【会刊精选】China: A Land of Opportunity(下篇),IPAA微信公众号文章

As trusted business advisors, accountants are perfectly placed to help clients take advantage of a slew of new free trade agreements with strategic Asian markets. In part 1 of our series, we look at what you and your clients need to know about the upcoming China-Australia Free Trade Agreement.

By Peter Cai

Carpe diem

After many years of negotiations (talks of a free trade agreement began with China under the Howard government in 2005), it is now up to the Australian business community to take action and translate the resultant opportunities into growth and increased profit.

One worrying fact is that Australians have a less than stellar record when it comes to actually using free trade agreements (FTAs).

A recent Economist Intelligence Unit (EIU) survey of business owners shows that Australia has one of the lowest usage rates of FTAs in the Asia–Pacific region. Only 19 per cent of Australian companies surveyed by the EIU actually used these agreements. However, 75 per cent of those who have used FTAs say their exports have increased.

Why don’t people use them more often then? One of the big reasons is many businesses are put off by the complexity of such agreements, which often comprise hundreds of pages of dense legal texts, annexes and tariff schedules. They are about as exciting as a calculus textbook.

The government is aware of the problem. David Landers, Austrade’s general manager for East Asia Growth Markets, says the commission is working with a range of stakeholders to promote the awareness of the FTAs and highlight their relevance. “There are a lot of resources out there for SMEs to take advantage of,” he says, “but we find almost unbelievably that many businesses don’t even know these programs exist.”

The Export Market Development Program, for example, encourages small and medium businesses to develop export markets; the grant can reimburse up to 50 per cent of eligible export promotion expenses above $5,000.

“It still comes back to SMEs to take action,” says Landers. “You still have to build distribution, you still have to build your brand, you still have to adapt your products to the market, and you still have to understand who the new Asian consumer is.”

E-commerce growth

Landers also suggests that businesses should take advantage of the booming e-commerce sector in China. McKinsey estimates China’s total e-commerce market size to be worth US$295 billion, larger than the US’s US$270 billion.

Landers says Austrade will release a guide on e-commerce in China to help SMEs crack Australia’s largest export market. “E-commerce is growing so rapidly in China across multiple channels,” he says. “It is a very non-invasive and low-cost way of entering China.”

One of Canberra’s biggest ChaFTA concessions to Beijing is to lift the foreign investment screening threshold to $1.094 billion for private enterprises. At the same time, in February 2015 the government announced fees for foreign nationals who buy residential property in Australia. While this applies to all foreign nationals, the foreign investment review board says that China was the number one source of foreign capital investment in 2013, to the tune of $6 billion.

Work to be done

While ChAFTA heralds a significant and historic chapter in Australia’s economic relationship with China, exporters like Delamere’s Holloway and Austin know that bringing those new opportunities to fruition will require time and effort. The couple are upbeat about the potential of the Chinese market but are also realistic about the immediate benefits of the new trade agreement.

“For us, it is very much a long game and we don’t have huge expectations on the varietal and style that we are making now,” says Holloway. “We expect our wines to become far more desired and approachable in the future as Chinese palates become more developed.”

The end

BREAKOUT BOX:

ChAFTA timings

After almost a decade in the making, the declaration of intent for a free trade agreement was signed by Australia and China on 17 November 2014. ChAFTA will start 30 days after both governments complete their respective domestic legislative processes. The Australian Government has not given a firm starting date, but this process is expected to take months. At time of writing, ChAFTA was not yet in effect.

Peter Cai

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