In his first major speech outlining Victoria’s future China strategy, Victorian Premier Ted Baillieu has lashed out at the Federal government over ill-conceived policies that are restricting business opportunities for Australian and Victorian businesses, writes Sophie Loras.

Speaking to a sell-out Australia China Business Council event in Melbourne, Mr Baillieu cited changes to skilled migration rules, new stricter student visa regulations imposing greater financial burdens on international students and the “ill-thought out and badly handled” imposition of a mining tax, saying Australia was sending the wrong message to its biggest trading partner.

“For Australia and Victoria to be ranked highly as a destination for foreign direct investment, business needs certainty and policies that make it easier, not harder, to do business,” Mr Baillieu told an audience which included Chinese Consul General, Shi Weiqiang, Austin Shi, Chief Representative of Jiangsu Province’s office in Victoria, Victorian Governor Alex Chernov and Melbourne Lord Mayor, Robert Doyle.

More than 450 people had arrived at the event to hear the Premier’s first formal outline on Victoria’s China strategy. The event sold out early with many placed on a waiting list.

Victoria has been at the forefront of Australian state-level engagement with China which stretches back more than 30 years. Victorian businesses have been eagerly awaiting the Baillieu government’s future strategy for the Victoria-China relationship, hoping strong platforms established under the Bracks-Brumby governments would not be overlooked. Any anxieties were quickly quashed as the Premier pledged more support for Victoria’s three existing trade offices in China and Hong Kong as well as announcing a fourth to be opened in Beijing.

A 2006 census showed there were nearly 60,000 China-born people in Victoria but almost 200,000 Victorians who declared a Chinese ancestry.

Mr Baillieu said 14 of Victoria’s local councils and regions had already formalised connections to Chinese cities and provinces.

Victoria, meanwhile, has become home to a growing number of Chinese businesses, including ZTE, Huawei Technologies, Hisense, CITIC, ChemChina and the Bank of China.

Mr Baillieu said China’s rapid rate of urbanisation was presenting unprecedented opportunities for Victoria – highlighting that an estimated 100 million people – 20 times the population of Victoria – would migrate to urban areas in the next ten years.

By 2025 China expects to have 221 cities with more than one million people and 23 cities with more than 5 million.

“In other words, 23 Victorias within the next 14 years,” Mr Baillieu said.

China’s middle class is expected to grow from 80 million from four years ago to 700 million by 2020 – or nearly 50 percent of the population.

“With higher per capita income will come a demand for consumable manufacturing goods but also services that comprise 43 per cent of GDP today which China plans to increase to 47 percent over the five year plan,” he said.

“That’s significant for Victoria because while our trading relationship has predominantly been based on primary and merchandise exports, recently there has been an increasing shift to service based exports, an area where undoubtedly Victoria possesses significant competitive advantages.”

Victoria already has a long established and very fruitful relationship with Jiangsu province through a 30-year sister-state arrangement, and also through Melbourne’s sister-city relationship with the booming northern Chinese port city of Tianjin.

Jiangsu’s GDP was $25 billion when Victoria signed up for the sister-state relationship – today Jiangsu’s GDP stands at US$612 billion.

Jiangsu is China’s second largest provincial economy in terms of GDP with an annual growth rate of 12.4 per cent and foreign trade of US$339 billion.

Mr Baillieu’s big question was: “What is the next Jiangsu Province for Victoria?”

Not wanting to put all the state’s eggs in one basket he announced that Victoria would soon be opening a State of Victoria Representative Office in Beijing and would strengthen the role of its existing offices in Shanghai, Nanjing and Hong Kong.

Mr Baillieu said his government was examining potential options for additional representation in second and third-tier cities, such as Chongqing, Guangzhou and Xi’an.

“What are some of the second and third-tier cities in the west of China – many with exponential growth possibilities – that will ensure Victoria stays ahead of the curve for the next 30 years?” He asked.

Mr Baillieu said Victoria would “languish” and “struggle” if it did not address its lagging productivity stakes and that China was a large part of that equation.

“While Victoria benefits from resources that underpin Australia’s bilateral trade, we don’t have the luxury of significant royalty revenues flowing into the coffers of the resource rich states,” he said.

Mr Baillieu said that while gold had been the genesis of Victoria’s historic links to China, the challenge for the state was to find “the new gold.”

“While we are mindful of the two-speed economy, Victoria has diverse strengths that position us well in terms of China and the growth of Asian economies.”

He highlighted Victoria’s reputation in the financial services sector, considered one of the world’s best-regulated financial markets and its capabilities in superannuation management and regulation.

“As opportunities in China’s financial services industries increase so will the need for effective regulation and the necessary skills to service this demand.”

Victoria’s manufacturing sector had gross value-added in 2009-10 of $31 billion, and employs more than 300,000 people.

Other sectors Mr Baillieu hopes to see better engaged with opportunities in China include Australia’s expertise and experience in the aviation and aerospace industries.

“With China’s domestic aviation industry growing strongly Victoria is well positioned to provide the necessary expertise to enable China to service and grow this important sector and we have some particular ideas about how that will happen.”

He also touched on the state’s mining and resources expertise, its vibrant ICT sector, food and agriculture, Victoria’s leading urban design, planning and clean technology firms, and that many leading R&D research institutions had chosen to base themselves out of Victoria – especially in the areas of health and biotechnology research.

“So while Victoria may not have the iron ore and mining riches of other states and has only 3 per cent of Australia’s landmass, we produce 25 per cent of the nation’s GDP.”

“When you look at China’s 12th 5 year plan one of its striking features is how sectors of Victoria’s economy and our skills and expertise naturally align with, and are complementary to, the needs and preferences of China’s second and third-tier cities.”

“This is the next phase of the Victoria China relationship it is what our future must be based upon.”

Mr Baillieu says priority engagement should include new energy and energy-saving and environmental protection, biotechnology, alternative car fuel and sustainable urban development and clean technology – two areas Victoria has made significant headway already through its AUS Cluster system and strong Jiangsu sister-state relationship.

Tourism is also a major focus of the Baillieu government – with the China market growing 500 percent over the last 10 years for Victoria and accounting for $752 million.

“This year we will release a China Tourism Plan that outlines strategies to achieve higher growth of at least 11 per cent per annum to 2050, including a major $8 million tourism advertising campaign in China.”

International education is Victoria’s largest export earner and will continue to be so, despite recent dents to the market.

Emphasising the great opportunities for the state in assisting China to shore up its long-term food demands, Mr Baillieu announced a partnership with the Victorian Government’s Dairy Nutriceuticals to Asia Project and Murray Goulburn to meet anticipated growth in China.

Under the arrangement, Murray Goulburn will build a new packing plant in Qingdao to increase Murray Goulburn’s capacity from one line to six enabling the company to capture major new opportunities generated through increased demand.

Murray Goulburn Co-operative is the second largest international trader of dairy products to the world employing more than 2200 Victorians.

Victoria’s dairy industry is worth $1.76 billion in annual exports and accounts for 26 per cent of the state’s total food exports.

Mr Baillieu also said he hoped every Victorian child would some day have the opportunity to visit China, announcing a recently established Victoria-Jiangsu Chinese Language Scholarship Program.

“This program will involve up to 50 Victorian students a year will create opportunities for intensive Chinese language study at a Jiangsu-based university. This will build the language capabilities of young professionals and build cultural awareness in China,” Mr Baillieu said.

The scholarships are worth $10,000 and will create business, cultural and educational ambassadors to China.

The state has also committed $16 million to provide out-of-hours language programs to more than 35,000 students, more than 12,000 of whom are learning Chinese languages.

“I believe that it is time then nevertheless to significantly upgrade Victoria’s relationships with China.” ■