New HSBC research launched at the recent China International Import Expo showed exactly why Australian companies consider China’s market to be so important and the challenges they face in tapping it.
Major commercial agreements between Australian and Chinese companies worth almost $15 billion were signed at the inaugural China International Import Expo in a sign of the deepening trade ties between the two countries.1
The signatories – which included Fortsecue Metals Group, vitamins business Blackmores and Australia Post – were part of a much bigger Australian contingent that attended the landmark expo alongside Trade Minister Simon Birmingham.2
“Chinese consumers are shaping the strategies of more Australian companies as they become not just richer but also more health-conscious and concerned about the environment. Our clients are witnessing particular demand for high quality agricultural exports but also for travel, furniture and technology,” says Steve Hughes, HSBC Australia’s Head of Commercial Banking.
“Everyone is familiar with the ‘made in China’ slogan. Now products are actually being ‘made for China’ and it’s rapidly growing middle class,” Steve says.
Among Australian companies currently selling in China, 33 per cent identified their ability to provide specialist expertise as the top factor that would drive their sales growth there. Another 31 per cent highlighted the rising affluence and increasing disposable income of Chinese consumers as the key catalyst for their companies’ sales growth.
According to government estimates, China is going to import USD8 trillion worth of goods in the five years from 2018 to 2022. That is equivalent to an average of USD1.6 trillion a year, which is about the same as the gross domestic product of Canada or South Korea in 2017.
Most Australian businesses surveyed said Chinese consumers aged under 40 today will drive Chinese consumer demand for years to come: 37 per cent believe that those born in the 1990s will provide the strongest sales growth, while 30 per cent believe that growth will come from those born in the 1980s and another 23 per cent believe it will be driven by those born in the 2000s.
Understanding the local business culture was identified as the top challenge faced by Australian companies (43 per cent) already selling to China. The need to customise products and services to meet Chinese needs (37 per cent) and the need to adapt to Chinese e-commerce platforms (33 per cent) were further challenges.
The top three challenges for future growth were considered to be regulatory requirements (33 per cent), adapting to Chinese tastes (32 per cent) and local competitors (31 per cent). Businesses are looking to overcome these challenges by establishing a local office (38 per cent), setting up partnerships with local companies in China (35 per cent) and investing in staff training or up-skilling (34 per cent).
Read the full report Navigator: Made for China on the HSBC Commercial Banking website.
1 Media release from SENATOR THE HON SIMON BIRMINGHAM, Minister for Trade, Tourism and Investment, 7 November
2 Media release from SENATOR THE HON SIMON BIRMINGHAM, Minister for Trade, Tourism and Investment, 7 November