ACBC Chairman Frank Tudor contemplates the words of departing Chinese Ambassador to Australia, Zhang Junsai and the importance of China and Australia’s interdependent relationship.

One thing that stands out in my mind as we contemplate the future is that we are not faced with a choice between friends, and our future foes are not a foregone conclusion, as some commentators in this debate contend – nor should we pontificate from the pulpit of a middle power and assume what is best for our friends in Beijing, Tokyo or Washington.

Rather, we should have a conversation about how we can increase multilateral interdependence, and rise to outgoing Chinese Ambassador Zhang Junsai’s challenge of being “a crucial testing ground for China’s relations with the West”.

*Pictured right: Outgoing Chinese Ambassador Zhang Junsai delivering his farewell address.

This is why bodies such as the G20, which promote dialogue and understanding, are crucial to our future. This is why the Council congratulates the Australian and Chinese governments and the outgoing Foreign Affairs Minister Stephen Smith and outgoing Chinese Ambassador Zhang Junsai, in particular, for initiating the establishment of the Australia China Forum – this unprecedented exercise in one and a half track dialogue, which seeks to bring together government policy makers and industry players, has the potential to emerge as the centrepiece of the relationship.

It is for this reason that I bemoan the relative year on year budget decline in Australia’s diplomatic missions which have an unrivalled role to play in orchestrating all manner of such dialogue.

The Council sees balance between FDI and trade as the fundamental yardstick of broad based and sustainable terms of trade and investment. In 2009 Australia supplied more than 40 percent of China’s iron ore, China represented more than 10 percent of our trade in services and more than 20 percent of our exports were destined for the Chinese market.

Writing in the Lowy Institute’s recent report on Australian FDI in China which I referred to earlier, John Larum makes the pointed assertion that in an environment characterised by increased FDI flows into Australia and increased bilateral terms of trade – China enjoyed a meagre 0.7 percent share of Australia’s FDI output in 2009. This is against the backdrop of consistent increases in FDI stock from other countries and an ongoing recognition of what the China opportunity represents in FDI terms.

The evidence including Hu Jintao’s directive for scientific growth, Kuznet’s universal maxim on environmental considerations (environment problems worsen during the early stages of economic growth and then begin to improve with rising income) and progression through Maslow’s hierarchy of needs suggests that the quality dimension of Chinese consumption growth will become increasingly important. Australia’s expertise in environmental management, financial products and funds management must surely be well placed to find a home in China. The competition is intense and if history is a guide we do not have a stellar scorecard and have much to do to secure our share of the Chinese market.

This should be concerning to anyone with an interest in the Australia-China relationship – and this includes the Chinese Government for taking a greater share of Australia’s FDI in China and for actively promoting China as a world-class investment destination. By actively supporting Australian investment and welcoming companies to China, the Chinese government would be greatly assisting us in our attempts to encourage a greater public acceptance of Chinese investment in Australia.

The Australia China Business Council is an obvious partner for this process. We will vigorously promote China to the business community and importantly, make the case to the Australian Government for an increased presence in emerging markets beyond the eastern seaboard. I support efforts to establish an Australian Consulate-General in either Chongqing or Chengdu.

This would make a genuine contribution to increasing Australian FDI stock in China but importantly it would also assist the Chinese Government’s commendable ‘Open up the West’ policy and deliver Australian innovation and expertise to key western provinces.

Again, our diplomatic corps is absolutely fundamental to creating awareness and entry platforms to the opportunities of the Chinese interior.

This takes me to the broader question of how Australia can play a constructive role in achieving China’s development goals and supporting its go global aspirations. Rio Tinto’s multibillion-dollar West African iron ore venture with Chinalco is a striking example of what is possible. China’s expansion in regions such as South-East Asia and Africa present significant opportunities for companies to take successful Australian joint ventures as blueprints for global cooperation – existing Chinese investments in Australia are tangible models for genuine global partnerships which harness mining expertise, in-country risk management and do-ability at scale.

*Pictured left: ACBC Chairman Frank Tudor with Chinese Ambassador Zhang Junsai.

The Australia China Business Council

The ACBC is the premier organisation for the promotion of trade and investment with the People’s Republic. We are widely regarded as a thought leader driving balanced debate on issues affecting our bilateral relationship. Our investment series last year sought to put pay to the domestic grandstanding, emotionally-driven interpretation and inaccurate appreciation of the pros/cons of Chinese FDI.

The Council has actively resolved to pursue comprehensive research that will examine the facts behind Chinese investment in Australia. Additionally, we are moving to publish annual updates of our 2009 report that examined the benefits to Australian households of trade with China. We feel it is crucial for us to take the case for stronger trade and investment ties directly to the Australian kitchen table – many of you will know that this found trade with China to be worth more than $3400 per annum to the average Australian household.

This key finding was based on 2007-08 figures, which placed bilateral trade at $58 billion, whereas the most recent figures value trade at more than $100 billion – it will be fascinating to see what these new figures mean on a household level. It will also be updated to reflect associated implications stemming from changes in the inbound investment landscape.

The research, initially commissioned by Chalco, presents a unique opportunity for Chinese companies to be associated with leading research that is widely heard in the public policy arena. ■

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