Tuesday, 9 January 2018

China’s digital revolution is good news for Australian exporters

Australian businesses should position themselves to take advantage of technological developments in China.

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China’s digital economy and high-tech industries are creating major opportunities for Australian exporters of products, services and research.

The ecommerce market in China is growing significantly as more people access digital marketplaces and their incomes rise.

The number of internet users in the country skyrocketed from 137 million in 2006 to 731 million in December 20161, with more than 95 per cent of users now getting online via their mobile phone.2

Not only are many more Chinese people using the internet, they are also spending a lot more online. In 2016, they spent US$5.5 trillion through mobile ecommerce services.3 During China’s 2017 Singles’ Day, which is the world’s biggest shopping day by revenue, Chinese ecommerce giant Alibaba achieved US$25.3 billion in sales.4

How different industries can profit from China’s technology boom

  • Australian agricultural exports could find more markets in China as Chinese consumers develop a taste for a wider variety of Western food.
  • Agribusiness companies can also benefit from China’s efforts to improve its agricultural productivity. The Australia-China Agricultural Cooperation Agreement, signed in 2016, encourages the joint development of agricultural technology. For example, this agreement has funded the introduction of a system to track wool bales and the development of spatial technology applications for broadacre cropping.5
  • Australia’s medical industry can provide the technology, research and systems to help China support its ageing population.
  • There are also opportunities in China for Australia’s advanced manufacturing sector. China is prioritising the development of new materials, and there may be export opportunities in photonics and polymers, among other market segments.6

Export opportunities will grow as China’s middle-class expands, a trend HSBC Australia Chief Executive Martin Tricaud predicts will continue. “Between 60 and 80 per cent of the population will be middle class by 2025,” he told the HSBC Australia-China Conference in Sydney in November 2017.

Experts at the conference said China’s growing middle class is demanding more expensive goods and services. That included holidays, healthcare products and premium food.

Australian businesses needed to improve their understanding of online consumer spending in China to capture this demand, said Scott Farrell, Partner at Hong Kong–headquartered law firm King & Wood Mallesons.

“The real value of digital connectedness is data,” Farrell told the conference. “The [amount of] data is huge inside China. Every time you collect data about a consumer’s activities, you have greater power to work out how to serve their interests.” The integration of social media, ecommerce, messaging and even investment services via applications such as WeChat was generating vast amounts of data about Chinese consumers, he said.

The ecommerce boom isn’t the only technological development in China with major implications for Australia. Export opportunities are also emerging as China’s high-tech industries expand.

The Chinese government’s goal is for the country to become an ‘innovation nation’ by 2020.7 It is already a leading developer of smartphones, renewable energy systems and payment systems. It is also encouraging investment in electric vehicles, semiconductors and robotic and pharmaceutical technologies, among other high-tech areas.

China is seeking research and technical expertise to support its innovation goals. For example, the Chinese Ministry of Science and Technology’s Torch program has backed the creation of the Torch Innovation Precinct at the University of New South Wales in Sydney.

The initial research in this precinct is focused on hydrogen energy storage technology, climate-resistant power cable technology, and wastewater treatment and resource recovery. The goal is for the precinct to become a research and development base for up to 10 major Chinese companies, as well a technology incubator that supports up to 100 Chinese and Australian businesses.8

Companies in various industries could provide technical expertise to China. This has been made easier with the advent of the China-Australia Free Trade Agreement, which started in December 2015.

Australian organisations that take advantage of these developments will be well placed to profit from China’s growth.

1 China Internet Network Information Center, ‘Statistical Report on Internet Development in China’, January 2017, cnnic.com.cn/IDR/ReportDownloads/201706/P020170608523740585924.pdf

2 Ibid.

3 Helen Wong, ‘How China’s can-do generation will be the engine of growth, both at home and globally’, South China Morning Post, 20 August 2017, www.scmp.com/comment/insight-opinion/article/2107378/how-chinas-can-do-generation-will-be-engine-growth-both-home

4 Helen H Wang, ‘Alibaba’s Singles’ Day by the Numbers: A Record $25 Billion Haul’, Forbes, 12 November 2017, www.forbes.com/sites/helenwang/2017/11/12/alibabas-singles-day-by-the-numbers-a-record-25-billion-haul/#729b184b1db1

5 Australia-China Agricultural Cooperation Agreement (ACACA) Programme, www.agriculture.gov.au/market-access-trade/acaca#activities-and-funding

6 Austrade, R&D development services and technology to China, www.austrade.gov.au/australian/export/export-markets/countries/china/industries/r-d-development-services-and-technology-to-china

7 Austrade, R&D development services and technology to China, www.austrade.gov.au/australian/export/export-markets/countries/china/industries/r-d-development-services-and-technology-to-china

8 Torch Innovation Precinct at UNSW, www.torch.unsw.edu.au/about-us

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