ACBC Chairman’s Column: Opportunities and Challenges in the China and Australia Relationship

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ACBC Chairman, Frank Tudor, says education is a key component to enhancing the long-term relationship with China.

The Chinese Ambassador to Australia Zhang Junsai observed that the bilateral relationship between Australia and China is in fact multidimensional, and exists at the people, the professional and the political levels. This observation appears to accord with Confucius ideology which both recognises the existence of multiple relationships, and sets out the way of the “superior man” in managing relationships with virtuosity, wisdom and courage.

It’s also important to note that both Confucius philosophy and history continue to shape contemporary Chinese thinking and relationships. Chinese Vice President Xi Jinping did in fact say that China’s “commitment and determination is rooted in our historic and national pride”. For example, it’s widely acknowledged that Chinese civilisation started some 5,000 years ago with the advent of agriculture and was for much of that time (up until the 19th century) the world’s largest economy and most advanced civilisation. Feudal China was internally focussed and had little in the way of expansionist aspirations given its unparalleled achievements.
Chinese insularity and market induced modernisation by expansionist foreign powers, left China vulnerable to forced territorial concessions and invasions by foreign powers in the 19th century. This lingering memory of oppression continues to shape China’s re-emergence as a global power, which amongst other things, is intended to ensure it does not find itself hostage to foreign demands in the future. 

The anxiety that may be felt outside China by its emergence as this large force can again be put in context by reference to a quote by Chinese Vice President Xi Jinping who said that “China does not, first, export revolution; second, export poverty or hunger ; or third, cause unnecessary trouble” for others.

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The people to people relationship between Australia and China started soon after Australia was settled by the British in 1788 when Chinese immigrants came on the promises of riches from the Australian gold discoveries of the 1850’s. 
Today some 700,000 Australians (some 5th generation) are of Chinese descent. This is significant because it provides an invaluable family connection which along with Chinese tourists, (who now number 400,000 per annum), and the student population (now numbering 130,000), serves to enhance our collective “cultural intelligence”. 

Whilst this bodes well, outward bound tourism and student numbers from Australia into China are woefully small. Less than 6 percent of Australian year 12 students study Mandarin, and over 95 percent of those are of Chinese background. 
University entrance requirements dissuade non-Chinese from studying Tertiary Entrance Exams subjects, such as Mandarin, in which they feel naturally disadvantaged. This is both understandable and regrettable. Broad-based empathetic understanding can only come from knowledge (ie the spielautomaten richness of any culture can only be fully appreciated through its native language) and exposure (ie prejudices, can only be dispelled through familiarity and an appreciation of the cultural differences and similarities). 
The opportunity cost of neglecting education as a most important plank of our bilateral relationship, now and into the future, is enormous and growing with respect to the part that it can play in underpinning successful FDI in China.  I personally bemoan the low languishing level of outward bound Foreign Direct Investment by Australia in China which is vested in very few large companies and at the smaller end includes investment by Chinese with Australian citizenship. 

As the scope of Chinese growth moves from the quantity to quality dimensions, as domestic consumption increases from 30 percent of GDP (the global average is approx 60 percent of GDP), the opportunity for the penetration of Australian services (including water management, funds management, banking services) into the domestic Chinese market is nothing short of breathtaking.  My fear is that practical exploitation by enterprises, especially at the SME level, will be unduly constrained by our lack of “cultural intelligence”.

Unlike resources (the current thrust and attention of Chinese FDI into Australia) which are relatively straight forward to successfully commercialise over the long-term services require a far deeper culturally sensitive approach to yield sustained long-term rewards. 
This being the case how can we ever hope to achieve reciprocity in our bilateral investment relationship?

Herein lies an opportunity and risk.  China will continue to urbanise, but as big as this is it’s not infinite. Growth for commodities will not continue unabated. There is a window of opportunity for significant growth which will eventually close. 
As the Chinese leaders unlock the internal demand of 1.3 billion consumers only those companies and countries that are prepared (ie in which education sets the platform for relationship based business) will reap the maximum benefit.

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Since opening up its economy to market forces China has been one of the biggest recipients of foreign FDI. This has gone into building productive and manufacturing capacity but in the future will progressively target all manner of services demanded by China’s increasingly sophisticated consumers.

For Australia, China is fundamentally important. It’s a partner, customer, supplier, source of investment, competitor, neighbour and should be seen much more as a recipient of Australian services. Whilst a FTA may be helpful in unlocking the door to sectorial investment in the short-term it will be “cultural sensitivity” that determines the winners over the long-term.

Australia has been lucky to date (Australia possesses a world class endowment of natural resources) but must commit to learning and experiencing China at a fundamental level which is not currently the case. The opportunity costs of continuing along our current path are potentially very high indeed. 

For more information about the Australia China Business Council visit: www.acbc.com.au

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