Trade with China buoyed by improved ties, Covid changes: AustCham China survey

A survey of 160 Australian companies doing business in China shows the majority planning to boost their investment in the country to return to or exceed pre-pandemic levels.

Workers wearing personal protective equipment (PPE) near a residential community that just opened after a lockdown due to Covid-19 restrictions in Beijing earlier this month. Picture: AFP

The improvement in Australia’s the bilateral relationship with China under the Labor government and the relaxation of China’s Covid lockdown restrictions have improved the outlook of Australian companies doing business with China, according to a survey.

The survey of 160 Australian companies operating in or doing business with China, by the China-Australia Chamber of Commerce (AustCham China) and University of Melbourne, shows 66 per cent were planning to boost their investment in the country to return to or exceed pre-pandemic levels.

Despite concerns that the outlook for investing in China has deteriorated over the past few years, more than half the Australian companies surveyed were optimistic about market opportunities and growing profitability of their China operations over the next two years.

While 36 per cent reported they had cut back their China staff since the last survey before Covid, and 31 per cent had cut back their investments in the country, their views going forward were much more upbeat, with expectations of increasing staff and profitability.

For 58 per cent of respondents, China was seen as one of the three top priorities for their global investment plans for the next three years.

“The results of the survey show the resilience and adaptability of Australian companies doing business in and with China,” Beijing-based Vaughn Barber, the chairman of AustCham China, said on the release of the report.

“Considering the challenging operating environment, the survey results are encouraging and speak to the underlying demand from Australian companies and their desire to be present in the Chinese market.

“The improvement in the bilateral relationship since the federal election and recent changes to China’s Covid-19 policies are welcomed by business and augers well for cautious optimism.”

Paul Kofman, the dean of the faculty of business and economics at the University of Melbourne, said the survey showed that “a significant number of companies continue to believe that China remains among the top three markets over the next three years”.

Participants in the survey reported that the state of Australia-China relations was seen as the major risk affecting their future investments in China.

The top challenges facing businesses were seen as the impacts of international travel restrictions as a result of China’s zero Covid policies and the impact of trade sanctions and tariffs on Australian goods such as wine, barley, coal, lobsters and beef.

They said the pandemic resulted in the sales and profitability of their China operations decreasing significantly, although 82 per cent were profitable or at least broke even over the period.

The survey showed that Australian companies have been reshaping their operations in China, with fewer expats and more locally hired staff and a significant shift in focus to localising both sourcing and sales within China.

China was also increasingly used to source sales to third countries other than Australia (up from 7 per cent in 2018 to 20 per cent this year).

Mr Barber said the survey showed that Australian companies were not leaving the China market “despite the challenges posed by the pandemic, the impact of sanctions and higher trade tariffs on some Australian products, risks associated with heightened geopolitical tensions and economic decoupling.”