The implications of three decades of rapid Chinese economic growth

I recently attended a breakfast seminar hosted by Deloitte Private for the private market clients to gain insights into the implications of three decades of rapid Chinese economic growth, the economic and systemic challenges facing the country, and what this means for Australia and businesses faced with navigating the uncertainty. It was presented by leading Chinese economist Sitao Xu from Deloitte China, and Deloitte Access Economics Partner, David Rumbens.

The seminar was well received by the audience and there was quite a lot of information and phenomenal numbers to takeaway:

  • China’s GDP growth has been forecast to be between 6.5% to 7% but Sitao suggests that realistically it should be around 4%-5% and China’s GDP growth contributes to 1/3 of the global GDP growth.
  • RMB is expected to devalue late this year, but only by 2% per Sitao due to the Chinese foreign currency policy.
  • In 2014, Chinese Outbound Foreign Direct Investment was over USD$120Billion, but only USD$4 billion was invested into Australia.
  • China is currently the largest recipient of Australian merchandise exports at 30%, followed by Japan at 14%.
  • There are 60 million Chinese that have a passport, but this is only 4% of the total population.
  • Visitors from China have contributed over one third of total growth in visitors to Australia.
  • Spending by visitors from China grew more than five-fold since 2005.
  • Australia’s Direct Investment into China has more than halved since 2007 to $250 million in 2014.thumb_env_glb_ho_2353_resize_1024_0

China’s economy is in a transitional phase which has its challenges but also presents opportunities too. To understand the Chinese government strategy and focus, to gain deep insights to its policy making process and business culture is very important when dealing with Chinese investors and business.

On reflection of my experience in the last few years as part of Deloitte Chinese Service Group, I have seen increasing business activities between Chinese and Australian businesses, but mostly are inbound investments from China. How could Australia increase its outbound investment into China to take a bigger share of this fast growing economy? Here are a few opportunities that were presented by Sitao:

  • Chinese’s service industry contributed to over 55% of the GDP growth which presents a good opportunity.
  • There are unmet demands in the health care market in China, calling for expertise and investments.
  • There is a boom in online sales in China. It is projected that the online sales will represent 20% of the total retail sales of consumer goods by 2020, it is currently at less than 10%.

We can see that the total inbound investment into Australia only represents a small percentage of the total outbound investment from China. Obviously, the booming in Chinese outbound tourism has presented a great opportunity for Australian tourism industry and this industry is expecting a high growth.  However, how could Australian business tap into the inbound investment to grow their business? How could Australia increase its share in the total outbound investment from China?

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