Doing business in China

Does your bank understand the China growth story?

Rising demands

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China's consumers are rapidly becoming the driver of China's growth, as demand grows for discretionary goods and services. Australia stands to benefit from this change with the support of ChAFTA (China-Australia Free Trade Agreement), albeit with greater competition from other markets.

Does your bank really understand China Growth?

Size is everything: Capturing the China opportunity

As China moves from a manufacturing to a services-based economy driven by domestic consumption, Australia looks set to benefit. Thus far, Australia has relied heavily in the past on exporting commodities and agricultural goods to its Asian neighbours.

This will change with a now ballooning Chinese middle class, is in search of quality services. Trade will also increase with the China-Australia Free Trade Agreement (ChAFTA), signed in December last year, facilitating greater access for Australian goods and services to China.

"The great thing about China's demographic is that it's huge. So you just need to focus on doing a great product and a great service, then the market will converge towards you," says David Liao, president and chief executive office of HSBC Bank (China) Company Limited. "China is the one place where you don't need to find a market, it's absolutely there."

"It's a fantastic opportunity," agrees Dr. Geoff Raby of Geoff Raby & Associates, who served as Australia's Ambassador to China from 2007 to 2011. "Distance no longer matters. Scale doesn't matter. You can be a very small operator and reach a huge market through mobile and ecommerce. Provision of services is a massive opportunity."

The Chinese middle class is estimated at around the half billion mark; in 2015, retail sales grew over 11 percent and consumer spending is now USD10 trillion. Urban household incomes increased more than eight percent last year.

This new middle class have to "manage their wealth, their pension, their kids need a better education, they want to go overseas as tourists, [have] a decent house solution. The rise of middle class brings a whole suite of service demands that we have capacity to sell," says Dr Chuyang Liu, China advisor at the Australian Trade Commission.

One key service is tourism. Tourism Australia wants to increase annual overnight tourism spending to between AUD115bn and AUD140bn by 2020. Chinese tourists are key to achieving that goal.

Australia remains the "number one aspirational destination for Chinese tourists," says Lisa Ronson, chief marketing officer of Tourism Australia. Chinese tourists spent a record USD8.9 billion over the last year until March, up nearly forty percent. A key attraction for a country with chronic pollution problems is Australia's reputation as being "secure and safe [and] clean," says Ronson.

"One of the other things that the Chinese traveller seeks is a sense of health and well-being," explains Ronson, denoting to Australia's potential to capitalise on its reputation for reliable health services. As part of ChAFTA, Australian wholly-owned hospitals can be set up for the first time in China, as can Australian-run elderly care institutions, crucial in a rapidly ageing population.

Catering to a vast country of 1.3 billion people, internet hospitals are also growing in demand in China. They are able to service a monk in Tibet, a rural farmer, or a busy working mother -- many of whom don't have the time or means to travel to see a doctor -- at a click of a button.

Dr Liu gives the example of an Internet hospital close to the city of Hangzhou in Zhejiang province that connects with "7,000 specialist groups and 7,000 doctors. One hundred and ten million members signed up straight away," says Dr. Liu, adding most are looking for "consultation and post-surgery consultations".

Challenges persist, from tapping into a market that increasingly uses their smart phones to purchase services to understanding cultural differences and local consumer preferences. If played right, however Australia is in a strong position to provide for the largest nation on earth.

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Open Monday to Friday 9am-5pm (AEST)

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