It's a pleasure to be here for my second engagement with AustCham in Shanghai, the first being almost two years ago as the then Parliamentary Secretary for Trade and Investment.
My visit at that time preceded the conclusion of the landmark China Australia Free Trade Agreement – an agreement that has taken the China-Australia trading partnership to a new level.
Chairman Xu and I discussed the early success of this Agreement in our meeting on Monday. It is clear that both countries are committed to ensuring Chinese and Australian businesses can maximise the opportunities the Agreement presents.
While the Agreement has certainly strengthened the relationship between our two governments and our two economies, pleasingly, it has also produced significant and immediate commercial outcomes.
For Australia, these outcomes have included:
- exports of Australian wine growing 38 per cent to reach AUD 470 million;
- exports of fresh Australian cherries doubling; and
- exports of Australian skin care products growing 82 per cent.
Behind these statistics are great Australian success stories.
Australian skincare manufacturer Cherub Rubs, a small business based in Nowra on the New South Wales South Coast, are planning to double the size of their factory to meet the demand flowing from China.
Similarly, Australian pharmaceuticals manufacturer, BJP Laboratories, located at Yatala, just north of my home town the Gold Coast, is more than doubling the size of their workforce and moving into a new facility to meet increasing demand from China.
It's clear Chinese consumers have an insatiable appetite for the clean, green, quality products Australia produces.
But it's not just Australian goods that are in demand. The role of ChAFTA in fostering greater trade in services must also be acknowledged.
The framework our governments have put in place through this Agreement has given businesses in both countries the confidence to work together.
It was this confidence that prompted IKEA China to offer Australian architectural services firm, Leffler Simes the opportunity to be the architects for one of their new projects.
This has seen Leffler Simes not only employ more staff in Australia but also open a small office here in Shanghai.
Win-win outcomes like this go not only to the spirit of ChAFTA but to the very core of why countries pursue free trade agreements.
Indeed the experience for both Australia and China has been that open markets, trade liberalisation and globalisation have delivered wave after wave of prosperity and growth.
President Xi said as much in his remarks at the recent World Economic Forum event in Davos, saying:"To grow its economy, China must have the courage to swim in the vast ocean of the global market. …we have learned how to swim in this process. It has proved to be a right strategic choice."
Critical to furthering the growth in trade between Australia and China will be the obstacles that remain behind borders.
This is an issue that plagues exporters and importers around the world.
The clear message from industry is that non-tariff measures are increasing in prominence and complexity, and are often characterised by opaque rules, and regulatory and compliance processes that are slow and costly.
Such measures have the potential to undermine supply chains making exporting and importing more complex and expensive.
In this context, it is important for partners like Australia and China ensure the smooth functioning of international standard setting organisations such as the collaboration between the WTO and CODEX, the International Plant Protection Convention and the World Organisation for Animal Health.
Addressing the barriers in such a way that strikes the right balance between the need to maintain quality and standards and the imperative to facilitate trade will be critical for all nations seeking to grow their share of export markets.
Australia's own experience is that restrictive trade, economic and labour market policies which drove policy formulation from federation in 1901 to the late 1970s acted like a dead-weight on our nation's prospects.
When we put up the shutters and adopted closed markets we fell from among the richest countries in the world in per capita national incomes in 1901 to outside the top ten in 1975.
Australia's pivot to openness, beginning in the early 1980s, wasn't easy – vested interests had to be tackled, policy change had to be mutually reinforcing and well sequenced, industries had to transform, and many had to retrain and find new footholds.
However, the results now speak for themselves.
Australia today is an open and prosperous economy entering our 26th year of continuous economic growth.
It is a consistent commitment to market-oriented values that allows Australia to remain a nation of opportunity.
While China and Australia are two countries with very different histories, different cultures, and different traditions, we have been able to learn from each other, and through our long trading relationship help strengthen each other's economies.
Indeed, the complementarity of the relationship is what makes it so strong - for example, Australia's mining sector hasn't just helped support China's growth, or only advantaged Australia – it has been a win-win driver of growth and prosperity for both our countries.
Open markets are all the more important in the 21st Century for our mutual success and prosperity. China and Australia are on the same page.
Both our countries continue to pursue an ambitious free trade agenda, we are both actively engaged in negotiating the Regional Comprehensive Economic Partnership, or RCEP.
RCEP brings together nine of Australia's top 13 trading partners, and covers almost half of the world's population.
Australia, as for all the trading nations involved, sees this agreement as offering the potential to create jobs and drive growth across our economy, providing greater access to markets in the region and driving down barriers and costs to trade and investment.
It also presents us with an invaluable opportunity to help shape Asia's future economic landscape.
That future is filled with opportunity, with the Asian middle class set to swell to over three billion people in the coming years.
As the Asian middle class balloons, so does the demand for premium Australian products and services.
Australia's number one services export industry is of course tourism.
The President of China, Xi Jinping, and the Prime Minister of Australia, Malcolm Turnbull, have jointly commissioned 2017 as the China Australia Year of Tourism.
I'm pleased to be joined on this visit by a delegation of senior tourism executives from Australia, including the chief executives of seven Australian airports, BridgeClimb Sydney and the Skyrail Rainforest Cableway.
On Monday night we officially launched the China Australia Year of Tourism in Beijing, following a launch in Australia earlier this month at the Sydney Opera House.
Australia welcomed some 1.2 million visitors from China in the last 12 months – almost half of them, or some 515,000, were returning visitors.
And while 830,000 Chinese tourists visited an Australian beach on their holiday, the most popular tourism activity Chinese tourists identified was shopping for pleasure.
Australia wants to welcome even more Chinese tourists to our country – our goal is for two million Chinese tourists to travel to Australia in the year 2020 – just three years away.
This is a goal shared by government and industry.
For the Government's part, we are making it easier for Chinese tourists to travel to Australia.
We have made visa applications available online in Simplified Chinese – the first time Australia has allowed visa application lodgement in a language other than English.
We have also introduced new three and 10 year multiple entry visa products for tourists and business visitors.
In December of last year the Australian and Chinese Governments agreed on a landmark open aviation market between our two countries.
This means, in a regulatory sense, aviation capacity between Australia and China is now unlimited for each country's airlines.
As I mentioned earlier, I am joined on this trip, and here today, by a delegation of chief executives of Australian airports, including: Cairns Airport, Sunshine Coast Airport, Brisbane Airport, Sydney Airport, Melbourne Airport, Gold Coast Airport and Hobart Airport.
Together we are meeting with senior executives from major Chinese airlines; meetings I hope will lead to more flights between China and Australia.
Of course, while the top half of those planes will be filled with travellers, the bellies will be filled with perishable cargo.
In some instances, whole planes will be filled with just cargo.
Qantas will soon operate a Boeing 767 freighter from Hobart in Tasmania to Ningbo in Zhejiang province to transport some 50,000 litres of fresh milk a week between Australia and China.
The story of this milk, from the Van Diemen's Land Company, reflects another great strength of the China-Australia relationship: investment.
Last year Australia's Foreign Investment Review Board approved the $280 million acquisition of Van Diemen's Land Company by China's Moon Lake.
Moon Lake in turn created the air freight export opportunity - shipping fresh milk direct to China – a first for Tasmania – all while continuing to employ local Tasmanian workers and utilise local Tasmanian suppliers.
In recent years, my Government combined responsibility for Trade and Investment under the one Cabinet minister, recognising they are two sides of the same coin.
Wherever you see a strong trading relationship, history shows you get a blossoming of the investment relationship in due course.
And so it's proving in the case of the Australian-China relationship.
The stock of Chinese foreign direct investment in Australia is growing strongly – from $3.6 billion at the end of 2008 to $35 billion at the end of 2015, giving a year-on-year average growth of 33 per cent.
And, as I often make the case at home, foreign investment is a two-way street.
Australia has long been investing in China:
- Biopharma leader CSL has been here for 25 years,
- Likewise, BlueScope Steel has been here for 25 years,
- Cochlear for 21 years, now with a 60 per cent share of the Chinese hearing implant market; and
- LendLease has been here for 20 years, with some 250 projects.
I made the point earlier that trade paves the way for investment to follow.
The first shipments of Australian iron ore to China arrived in 1973, just one year after the establishment of diplomatic relations.
Since then, Chinese investment has become an important driver of major Australian resources and energy projects:
- Commencing with the first ever Chinese investment in Australia through the Channar Iron Ore Joint Venture Project between Sinosteel and Hamersley Iron (now a Rio Tinto subsidiary) – a project that continues to prosper;
- Continuing with Hunan Valin Iron and Steel's $1.2 billion purchase of a 15 per cent stake in Fortesque in 2009;
- And broadening out to our energy sector, by underwriting the growth of our LNG exports through major deals like CNOOC's purchase of a 25 per cent stake in Queensland's Curtis LNG in 2013-13, a $6 billion investment.
Chinese investment was traditionally concentrated in real estate and resources, but is now diversifying into sectors including agriculture, infrastructure, tourism, healthcare, R&D commercialisation and, in 2015 for the first time, into healthcare.
Australia is overwhelmingly favoured by Chinese investors as a stable and business-friendly investment destination.
Australia is, by some measures, the second most popular destination for Chinese investment after the United States.
Chinese investment brings not just capital, but new ways of doing things, new technologies, and access to new markets.
We've seen big investments in tourism and entertainment – like the more than $2 billion investments China's largest hotel operator, Dalian Wanda, has made in the Gold Coast and Sydney, or the recent announcement by SongCheng of plans for a $600m theme park development, also on the Gold Coast.
As far as Australian investment in China is concerned, we continue to make the case for greater investment liberalisation.
In particular, we're keen for China to move from a highly regulated foreign investment regime to one that based on a negative list that opens more sectors up to foreign involvement.
I know that – from an overseas perspective – a lot of focus is put on cases where Australia's Foreign Investment Review Board applies scrutiny.
Over the past 15 years, we have averaged around 1,000 business investment applications a year to our Foreign Investment Review Board.
In that time, we've had the grand total of five rejections. Just five out of 15,000.
In the handful of cases where the Board has intervened, these cases involved transactions of national significance and highly complex issues, where specific concerns unique to a particular asset have arisen.
There have been over 950 FIRB approvals of Chinese investment proposals since 2005-06, totalling more than $183 billion.
Any change to our processes naturally attracts attention – so I wanted to use this opportunity to reassure you about some new national security developments.
Last month, the Australian Government announced the establishment of a new Critical Infrastructure Centre to work with Australia's states and territories, as well as owners and operators, to keep Australia's critical infrastructure secure.
This is a proactive, structured approach, while also taking account of changes in technology and business practices in the sector, including increased privatisation.
Australia remains committed to an open investment regime.
This new approach will provide greater certainty and clarity to investors on the types of assets that will attract national security review.
The Government will seek public comment on its proposed approach – a Discussion Paper was released yesterday.
However these national security changes will not change the fundamentals of our investment regime: we remain committed to an open, transparent, non-discriminatory system.
We always welcome foreign investment where it is not contrary to our national interest. Despite our mutual strengths, nothing ever stands still in the global economy, and it will be important for the health of our trading and investment relationship to keep making progress.
We should work together over coming years in a range of forums to ensure that behind-the-border measures do not unnecessarily impede trade in areas such as:
- Food safety;
- Labelling and packaging; and
- Registration and certification of production establishments.
Ladies and gentlemen, trade and trade reform are under intense global pressure these days.
Australia and China are two long-standing, proud trading nations with trade forming the backbone of our relationship for decades.
Businesses and government on both sides of this relationship understand how important it is that we continue to make the case for the benefits of an open and transparent, rules-based trading system, as a fundamental driver for peace and prosperity in our region.
The Australia-China relationship is a great example of mutual benefits from bilateral trade and investment. Our relationship is decades old, strengthening every day.
I look forward to working with you to strengthen it further.