminated existing tariffs on unwrought nickel and zinc.
Likewise, Australian manufacturers are already seeing the benefits of ChAFTA, with tariffs in the process of being eliminated on vitamins and health products, orthopaedic appliances and hearing aids, car parts and engines.
This means great Australian brands like Blackmores and Cochlear will further strengthen in a key market.
This is all the more significant when you consider ChAFTA only entered into force just over two months ago.
I'm told, only one day after the agreement entered into force - so on 21 December 2015 - Chinese media reported the first ChAFTA shipment to clear Customs in China was 1.2 tonnes of fresh Tasmanian cherries.
Chinese media also reports other shipments to have benefited from ChAFTA have included:
- Australian mutton imported into the northern port city of Tianjin
- frozen beef into the large south-eastern coastal city of Xiamen
- coal into the large industrial centres of Ningbo and Zhuhai
- and several batches of seafood airfreighted to Guangzhou.
These early outcomes on goods are significant, and serve as an early example of ChAFTA's success.
But I can't emphasise enough how important ChAFTA is as a platform for building future growth between economies.
Here, another crucial story is about services and investment.
The services industry is vital to the health of Australia's economy.
It accounts for around 70 per cent of our GDP and is responsible for an even greater share of employment.
Likewise, China's future prosperity is linked to the development of its service sector.
In legal, health and aged care and tourism and travel-related services, Australia has world-class expertise which can help China to develop its own services sector.
For investors, ChAFTA improves opportunities in both markets.
For example, Australian banking and wealth management companies now have greater certainty to invest in China.
Australian telecommunications companies now have guaranteed Value-Added Services access into China.
The Foreign Minister stressed the importance of the health and aged care sectors: with ChAFTA we have removed restrictions on Australian ownership of hospitals and aged care facilities in China.
In banking, we removed branching restrictions for Australian banks wanting to expand into China, along with RMB waiting periods, and achieved guaranteed access for subsidiaries.
In education, 77 additional private Australian institutions will now be listed on China's Ministry of Education website.
At the same time, Australia wants Chinese companies to invest here.
This is why we ensured ChAFTA has liberalised screening thresholds for private Chinese investors in non-sensitive sectors.
We know investment equals Australian jobs, and stronger economic growth for our country.
Another important but less well understood outcome from ChAFTA is the added attraction our negotiating successes will mean for global investors, particularly in agriculture.
Investment in Australian agriculture has huge potential.
Ladies and gentleman, while we cannot always perfectly predict the future, I am confident Australia is well placed to shape a bright future for the Australia-China trade and investment relationship.
The relationship is already strong, and ChAFTA provides a living agreement for shared future prosperity, which will continue to deliver for decades.
Please take the opportunity today to build on the links already in place to connect business from both Australia and China.
For my part, as Australia's new Trade and Investment Minister, I very much look forward to working with you to that end.