China's inland cities have watched the coastal regions develop and now want some of that for themselves, writes Tim Harcourt.
THERE'S no shortage of China stories in the Australian business press, particularly with the enormous resource and energy deals that have been forged between Australia and the People's Republic.
However, most of the attention on China focuses on the "big three" — Shanghai, Beijing (or the Beijing-Tianjin region) and Hong Kong-Pearl River Delta areas of coastal China. This is no surprise as these places are where all the economic growth and wealth has occurred. Much of this, of course, is by design. For example, Deng Xiaoping, the father of China's market reforms, chose the sleepy fishing village of Shenzhen to be a "Special Economic Zone" in 1980. This enabled Shenzhen and the Pearl River Delta (PRD) region to be a test bed for Deng's market reforms.
As a result, this region has never looked back as an engine of growth, trade and entrepreneurship. As a result of Deng's reforms, the value of the PRD region's production grew from $US8 billion ($A10.7 billion) to more than $US90 billion two decades later. The PRD also dominated China's trade flows over this period, accounting for more than 33 per cent of national trade and 29 per cent of foreign direct investment (FDI).
In addition to the PRD, Shanghai and the Yangtze River Delta (incorporating Shanghai-Pudong, Hangzhou and Nanjing) have followed suit; and Beijing, as the powerful national capital, has gone from strength to strength and will attract closer global attention as host of the 2008 Olympics.
However, on my most recent visit to China, I noticed another trend. After watching the growth in wealth of the big three, the rest of China is keen to get a slice of the action, and Chinese authorities are directing resources in their direction. Inland cities such as Chongqing, Wuhan, Nanning and Chengdu are keen to generate economic growth and attract infrastructure investment in airports, freeways, factories, offices and apartments for their growing populations.
And remember, these regional centres are not country towns. The Chongqing region has about 12 million inhabitants, Wuhan 7 million, Nanning 6 million and Chengdu 5 million.
The rise of the interior is also good news for Australian exporters. According to Peter Ironmonger, Australia's trade commissioner in Shanghai: "In many ways, the PRD represented the first wave of modernisation and the Shanghai-Pudong region the second wave. Now the interior and the west are looking to follow the coastal areas in economic development. This will provide great opportunities for Australian companies involved in infrastructure, construction, architecture and environmental design."
For example, in architecture, Australian firm Hassells has won big contracts in Chongqing. Hassells principal Peter Duncan says there are benefits in chasing work in "second tier" cities, outside the big three: "You get great access to decision makers in Chongqing and, relative to places like Shanghai and Beijing, it's a pretty open field. Every man and his dog is in Shanghai, with the Americans, Europeans and the rest of the world there, competing for the work."
Indeed, Hassells is not alone. Many architects, environmental design companies and town planners are doing well in regional China, as well as picking up the high-profile Olympics-derived projects in Beijing. This indicates that Australia's export base to China is broadening as professional services and niche manufacturers join the resource houses and blue chips.
In fact, according to the latest data, more Australian companies export to China than ever before. In a comparison of Australian exporter destinations by company since 1989, China has clearly been the chart buster. According to research conducted by Austrade and the Australian Bureau of Statistics, more than 3245 companies export to China. There's considerable action at the small-business end as well, with a recent Austrade-Sensis survey showing that 10 per cent of all small and medium-sized exporters are focused on the China market.
So why is Australia so well placed?
The first reason is Sino-Australian diplomacy. Australia has been regarded as a good friend of China since Canberra's recognition of the People's Republic in 1972 and Australia's support for China's entry into the World Trade Organisation. The bilateral relationship is strong, which makes a real difference at all levels of government in China, whether it be central, provincial or local. For example, having a trade commissioner or ambassador accompanying an Australian company to meet a local official can go a long way when tendering for a contract, especially when Beijing has a favourable view of Australia.
Second, there is strong exporter support for closer economic ties with China. According to the DHL Export Barometer, exporters have given a positive reception to free trade agreements in general, with an agreement with China consistently heading the pack.
Third, as well as having trade interests that are complementary, Australian business skills are well regarded. We are good at running large projects and have a strong professional service culture. This is consistent with recent global surveys demonstrating the current strength of the Australian "brand". For example, GMI-Amsholt ranked Australia as the No. 1 country brand in the world and it found that Australians were regarded as very good to work with and to do business with.
Finally, there's the important role played by Chinese-Australians in facilitating trade between their countries. People like Jimmy Du of Australian manufacturer Dynalite in Shanghai and Dr Dan Sun, Australia's senior trade commissioner in that city, all provide natural links between Australia and China.
Dan Sun says: "It's easy for me, I work for Australia, I was educated in Australia, and my son is in school there. Everyone is coming to Shanghai but I want to make sure Australian exporters also take advantage of the opportunities occurring all over China." Dan Sun, a native of regional China himself (he hails from Kunming, a south-western city) supervises a network of trade consultants in the emerging centres of the west and the interior.
In conclusion, the world has watched China's economic growth over the past two decades with a mix of admiration and caution. So far it has been a case of the three big coastal regions leading the pack in terms of economic growth, trade, foreign direct investment and entrepreneurship. However, the rest of the country now wants its slice of the action and many Australian exporters have a role to play in catching China's next wave.
Tim Harcourt is Australian Trade Commission chief economist. He thanks Peter Ironmonger, Dan Sun, Kimberly Ashton, Jessie Jiang, Emma Huang, Peter Duncan, Justin Bremeny, H. Shash, Karla Davies and Gregory Harvey for their help with this article.
