Australian companies operating on the ground in greater China have a positive outlook of the country’s economy in the coming 12 months and expect their operations in China to continue growing, according to results of the 2013 China Business Perceptions survey.

The joint report by the Australian Chamber of Commerce in China and the Australian Trade Commission found 83 percent of respondents were optimistic about the overall outlook for the mainland Chinese economy over the next 12 months – up from the 2012 survey.

Members of the Australian Chambers of Commerce in Shanghai, Beijing, West China, South China and Hong Kong & Macau were invited to participate in the Sweeney Research survey conducted between October and November last year. Almost all respondents – 95 percent – have operations in mainland China, with Shanghai, Guangdong and Beijing the top three most popular Chinese regions. A third of respondents operate in the Hong Kong and Macau regions.

The responses show that Australian businesses operating in greater China are even more confident about the prospects for their businesses in China compared to a year earlier when seven out of 10 respondents were optimistic about China’s economic future.

More than half of the respondents said 2013 was more profitable than 2012, paralleling results from a year earlier when around half reported 2012 as more profitable than 2011.

Three in four business indicated they would likely expand their China operations over the next five years, with two-thirds of those expecting to expand within the next two years. Tier-one cities Beijing and Shanghai topped the list of regions where expansion was most likely to occur, followed by Guangdong and Hong Kong. The inland western regions of Chongqing and Sichuan – where the Chinese government has actively promoted investment and growth – were seen as more likely locations for expansion than the traditional eastern coastal provinces of Zhejiang and Jiangsu.

Drivers when planning for extending operations were: access to customers (53 percent) and expanding capacity to meet demand (47 percent).

Those planning to expand into Western China indicated access to customers as the primary reason for expansion (76 percent).

Despite the positive sentiment, four in five of the businesses surveyed said competition had increased over the past 12 months. Strongest competition came from local mainland Chinese competitors and foreign-owned competitors operating in China.

Key obstacles to growth for respondents with operations in mainland China were the availability of skilled staff, lack of transparency in organisational practices and an unclear regulatory environment.

However, key competitive advantages cited for Australian companies operating in China were quality of products and services, client relationships, range of offerings and innovation, according to the results.

Austrade Chief Economist Mark Thirlwell said regular research on Australian businesses in China was critical to understanding the trading relationship and developing long-term policy settings.

“China is Australia’s largest trading partner, accounting for more than a quarter of all our goods and services trade last year. It is also an increasingly important source of, and destination for, foreign direct investment,” Mr Thirlwell said.

“As such, it’s important for us to understand the opportunities and the constraints facing Australian businesses. This year’s survey delivers significant insights into what some of those businesses think about China’s economic prospects and the obstacles they face,” he said.

AustCham Shanghai Chairman, Peter Arkell said the survey was a reality check.

“There is a lot written and spoken about the Chinese economy and its impact on Australia, yet often these are observations that are made a long way from the day-to-day realities of operating in China,” Mr Arkell said.

“The AustCham business community in Greater China is ideally placed to comment on how real business for Australian companies is tracking in the current economic environment and provide information to the broader Australian industry,” he said.

AustCham South China Chair Kevin Li said the survey provided important grounds for proactive strategic approaches that were “essential to succeed with the major changes of China’s growth model.”  ■

To view the report in full, click here.