Australian businesses prepare for China Free Trade


China is Australia's largest trade partner but its economy is slowing. What does that mean for Australian businesses looking to take advantage of the China-Australia Free Trade Agreement?

Many businesses are preparing to take advantage of the China-Australia Free Trade Agreement, which was signed in Canberra back in June.

Melbourne architect and director at Leffler Simes Architects, Stephen Evans, is preparing for another visit to China.

"We're currently working on a major mixed-use development in Tianjin, which is a hotel, a shopping centre and aquatic centre all mixed together." he said. "We're doing conceptual design for that at the moment [and] I'm hoping that will come to fruition."

It followed four Chinese works already completed.

Stephen said they came about thanks to a chance encounter which a Chinese businessman in Australia.

"We had a very random experience where we had a young Chinese gentlemen three years ago - he was walking through our Ikea Harvey Norman shopping centre in Springvale here in Victoria - and he basically explained that his father-in-law owned a Chinese development and construction company in northern China. They were on their fourth project and had very little confidence in their local architects and then asked if we'd be interested in helping them out."

With a footing in the world's most populous nation, Stephen's now excited about his prospects following Australia's Free Trade Agreement with China.

"What it has allowed is the Chinese government to recognise our qualifications and our experience, which means we can bid for larger projects and do the full documentation services that we would normally do here in Australia," he said. "It means we can bid for more projects, larger projects, in China. We can take on more staff here in Australia and hopefully open our China Beijing office, as well and take on some staff up there."

The services sector that Stephen Evans operates in accounts for 70 per cent of Australia's economic activity.

Senior China Economist at UBS, Donna Kwok, said China was demanding more from it.

"Increasingly more and more spending is going towards services, and an increasingly affluent population will be seeking to spend more on better quality foods, because there are still concerns about food safety," she said.

That's underpinned some food success stories, more recently baby formula.

Since the middle of this year shares in A2 Milk, which already exports infant food to China, along with Blackmores which recently inked a deal to do the same, have more than doubled.

ANZ's Head of Agribusiness Mark Bennett said the opportunities for the local milk industry were enormous, and not just in China.

"In Indonesia there are four million people under the age of four, so you can understand why that is such a compelling market compared to our own stable and mature market here in Australia," he said. "And of course it isn't just about infant formula - dairy lends itself to other specific proteins and products around health and nutrition and that can be equally harnessed towards an ageing population as well."

They come amid China's decision to end its one-child policy, but UBS' Donna Kwok said the benefits won't be immediate.

"You've got to bear in mind that as per the rest of Asia, the fertility rate and the fertility intentions of Chinese women is quite low. So while there are opportunities, and there will probably be an incremental uplift in child-related spending, don't expect a major boom overnight."

Ms Kwok said that at the other end of the spectrum China's aging population may offer some opportunities.

"Also education services, other types of sophisticated high value added types of services from a business logistics, to investment advice, or even how to best invest in Australian property," she said.

But it's China's property market that is in the middle of a multi-year structural downshift, which Ms Kwok said continued to be the biggest threat to its economy and is something that any Australian exporter should consider.

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