Political tensions tops risk in China trade

Tensions in the Australia-China relationship are the largest risk faced by companies doing business with China.

Trade Minister Simon Birmingham at the China International Import Expo in Shanghai. Picture: DFAT/Chris Crerar

Tensions in the Australia-China relationship are the largest risk faced by companies doing business with China, according to a survey released in Shanghai yesterday by the Australia China Business Council and the China-Australia Chamber of Commerce.

The survey of 165 members of the two organisations, compiled by the University of Melbourne and KPMG, puts tension in the political relationship as the top business concern.

It ranks well ahead of other concerns, including the impact of the slowdown in the economy, increasing Chinese protectionism and rising labour costs.

But despite the challenges, the survey shows that two-thirds of Australian companies already doing business there plan to step up their investments, with 60 per cent planning to hire more staff on the ground in the near term.

“Last year’s inaugural Doing Business in China survey showed a high level of optimism,” said John Brumby, the national president of the Australia China Business Council. “This year we see a mixture of optimism and concern.

“The word respondents use most often to describe working in China is ‘challenging’, but it’s closely followed by ‘opportunity’.”

More than 80 per cent of those surveyed said they felt the state of political relations affected the business relationship.

About 56 per cent believed their own business had been directly affected by tensions in the relationship, with 5 per cent saying it already had a “strong negative impact” on their business.

Top five risks facing business in China

The largest ever survey of Australian companies doing business in China was conducted over the past few months amid reports of tension in the relationship.

The news this week that Foreign Minister Marise Payne will visit Beijing tomorrow is being seen as a sign that relations are now beginning to thaw.

It will be the first time that an Australian foreign minister has visited China since Julie Bishop in February 2016.

Tensions in the relationship are reported to have blocked attempts by ministers to visit China this year, apart from a visit by ­former trade minister Steven Ciobo when he attended an AFL match in Shanghai in May.

Federal Trade Minister Simon Birmingham has been in Shanghai this week for China’s first import expo, an event designed to provide a showcase for foreign companies wanting to sell into China.

An initiative of President Xi Jinping, it has seen thousands of businesses from more than 80 countries pitching their wares in a massive exhibition centre.

The event has been backed by a large number of Australian companies doing business with China including Blackmores, Australia Post, Coles, Woolworths, Telstra, ANZ, BHP, Rio Tinto and Fortescue.

The report shows that 72 per cent of companies regard China as a challenging place to do business. But most regard profitability of their China business as being strong.

Growth opportunities included the rise of the middle class, China’s sustained growth and the opportunities from the Belt & Road initiative.

The report notes that “changed market demands, unclear laws, rising labour costs and market access” were still areas of concern.

“Sometimes it seems there are two stories about the Australia-China relationship,” AustCham Beijing chairman Vaughn Barber said. “One is a story of promise and opportunity, the other a narrative of challenge and suspicion.

“The survey shows that the members of AustCham and ACBC believe the opportunity survey should be the predominant pathway, while being sensitive to learning and adapting to current and emerging issues.”