Remarks to the Australia China Business Council Networking Function

March 2, 2016


Well thank you very much John [Brumby]. And I want to also acknowledge the Beijing Chair of AusCham, Tracey Colgan; the AusCham Shanghai Chair Peter Arkell, and all the representatives from the Chinese Embassy including of course, Minister-Counsellor Huang Rengang. And I would like to take off from what John has just said, about the transformation in China.

This change, this shift to an economy that is led by consumption - as certainly all developed economies are and many developing economies are - is long overdue. I mean, it has been, it has been advocated or foreshadowed in at least the last three five-year plans.

And I think the truth is, the economic history is probably that that progress, that transition, was derailed by the Global Financial Crisis when the Chinese stimulus response was one of massive investment in infrastructure. And financial repression, by which I mean keeping interest rates low so that banks had essentially - households were subsidising banks which were then able to loan money at low rates to companies, many of them associated with local government, that were building infrastructure and doing property development and so forth.

And so, you had a big rise in investment as a share of GDP right at the time when I am sure the economic planners in Beijing would have preferred it to be going the other way. But, circumstances intervened.

Now, that trajectory, that rebalancing, as it has been described by the Chinese leadership, is happening. And it is enormously important to us. The challenge for Australia is how do we transition from an economy that is being led, fueled, by a massive mining construction boom to one that is able to embrace all of the extraordinary opportunities of these, the most exciting times in human history.

You know we are living here in Australia in the most exciting part of the world. This is the fastest-growing part of the global economy and the pace of change, the pace of economic development has never been so rapid. It is not just the scale, it is the pace of transformation.

And so, I would like to go and take you back a little bit in history just to reflect on that.

Let's imagine ourselves standing in the fishing village of Shenzhen in the late 1970s. In the silence and darkness of the early years of post-Mao China and looking out at the glow of the Hong Kong skyline.

Seen from a great height above, it would have looked a bit like one of those satellite pictures of the Korean Peninsula - with the absolute darkness of North Korea pushing up against the flaming lights of Seoul.

And that is exactly what President Xi Jinping’s father, Xi Zhongxun, witnessed when he was sent to run the southern province of Guangdong.

The juxtaposition of the dark, impoverished autarky of the Chinese mainland, and the thriving prosperity which was just out of reach in Hong Kong, encouraged President Xi’s father to turn a blind eye to the peasants who were willing to risk their lives to smuggle vegetables across the border.

This, under his watch, was the beginning of China’s return to the global market place, after a three-decade interregnum.

President Xi’s father sanctioned this trade by establishing the Shenzhen Economic Zone. And this, in turn, went on to become a modern, thriving metropolis of 8 million people, which is now the export powerhouse of the world.

This forty-year transformation, writ large across a nation of 1.4 billion people, is the single greatest and most exciting economic transformation of modern times.

And it’s happened right here in our own region.

China’s transformation generated the greatest sustained resources boom we’ve ever seen - as villages like Shenzhen produced great steel high-rise buildings which were built with and powered by Australian iron ore, coal and gas.

Now, as China’s transitions towards a more consumption-driven economy, it faces big challenges. Reform and structural change is never easy. We underestimate these challenges at our peril.

But we have - the former Premier and I are smiling at each other, recognising they are not easy anywhere, are they John?

But we have a huge stake in the success of China’s economic transition because it will generate enormous opportunities.

That’s why we need to redouble our efforts to match China’s rapidly diversifying economy.

This is why we’ve delivered the China-Australia Free trade Agreement. It is one of the most ambitious agreements of its kind and it is the highest quality free trade agreement China has entered into with any other comparable nation.

Now, beef and dairy exporters have captured the headlines, for good reasons. But the ChAFTA is about much more than traditional farm products.

Just ask the proprietor of Seppeltsfield Wines, Warren Randall, who will be exporting tariff-free wine to China within three years. He says, and I quote: “The China FTA is the most important development in wine marketing in the 39 years I’ve been in this business.”

Or ask Western Australia’s Geraldton Fishermen’s Co-operative, which has just established a live lobster warehouse at Guangzhou’s Baiyun airport.

Or, indeed, the Tasmanian lobster fishermen I met only recently in Launceston who told me prices had doubled, with great glee.

And the biggest gains, however, are arguably in services.

Lawyers, architects and engineers will now find it much easier to work in China.

Ask our world-leading aged care and health care providers, who say the level of interest at a recent Austrade summit in Beijing was extraordinary.

The good news is that Australia has already passed most of the way through the greatest terms of trade shock in our history.

Our miners have responded by becoming even more efficient and technologically-advanced, increasing their share of Chinese demand.

Two-way trade reached an extraordinary $150 billion last financial year, despite falling export prices.

The creation of over 300,000 new jobs here in Australia last calendar year shows that we are progressing well from the mining boom to the services and higher-value export boom of the 21st-century economy.

We are transitioning to an ideas boom. An ideas boom that is based on innovation, on ingenuity, on being more productive, more competitive, all of those elements will enable us to succeed and excel in the 21st-century.

And one of the key elements in that is open markets.

And of course China is the biggest market by far in our region and we have through the ChAFTA and the great work of all of you here, we have access to that market in a way that we never had before. Now, we can't take anything for granted. We’ve certainly not with our access to Chinese markets, we should always reflect on how we can do better.

How we can better tailor hospitality services to Chinese tourists.

How we can continue to work with Chinese investors and customers to create new jobs and opportunities.

We need to continue to work hard to attract the talented people from China who are helping to make our society not only more prosperous but also the most successful multicultural society in the world - bound together by shared values, freedom , democracy and rule-of-law. And the glue that binds us together is mutual respect.

That mutual respect - and that respect for others' cultures, others' religions, others' ethnic background - that mutual respect is what binds us together and that is what makes us such a successful country. And it makes us, in many ways, a truly global nation.

You know, you have probably heard me say this before, but it seems a very long time ago when I was an investment banker working for, I was a partner in fact of a big global bank, Goldman Sachs. We used to hire more young Australians than we could ever use in Australia. And a lot of the other big global firms did the same. And the reason for that is Australians are naturally multicultural. You’re growing up in a country with so many different groups and backgrounds and friends who come from every different background imaginable. It makes Australians naturally very global citizens.

And, as we engage more with the rest of the world and as our society becomes more engaged with each other, so too, our ability to succeed in this global economy is enhanced.

And, just think about, the value or the significance, the importance of the Chinese Australian community.

Chinese people make up our third largest migrant community. In 2014, 447,000 people in Australia had been born in China.

More than 1 million people today in Australia have Chinese ancestry.

115,000 Chinese – mostly young - people are studying in Australia. Now, by way of contrast, the number for the United States is 300,000. Just think about that, just think about how much bigger the United States is than Australia, how many more colleges and universities they have. It gives you an idea of the significance of the Australia-Chinese connection.

And, there are more than 1 million Chinese visitors who came to Australia last year.

So a changing China is also changing Australia. And we are changing together, and in a way, and in a partnership, that leads to more jobs, more growth, more investment, more prosperity.

Now as we said in the Defence White Paper, which the Minister for Defence Senator Marise Payne and I released last week, we welcome China’s continued economic growth and the opportunities this brings Australia and others in the region.  

During President Xi’s visit to Australia in 2014 we formally lifted our bilateral relationship to a Comprehensive Strategic Partnership, reflecting the importance both countries attach to expanding our political, economic, strategic and personal ties.

But there’s a broader and more fundamental point to be made here too.  Our security and prosperity - and the security and prosperity of our region, and the security and prosperity of every country in our region including China - relies on a stable, rules-based global order which supports the peaceful resolution of disputes and facilitates free and open trade.

Now in my discussions with Premier Li and President Xi about China’s approach to the South China Sea I will continue to encourage China’s leaders - as I encourage the leaders of all the littoral states -to take steps to lower tensions there.

President Xi and I both have, curiously, a deep interest in a very old book. We possibly share an interest in some old Chinese histories as well, but, we have a very great interest in the history of the war between Athens and Sparta by the Athenian general Thucydides. And he wrote, arguably, the first history. Certainly in the Western tradition, the first proper work of history. And, as you probably know, he said, he related the very complicated events that led to the war between Athens and Sparta and he said the real reason for war however remained hidden but was simply this: that the Spartans became anxious about the rise of Athens.

And, President Xi has talked very wisely and thoughtfully about the Thucydides trap. How do you avoid the rising power, in this case China, creating anxiety with others such that you produce tensions and potentially conflict.

And he set out the avoidance of that Thucydides trap as being his single most important foreign affairs goal, foreign policy goal. And it’s a great credit to the president how thoughtfully and deeply he’s considered this. And I completely agree with him on this issue. That is the big challenge.

And so, the point that I’ve made, and I have said the same thing, I’ve been very consistent about this for a long time, long before I was PM in fact. That the litmus test of all of our policies in this region, and, obviously, especially China's as the big rising power,  is: ‘is it promoting harmony or is it creating the potential for tension’.

And so, that's why we see us all having an enormous vested interest in peace and harmony, peaceful resolution of differences, and ensuring that tensions are minimised rather than aggravated.

We have, we will all grow together, we will all prosper together, as long as we maintain that harmony.

So the Thucydides trap is one that we all have a vested interest in avoiding falling into.

The rewards from China continuing its 40-year journey towards open markets, rule-of-law, and enhancing the rule-of-law as the president has sought to do, are well worth the challenges along the way.

They are arguably the greatest challenges that China has faced in a generation.

China cannot afford to turn its back on that progress -  nor would it – any more than it could after the death of Mao.  

And we should remember, as I conclude, the wisdom of Deng Xiaoping when he went south, around the time that President Xi's father was appointed to administer Guangdong.

And he reflected on China in the days of the great Admiral, Zheng He, who, as I'm sure you know, sailed huge Chinese fleets around the Indian Ocean and through what we’d now call the Indonesian and Malaysian archipelagos. All through there.

And then after that of course emperors changed policies, and China became close to the world, and Deng Xiaoping reflected on Zheng He and he said: when China was open to the world, it was strong. And, when it was closed, it became weak and then, subject to oppression from foreign powers.

So, openness is strength. Openness to the world is strength. It brings peace, it brings prosperity, it brings the satisfaction, the realisation, of the China dream that the president speaks so powerfully and eloquently about.

So, my friends, there has never been a more exciting time to be pursuing business opportunities with China.

The ChAFTA opens up opportunities we’ve never seen before. This is the most exciting time in Australian history. It’s the most exciting time in Chinese history. The destinies of our two countries, the success of our two countries are closely linked, are tied together, and they depend on your enthusiasm, the wisdom of our leaders, but, above all, on the entrepreneurship and goodwill of millions of Australians and Chinese who know that they have so much in common and working together.

So, I would say: Go for it.  Jia you!


Recommended Posts