As the China FTA stagnates, Ted Baillieu gets on with business

The Australian, Canberra

As the China FTA stagnates, Ted Baillieu gets on with business

By Rowan Callick

13 September 13, 2012 12:00AM

At first blush, it looks like a suicide mission - taking hundreds of businesspeople to China for a big encounter with a one-party state, just weeks before that one party is to stage a 10-yearly leadership transition that will cascade down through every significant job in the country.

But a closer look at the planning behind the Victorian government’s "Super Trade Mission" to China indicates that its low-key, focused aims may pay off whatever the state of political play - while acknowledging that politics can never be taken out of the Chinese equation.

About 600 people will fly to China on Saturday. The state government claims, almost certainly correctly, it is the biggest trade mission to leave Australia.

Victoria further believes - and this may also be true - that it is the largest such mission yet to go to China from any country.

The 600 will fan out through 13 cities: Beijing, Changsha, Chengdu, Chongqing, Dongguan, Guangzhou, Hefei, Nanjing, Shanghai, Shenzhen, Suzhou and Tianjin, and to Hong Kong, and will rally together once or twice.

Premier Ted Baillieu will be accompanied by three ministers. He will fly to Beijing, Nanjing — capital of Victoria’s sister province, Jiangsu - and Chengdu, where Canberra has just installed a consulate and which is seen as a gateway to China’s less developed west.

It will then finish in Dongguan, a great manufacturing centre alongside the Pearl River. The mission will stay, appropriately, at Dongguan’s Mission Hills resort, renowned in corporate Asia for its golf courses - with a world-beating 216 holes.

Crucially, 80 per cent of the delegates come from small and medium firms, which have often struggled to make connections in China - hence Victorian taxpayers are paying $3000 to subsidise each of the participants who say they need it. The 2000 meetings already arranged with counterpart businesses in China form the core of the mission.

Almost half, 42 per cent, of the participants are new to the Chinese market, and a third are yet to export at all. As a Boston Consulting report on Asian engagement said yesterday: "Business relationships cannot be conjured from a single visit or acquisition", especially in China.

In these circumstances, it’s not so meaningful to judge such a mission by totalling its "announceables". But it could prove, in time, the start of some profitable relationships.

The Victorian government on Tuesday published a 24-page China strategy document.

It provides a helpful setting for the mission. But sadly, it disregards investing in China itself - a crucial path to understanding Chinese markets and building relationships, and a core area in which strong government support and encouragement is needed.

Baillieu will personally focus on attracting Chinese investment in Victorian infrastructure, which needs a huge upgrade just as government revenues are slumping.

This is a great idea, but he will have to be prepared to fight some political battles back home, since Chinese investors usually want equity rather than a low-key banker relationship - good for Victoria, giving the financier a real stake in infrastructure projects, but also raising the profile of the funders.

Baillieu will meet the vice-chairman of the state-owned Assets Supervision and Administration Commission, whose approval is required for any major offshore investment.

At the federal level, however, we seem to be stuck.

The free-trade agreement is stagnating. I was in Wellington last week for a conference marking New Zealand’s 40th anniversary of ties with China, where Prime Minister John Key said that since NZ had signed its China FTA, in 2008, trade had trebled.

This is especially gloomy news for Victoria’s dairy industry, whose Kiwi competitors are taking full advantage of their preferential access to Chinese markets.

It’s even proving hard for Canberra to get its own act together - its Asia white paper is already three months overdue.

It’s all the more important, then, that the states - led by Victoria - are getting on with business.