How Are Chinese Investors Influencing The Australian Economy?
With China looking to shift its economy’s focus from investing in physical infrastructure to building a more developed social infrastructure by moving from an export driven growth to a more consumption driven growth, changes are only consequential. There will be a remarkable change in what it decides to import from other countries and Australia will look forward to maintaining its trade relationship with China that the two countries have built over the past few years.
Since the early 70s China has entailed urbanisation, growth related to the manufacturing sector, and investment in developing infrastructure. Such entailments generated demand for building materials, resources, raw materials, energy for manufacturing and investing. Australia was ready to meet many of the Chinese demands along with being a market that was ready to pitch for the Chinese manufactured goods and market them as well.
Today China is Australia’s largest trading partner in both exports as well as imports. Further, due to the strong demands of China for coal, iron and liquefied gas, Australia is China’s sixth largest trading entity. As far as statistics go, 25 percent of Australia’s manufactured imports and 13 percent of its thermal coal exports are to China. It was the exports to China that helped Australia escape the serious impact of the global economic meltdown over the past two years. This clearly shows the strong economic dependence the two countries have built over the years. It is a two way relationship that seems to be growing stronger by the day.
Further with China planning to take a step towards its next strategic plan of development, the demand in the market will shift from raw materials towards more skill driven sectors like investing in manufacturing, expertise, services. Australia has the education and technical expertise that China is out looking for, making it an ideal land for investment for China with many advantages adding up to increase is economic value, offering China exactly what it is looking for.
China adheres to a development approach for its country whereby it is directed towards the production of more sophisticated goods and services which further generates a demand in the economy for high quality human resources along with a good regulatory system, infrastructure and a well-developed financial sector. Australia has since the recent years proved to be the country that possesses the expertise so required by China. In order to harness these benefits, China continues to invest in Australia’s economy. With Australia relying majorly on foreign investment, investment by China operates as a boost for its economy.
The Chinese investment has only grown over the years as China is the ninth highest investor in the Australian economy, along with possessing a 3 percent share in its total foreign direct investment. There are also many reported talks between the two countries directed towards the supposed interest of China is investing in Australia’s infrastructure sector. Australia also enjoys the position of being amongst the vital sources for possessing high technology required by China to match the rising standards of the developed countries of the world including the base technology for the design of the Houbei class missile boat.
In the period 2010-2011, the bilateral trade between the two countries amounted for an astonishing amount of A$ 105 billion, with the Australian exports to China amounting to a total of A$ 64.8 billion and on the other hand, China’s export to Australia was worth A$41.1 billion.
To encourage the economic relations between the two countries and also promote Australian entrepreneurship in China, the Australian chamber of commerce of China also organises the Australia-China Business awards ceremony every year to recognise those companies that work to deliver Australian goods and services within China.
The above might give an impression that and perhaps the most misunderstood aspect of the Australia-China relationship is that only China is the key investor here and because of this, the Australian economy suffers. But this is not true. The Australian Bureau of Statistics remarks that there is as much Australian Capital in China as there is a Chinese Capital in Australia. However, one cannot shy away from the fact that this roughly balanced investment relationship is not a positive sign. The relatively bigger size of China should mean that Australia is hosting more Chinese Capital than it is, which is not the case. It is therefore no less than a lost opportunity for Australia as the capital that could be used to invest in the major cities of Australia like Sydney, Melbourne and Rockhampton, lies languishing in Beijing, Shanghai and Chengdu. Once this situation is fixed, both the countries will reap the benefits that so arise.
It is important to mention the slip or slight fallout that China is facing currently with its growth rate falling to 7 percent from 10 percent or even 12 percent. Despite this slip, the Australian exports continue to bloom in China. The export of iron ore in specific rose by 20 percent in value and 15 percent in terms of volume. This growth continues unabated without heralding a low growth period for the Australian economy. Noting China’s stake in the resource exports, which amounts for 8 percent of the Australian economy and its stake in exports elsewhere exposes about 6-7 percent of Australian economy to the prevailing slowdown in China. If the same is stated alternatively, around 93-94 percent of the Australian economy remains unaffected by the slowdown.
In any case, a 7 percent economic growth rate is very strong and one should not forget that despite its economy ‘slowing’, the country continues to expand. As per the current trends, something over $1.4 trillion is expected off China, which is much more than what we saw during the Great Financial Crisis. According to the numbers so recorded, the Chinese slowdown should not be a matter of concern for anyone as it is pure ignorance to jump to drastic conclusions and the same is the reason why the Australian export volumes and in whole its economy will by and large remain unaffected by the ‘slower’ growth rate of China