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Australia and China: Expanding Our Horizons

Australia-China Economic and Trade Cooperation Forum, Canberra

Australian Minister for Trade, Simon Crean

Introduction

Thank you.

Vice-President Xi Jinping it is my great pleasure to again welcome you and your delegation to Australia – this time to the nation’s capital.

The senior level of business representation here today, and the diversity of your accompanying business delegation, is a very serious statement of our shared commitment.

The business to business relationship sits alongside the government to government relationship as a powerful signal of the importance both countries place on building this relationship.

Ours is a mature relationship built over many years on a foundation of mutual respect and trust.

It is no secret that I am a frequent visitor to China.

I keep going back because China is a valued friend and because it is a market of tremendous promise and opportunity.

I have witnessed China’s capacity for growth and change - not only in the great cities of Beijing and Shanghai - but also during visits to provinces such as Shandong, Yunnan, Hubei, Anhui and their great cities.

Each visit leaves me more and more energised by China’s dynamic growth, and seized of the opportunities for Australian companies to contribute to the dramatic changes underway in China.

On this front, I welcome China’s announcement of further reforms to its exchange rate as China continues to contribute to the global economic recovery.

Overview of the Trade Relationship

The speed with which the Australia-China economic relationship has progressed is astonishing.

China is our largest two-way trading partner, and last year became our largest export partner. Two-way trade is now valued at AUD 85 billion, or nearly 17 per cent of Australia’s total trade.

The upwards trajectory shows no sign of slowing and this year, two-way trade may well exceed $100 billion.

But our economic relationship with China is becoming so much more than just trade in resources. It’s that diversity we need to intensify.

Two-way investment flows are the critical to this equation.

Investment

Australia welcomes investment from Chinese companies wanting to be a part of Australia’s dynamic economy.

Australia is, and will continue to be in the future, an attractive destination for Chinese investment.

Since the Government came to office in December 2007, Australia has approved around A billion of Chinese investment.

More than 170 Chinese investment proposals have been approved during this period.

Only five of these have involved undertakings, conditions or amendments. None have been rejected.

Our Foreign Investment Review Board will continue to consider direct investments by all foreign governments and their agencies.

Many of China’s investment proposals are in the resources sector and involve State Owned Enterprises.

Australia values our reputation as a trusted supplier of natural resources. In terms of competitiveness and reliability, we are second to none.

The planned changes to our tax regime will further encourage the investment needed to better balance the supply and demand of Australia’s natural resources.

Whilst Chinese investment in Australia is growing rapidly, it is doing so from a low base.

On the latest available figures from 2008, Chinese investment still forms less than one per cent of the foreign investment stock in Australia, ranking it 15th behind countries such as New Zealand, Switzerland and the Netherlands.

But investment is a two-way street.

Australian investment in China also continues on an upward trajectory, with about A billion in Australian investments in China in 2008, up from just A.35 billion in 2003.

This is an area where Australian companies need to do more to seize the opportunities available.

This two-way street is also a reflection of investment as the new form of trade. Instead of just producing and shipping goods, business increasingly seeks to get closer to domestic markets and to secure greater reliability and connectivity in their supply chains.

It is in our interests to understand this dynamic and to secure the basis for a modern investment framework delivered through successful FTA negotiations.

Importance of an FTA

It is another reason why we have a shared interest in concluding a comprehensive, high quality, treaty-based framework:

* one that goes beyond trade in goods to encompass services and investment
* and one which – whilst it must deal with the sensitivities – must be constructed fundamentally around the hugely growing opportunities for both countries

The negotiations are challenging because China has not previously negotiated an FTA with a country that has such extensive interests in agriculture, resources, services and investment.

Nevertheless progress has been made. We must continue to persist in finding and ensuring we overcome the areas of difference and focus on the opportunities.

I’m convinced we can deal with the sensitivities, just as we did in concluding the FTA with ASEAN.

All we need is the right mix of shared interests, conviction – and most of all, political will. I believe this visit makes a significant statement on all three fronts.

An Australia-China FTA will raise the bar. It will bring our economies to a new level of integration.

And it will set the modern framework for our trade and economic relationship.

The FTA negotiations received fresh momentum following the visit last year of Vice Premier Li Keqiang.

Our negotiators are meeting again in Beijing next week.

Mr Vice-President, we trust that this visit will further propel momentum in the negotiations.

Second Track in Parallel with FTA

While we are working hard to conclude the FTA, our trade and investment relationship does not remain hostage to the successful outcome of those negotiations.

We are focusing our efforts simultaneously on China’s rapidly developing regional areas as part of a second track approach which is designed to complement the FTA negotiations underway at the national level.

This strategy offers real and exciting opportunities for Australian industry.

It is about matching Australian industry strengths with commercial opportunities in the rapidly developing inland provinces.

Australian companies are well-placed to work in partnership with Chinese counterparts to help meet the infrastructure and other challenges arising from the rapid urbanisation of China’s population.

Our second track strategy also has a particular focus on services. As China continues to prosper, the services economy will make an increasingly important contribution to China’s growth.

Partnerships between Australian and Chinese companies promise to deliver win-win outcomes in areas such as financial services, logistics, education and skills, urban design, green building and clean energy.

In the financial services sector, major cities such as Shanghai and Tianjin are aiming to become international financial services centres.

Australia emerged largely unscathed through the Global Financial Crisis. Our success owed much to the strengths of a financial services sector with the right balance of openness, innovation and security.

In terms of both education and financial services, it is not just the service – it is the quality platform from which these services are delivered.

In the urban design and green building sector, Australian and Chinese companies continue to deliver great advances in the design and planning of sustainable cities throughout China.

In clean energy, we are both investing heavily in new, low carbon energy technology, including of course low emission fuels such as LNG and coal seam gas – plus the associated investments in carbon capture and sequestration.

And there is much we can do together in the field of agribusiness services. In dairy alone, there are tremendous opportunities for collaboration.

Let’s go beyond the simple trade in commodities and work together to deliver the value-added services needed to boost productivity and improve food quality. These are critical to China’s food security.

We are also seeing greater collaboration in the automotive industry, particularly in the provinces of Hubei and Anhui.

There is no more significant global automotive market right now than in China. After sales of almost 14 million vehicles last year, China’s auto production is now expected to exceed 16 million units in 2010.

Australia too has a long and proud history of car production. Along with China, Australia remains one of the very few countries that can take a car from design right through to the showroom floor.

There is much we can do together in this sector.

Expo Catalyst for Future Opportunities

Of course, Australia is not alone in seeking to bolster our commercial ties with China. The whole world is looking at the opportunities China has to offer.

We see that in the participation of over 190 countries in the Shanghai World Expo, the largest World Expo ever held.

The Expo site is stunning. It makes a powerful statement of China’s commitment to the central theme of Better City Better Life.

For those Australians in the audience who have not yet been to the Expo, I would encourage you not to miss this once in a lifetime opportunity.

Australia’s Pavilion is proving to be a signature attraction and to date, more than 2 million visitors have passed through the turnstiles.

Our Expo Pavilion is a strong statement of Australia’s commitment to the China relationship – a commitment further underlined by high level visits from the Governor General, the Foreign Minister and the Treasurer.

It is proving to be a great springboard for new and exciting trade and investment activities, as well as a very successful platform for strengthening institutional relationships and building new networks.

Conclusion

Ladies and gentlemen.

This is a strong relationship. It is in the interests of both nations that it is further strengthened. It is incumbent on us to develop the modern framework for that strengthening.

I look forward to this audience being a crucial catalyst in that development.

Thank you.

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