Without China how can Australia achieve a surplus? Where will Australia-China relations go in the new era?

2020-01-06 13:03|Browse:178Times

China's ambassador to Australia: China's contribution to Australia's recovery of budget surplus can’t be left unrecognized

 

Recently, the Chinese ambassador to Australia said that his country is helping the Morrison government to ensure a budget surplus. Trade between China and Australia, as well as iron ore export, has driven the process of ending Australia's decades long budget deficit. At a rare informal press conference, Chinese ambassador to Australia Cheng Jingye called on Australian media reporters to report more fairly on China. Ambassador Cheng Jingye said Australian media reports about the detention of millions of Uighurs were "completely false news". He said thousands of Australian jobs depend on trade with China. Statistics show that over one third of Australian exports of goods / services have gone to the Chinese market in the past 12 months. "Australia's exports to China increased by 33 percent," he said. “This is one of the main reasons why the Australian federal budget has recovered its surplus earlier than expected. " "I would like to emphasize the importance of practical cooperation and exchanges between the two countries, which is in the interests of China and Australia." From this reminder and wording of ambassador Cheng Jingye, China's posture on the world diplomatic stage is obviously "more confident". Previously, Sino-Australia relations deteriorated for a time because of a series of Australian unfriendly behaviors towards China. For example, the Australian government has banned Huawei, a Chinese communications giant, from participating in the supply of 5G mobile network equipment, and so on. Last week, the Australian federal government released the mid-year economic and fiscal outlook report (MYEFO). According to the budget update report, Australia's federal finance is very sensitive to iron ore and the demand of the Chinese market. As early as October this year, Australian Federal financial minister Josh Frydenberg said that China's dependence on Australia's imported resources may help maintain a peaceful trade balance with the superpower. At present, China has purchased 38% of Australia's exports, with a value of 117 billion Australian dollars. Australia accounted for 74% of China's iron ore imports in June, almost double the 10-year average, according to Australian official trade statistics. Australia has accounted for 64% of China's iron ore imports in the past 12 months, up 50% from five years ago. Australian experts point out that China is increasingly dependent on Australian energy and ore exports. In terms of Australian government’s strict stance in the areas of national security and resistance to foreign interference, this dependence helps to reduce China's ability to "punish" the Australian government. For other industries, such as education and tourism, the risk of a Chinese boycott is greater, just as China has boycotted Korean and Japanese culture before. Ambassador Cheng Jingye pointed out that the first-phase US-China trade agreement is expected to have a positive impact on the rest of the world, boost economic confidence and stabilize the market. Ambassador Cheng Jingye said that 2019 will be a "ups and downs" year for bilateral relations and hoped that there will be improved relations and more high-level exchanges and visits in 2020. He said that we look forward to the normalization of bilateral relations with the efforts of both sides.

                              

 Warm face of Australian enterprises

 

Compared with the games and frictions in politics and diplomacy between China and Australia, the stance that Australian enterprises take is quite opposite. The appeal of the latter is very direct and simple, that is, to expand cooperation with the Chinese market and enhance understanding of China. "No one will go against money, and the biggest risk of business operation is political risk." said an Australian business owner operating in China. Basically, statistics can show everything. Since 2000, Australia has been benefiting from the so-called "socialism with Chinese characteristics" policy.  The trade volume surged from 7 billion Australian dollars in 2000 to 1950 billion Australian dollars last year. According to the 2018/19 annual report issued by the Australian Trade and Investment Commission, China has purchased more than twice as many goods from Australia as Japan, the second largest trading partner, in the past year. Initially, iron ore and coal were the basis of trade between China and Australia. Now, China's changing population structure is driving the development of emerging industries. For example, after the wholly-owned acquisition of Bellamy's, the Australian infant formula brand, by 1.5 billion Australian dollars, Mengniu, the Chinese dairy giant, invested 600 million Australian dollars to acquire Lion Dairy, the second largest dairy company in Australia. Some local critics in Australia point out that Mengniu has made a big purchase of Australian dairy companies, which is enough to rebuild a light rail. According to economist Stan Roche, by any measure, China's current middle class population is 400 million and keeps growing. "When an economy's GDP per capita reaches $10000, a lot of magic will happen." he said. And Chinese investors are also interested in moving into emerging industries in Australia, such as renewable energy, battery storage, healthcare and tourism.

 

 The trend of China's investment in Australia

 

Among the milk powder stocks, A2 Milk (ASX: A2M) and Bellamy were both the first models to sell to the Chinese market. We see that with the rapid growth of sales in the Chinese market, the company's share price is also soaring. Recently, purchasing agent companies, experiencing companies, shopping companies and tourism companies, such as Aumake (ASX: Au8), Blackmores (ASX: BLK) and Mediland Pharm (ASX: MPH), are trying to take advantage of the strong demand in the Chinese market. At present, Australian wine is also very popular in the Chinese market, accounting for 42% of total exports to China. At the same time, Australia's health and life sciences industry is increasingly receiving "olive branches" from Chinese investors. In 2018, Sirtex, an Australian manufacturer of liver cancer treatment devices, was acquired by CDH Genetech and CHINAGRANDPHARM, a listed company of Hong Kong stock exchange, at a price of 1.87 billion Australian dollars to intervene in the market it wants to enter. Australian biological products giant CSL (ASX: CSL) and cochlear (ASX: COH), a cochlear implant manufacturer, have also successfully opened the Chinese sales market. At the other end of the market, Invion (ASX: IVX), a small cap stock, sold 15% of its shares to Cho Group, a Chinese technology investor, for 5.5 million Australian dollars in 2017. The latter won two board seats in Invion and a way to treat prostate cancer with light waves. Invitrocue (ASX: IVQ), a cancer biotechnology company, has established a partnership with the Institute of Biochemistry and cell biology of the Chinese Academy of Sciences ("SIBCB") to enter the Chinese market. At the same time, Medical Developments International (ASX: MVP), an Australian emergency medical solution, joined in hands with a Japanese company to launch the registration process for the sale of non-opioid analgesics Penthrox in China.

 

Concerns of Australian enterprises about the Chinese market

 

However, some companies also expressed uncertain views. Stephen Snowdy, CEO of Visioneering (ASX: VTI), mentioned the risk of intellectual property theft (i.e. the risk that Chinese scientists can achieve mass production without punishment through reverse engineering derivation of products), which is one reason why the company hasn't started selling contact lenses in China. Of course, such risks can be avoided by reasonable measures. Roche points out that choosing a strong local partner in China can effectively avoid this risk. "Many Australian companies will choose excellent venture capital partners when entering the US market to ensure that they are protected when entering the market," he said. "This is actually common in any country, including China." "In the future, the Australian biotechnology industry is expected to have more transactions with China. The reason is simple: China is a huge market that few people want to give up. " "As an Australian enterprise, if you want to commercialize in the Chinese market, the fastest and most effective way is to choose a local partner." "I think this is the right time to start to understand the market. Of course, we need to be patient enough to try to understand the market, participants and potential partners. "

 

According to Australian media reports, the United States once called China a "global threat". During his visit to the United States, Australian Prime Minister Morrison admitted that China is a partner, not a threat. "We have worked very well with China," he said. “But as we have said many times, we need to ensure that cooperation reaches a new level as countries continue to develop and give play to their potential.” Similarly, the leader of Australian Labor Party pointed out that in the context of Sino-US trade war and "geopolitical multipolar environment", if Australia wants to exert influence in maintaining global peace and security, it must prove that it is a mediator. "We need someone who can mediate between the big and strong powers, which is a very complex challenge," he said, “We need to keep balance properly."


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