China Presentation–Curtin University of TechnologyPaul SandaTrade CommissionerAustrade - Beijing

Wind and Waves are Strongbut we are Determined !

To Operate Successfully and undertake Business in China one must understand the History, Structure and Aims of the Chinese

Communist Party.

Big country – big differences

1.3 billion people80 million “middle class”

(annual income- RMB60,000 to 500,000)

15 million babies14 million engineers33 cities over 2 million132 Million Internet Users320 Million Mobile Phone Users

(60 million in Guangdong)290 000 suicides150 000 road deaths170 million unemployed (55 m officially )

Big Numbers

•8 Fatalities - Bubonic Plague•1000 Fatalities – Rabies•20 million cars

-(estimated 140 million by 2020)

•17 million “University Students”•120 000 lawyers•150 000 accountants

Small Numbers

Regional Vs National prioritiesAutonomy and CohesionNeighbours and FriendsLosing Control of InformationDevelopment of National StandardsPrivate Vs State SectorConforming to Agreements – WTO IP and Copyright IssuesDevelopment and EnvironmentBuilding a ‘harmonious society”

China – Big Country Big Issues

17 th Party Congress – Themes…

• Climate Change

• Energy – Renewable Energies

• Sustainable Agriculture

Agriculture – still 60% of China’spopulation ( 800 million people)

Gap between rich and poor, and coast and inlandNeed 20 million new jobs a yearSOE reformEnvironmentPopulation growthEnergy and Resources Slowing GrowthDisaster and Security Issues

More Big Issues

Focus on Education and Training

Emergence as a ICT “Player”

Not “MADE IN CHINA”

“CREATED IN CHINA”

Foreign Direct InvestmentUrbanisationWestern Development Strategy North East Revitalisation“Socialist” New Countryside Growth of private entrepreneursBeijing Olympics/World Expo Domestic Market International MarketsWTO/ Bilateral Agreements

Key Drivers of Growth

A Nation of Consumers

Retail sales

US$827 billion (2005)

Rise of 15 % recent years

Expenditure RMB 200 per month 12 months per year

Approximately one million dogs in Beijing= RMB 2.4 billion

Converted to Australian dollars

AUD 420 million per year !

It’s a Dog’s Life - Hidden Markets.

Shopping all over China

“By 2020, China will be the leading single source of touristsworldwide and one of the world’s top four tourist destinations”

World Tourism Organisation

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20

40

60

80

100

120

1994 1998 2002 2006 2010 2020

(outbound travellers – million)

The money’s not where you think it will be …“The rise of China’s 2nd Tier Cities”

2nd Tier 3rd Tier

Qingdao Harbin

Dalian Ningbo

Xian Fuzhou

Chengdu Jinan

Hangzhou Kunming

Agriculture remains a significant Issue for China !

• “Food Security”• maintaining supply ( self sufficiency)• maintaining safety and hygiene• (Nestle, Kraft, KFC, Haagen-Dazs, Heinz, Mead Johnson)• “Water Resources”• 390 billion cubic metres for farming annually• 1.3 billion people (22 per cent of world's total),• 9 per cent of the world's arable land (15%/China)• 6 per cent of the world’s renewable water resources• “Environment”• Balancing development• “Organic and Healthy” – Green Food• Marketing/Certification/Distribution

Agribusiness – Hot Topics in China

• Building a “new socialist countryside”

• US$42 billion earmarked for agriculture, rural development and farmers this year - increase of 14.18 per cent over last year.

• “We need to implement a policy of getting industry to support agriculture, and cities to support the countryside. We need to strengthen support for agriculture and farmers, and continue to reform rural systems.” – Wen Jiabao

China confirms Countryside not forgotten 11th Five year Plan 2006 - 2010

“Thousand Villages and Townships Project”

Bringing Consumer Lifestyle to CountrysideBringing Consumer Lifestyle to Countryside

… 270 days to go

Beijing 2008 – Australia is a major player…

Extensive Australian involvement & profile

30 companies with major contractsFacility design for:

main stadium, swimming, rowing, sailing, tennis, archery, hockey, equestrian, shooting, wrestlingOlympics village, Olympic Green

Transport planning, financial & telecommunications servicesEngineering, security, sports surfaces, adhesives …Olympic Torch relay planning, Paralympics

50 further companies bidding or involved in other contracts

Grabbing opportunities as the days count downTransport planning for VIP fleetSecure access control systems for temporary venues

Business Club Australia BeijingBusiness Club Australia Beijing –www.businessclubaustralia.com.au

… the next big “games”

Australia and China – a Special Relationship ?

Currently Riding “high” – high level visitsTwo Way Trade Increasing-$45 billionALNG – A$ 25 billion long term dealStrategic long-term alliances – “Uranium”Negotiation of Free Trade AgreementIntegrated with Olympic PlanningRecognition of the Importance of AustraliaTourism and Student Numbers IncreasingBroad Business – Mutual BenefitMajor success in “pillar” industriesOngoing substantial AID Program

water/hiv aids/education

•Exports valued at $A20 billion in 2006(Growth of 26 %)

• Iron ore, $A7.6 billion•Services exports valued at $A3.3 billion(growth of 20%)

• Student enrolments 80,000, actual students 49,000 (growth of 18%)

• Short term visitors 285,000• Stock of Australian DFI in China $A1.2 billion• Government to Government relationship critical to commercial outcomes

Major Australian exports, 2006 (A$m):

•Iron ore 7,639 (Up)•Wool 1,378 (Up)•Copper Ore 1,209 ( Up) •Coal 598 (Up)

Major China Exports , 2006 (A$m)

•Clothing 3,351 ( Up)•Computers 2,587 (Up)•Toys, games & •Sporting goods 1,355 (Up)•Telecommunications 1,610 (Up)

Merchandise trade with China (2006)

Exports to China (A$m): 20,376 (Up)Imports from China (A$m): 25,485 (Up)

Total trade (exports + imports) (A$m): 45,862

Merchandise trade deficit with China (A$m): 5,109 (Down - slightly)

Total Trade

•Commodities / Resources •Agribusiness / Food / Wine •Education and Training•Services •Tourism – Growing Rapidly•Building and Construction-Architectural Services

•Automotive•Information Technology and Communications•Environment

Major Australian Sectors

•Biotechnology•Film and Post Production – Digital Effects•Film Co-Production •Design and Fashion•Beauty and Cosmetics•Health and Organic/Green Food •Equestrian Industry and related services•Forensics and Security•Multimedia and Content Providers•Vocational and Management Training

Emerging Sectors

Mining chemicalsChildren’s books

Sheep skins

Cut flowers

Hydraulic partsWoollen quilts

Engineering consultancyProduct design

Training

Medical instruments

Mining equipmentTraining servicesSafety systems auditsSports surfacing

Potato chipsLandscaping designIndustrial chemicalsOlive oil

Fresh fruitSports education productsGranite & sandstonePilot training

Diverse market – diverse deals…..

Real deals for Australia

Pizza ovensTreesPet clothing

Video Lottery Terminals Salads

A few more examples….

Pizza ovens & trees to Hong Kong DisneylandArtificial surfacing for Olympic hockey fieldsIndustrial control systems- cigarette plantsVirtual medical surgery simulators-ChongqingChildren’s “pop-up” books in Xi’anAquarium fish from Cairns to ShanghaiTax training for Guangzhou Tax BureauPilot training for China Southern AirlinesDesign – architecture, fashion, planningHotel management in ShanghaiSandstone to Xiamen

Architectural Design

Soho “Shangdu”

Architectural Design

Olympics Aquatic Centre

Stage Automation Systems

National Theatre

Lighting Control Systems

Jin Mao Building

Have we got a deal for you ?

Role of Government in Business

Rapid change and development

Problem solving “on the run”

Vast differences/sophistication among industry

Logistics and Distribution systems not adequate

Lack of clarity in Regulations

Dispute Resolution

Internal Competition

Complex priorities and drivers

Opportunity driven and short-term

The Business Environment

• Research your market – Internet / Consultants• Develop a clear strategy• Spend time on partner selection – lots of options• Prepare Marketing Materials – Chinese language• Seek alliances – strength in numbers • Seek the less travelled road – customers/government

appreciate it• Use agents and representatives where appropriate• BUT – always have direct personal involvement• Make sure company and individuals have commitment• Manage Risk – Political/Economic/Disaster/Individual • Register IP and Copyright• Develop a strategy to protect your IP

Golden Rules for Success In China

• Never presume the fax/message has been read and understood…• Always follow up with phone/in market rep/Austrade etc• Always expect changes at the last minute• Be prepared to eat and drink but only on your terms• Prepare some short speeches and research area you are visiting• Prepare small but inexpensive ( creative gifts ) • Use an independent interpreter ( on your side if possible ) • Never assume an interpreter can handle all situations• Never assume the flights will take off and arrive on time• Don’t underestimate the power of government• Don’t judge a book by its cover• Be prepared if possible to spend more time ( flexible itinerary)• Be prepared to provide or facilitate favours

-( what is a good University in Australia ? )

Some Tips from the Frontline….

•Most formal jokes rarely work but humour is worldwide

•Beware the salesman waving “guanxi” –relationships

•Don’t assume one country is all the same …..•Be aware of other priorities and considerations outside business

•Never assume the contract is the end of negotiations

•Be Yourself……..

And some more ….

Austrade’s China Network

15 offices

80 marketing staff

Strong local market knowledge

Industry specialists

Customer contacts