Western Australian companies wanting to do business with China will need to modify their approach to deal with increasing competition and a changing marketplace, a leading advisory firm has warned.
Western Australian companies wanting to do business with China will need to modify their approach to deal with increasing competition and a changing marketplace, a leading advisory firm has warned.
Speaking at a WA Mining Club event on Thursday, The Beijing Axis group managing director, Kobus van der Wath, said that, in 2013, WA attracted just 3 per cent of China’s total $US9 billion investment in Australia ($308 million).
This was primarily due to a slowdown in new mining investment, and indicates the degree to which WA relies on its resources sector.
By comparison about $4.4 billion, or 48 per cent, was spent in Victoria
Mr van der Wath said China’s increased spending in states such as Victoria indicated its growing appetite for investment in agricultural, healthcare, and financial and professional services.
The amount of money China wanted to invest overseas was growing but it was becoming increasingly selective about the projects it chose, he said.
This presents both challenges and opportunities for WA businesses across a range of industry and professional sectors.
“There are many more opportunities for WA as well as Australia more widely to benefit from China’s transformation more so than it has done in the recent past,” Mr van der Wath said.
“If Australia plays its hand right, and WA, it will get more because it’s early in the game of China going overseas.
“As it goes from $80 billion to $90 billion of overseas investments a year to $130 billion, that’s $40 billion to $50 billion new.
“Some of the old bit already came here historically and each year more could potentially come here, but if your policies are not good, your cost is too high, foreign investment review board approvals take too long … it won’t come here.
“There’s a real opportunity to seek it and position for it, and if you do it well, yes it will go up.”
Mr van der Wath said China’s economic slowdown from 8-14 per cent growth in recent years to a comparatively smaller 7.4 per cent GDP in 2014 was not a bad thing.
“It’s even desirable to see China slow as it has slowed down … because the alternative of not slowing would be devastating and would create risks that cannot possibly be managed,” he said.
Mr van der Wath predicted China’s annual GDP to grow at less than 5 per cent between 2016 and 2020, but said the government’s anti-corruption push and changes to policy and widespread reform meant a diverse range of opportunities were still available.
“It’s all different, it’s practically a new country and this speed of change is only accelerating,” he said.
Mining companies that wanted to keep exporting to China would need to better understand the market and behave differently, he said.
“There’s no alternative to China, there’s no other rising force that will take its place so it means that we must accept that as it grows more slowly and imports grow more slowly and in some cases even contract,” Mr van der Wath said.
“It’s a real possibility for some commodities, it means that our going to market strategy, our ramp up, production, our portfolio of selected commodities that we focus on, how we market, becomes so crucial.”
