Anticipating the China problem

Waleed Aly wrote in SMH yesterday about whether or not we should have allowed China to become such a large percentage of our export market. Whether we should have made a decision to limit it.

Link

Which is worth discussing.

As a small business owner, who has experience with having a client that is so large and provides such a high percentage of turnover, that losing said client would be devastating for the business, I find the question a little odd.

It is true that as a business or country it is important to have diversified clientele. But to "limit" a trading partner to a certain percentage is a ridiculous notion. For me to turn around to that client and say, "So, you spend too much money with us so I can't take on any more of your work, please go and find another company to provide the same service that I do. Oh, but please don't take all your business there, just the bit that I don't want..." is clearly absurd.

It's true that a country is different to my small business, and offers a multitude of different goods and services. However the answer clearly has to be to expand into other markets so as not to rely on one source.

I am not intimate enough with Australia's endeavours to diversify our off-shore markets over the past few decades to make educated comments on whether or not we have done enough to diversify as a country. But it is also not entirely up to the government, in fact, given that we are a free market economy, is it not mostly up to individual companies who they decide to sell their goods and services to?

As CEO of an Australian mining company, with the world's largest consumer of minerals on our doorstep, why would you not be focusing your attention on selling as much as you can to China?
Possibly for the same reason I pointed out above...
So the question then has to be asked of our major miners, have they tried to diversify? I can almost guarantee they have. I would suggest that there simply isn't the demand elsewhere and that the massive expansion in output over the past 20 years has only been undertaken to quench the appetite of China. Thereby the answer to Walled's question with regard to mining is should we have forgone revenue for nothing?

As a tourism operator, with the largest growing middle class on earth a short flight away, why wouldn't you market your offering to China? It is just business. When I market our services I look for the biggest bang for buck. I throw my hook into the pond with the most fish, as surely this will provide the best opportunity for growth. So whilst this case is slightly different to mining, in that it may have been possible to attract more tourists from other parts of the world, the answer still remains, should we have forgone revenue opportunities just so we don't potentially lose it in the future? Client's come and go, there is no set and forget in business. You take your cash cows when they are there and pivot and change if/when they leave.

The same goes with the majority of our export markets.

Perhaps the question needs to be asked of our business leaders rather than our politicians. However I am sure this discussion is being had around the majority of board rooms nationwide, and likely has been for many years.

We clearly need diversification and this should always be the goal. But we must remember that there are other businesses all around the world vying for the same markets and we mustn't assume that there are large enough opportunities to let us limit what we sell to China.

The thing government should be focusing on IMHO is investing more in future technologies that we can produce internally and be world leaders in. Think CSL and Atlassian, among others.

Looking forward to thoughts and opinions.

 

It wouldn't work, anyway. The price would just adjust to include transshipment.

 

I agree with all you said - however - if in such a situation, as part of the "risk assessment", a potential loss of a major client should be written into the business model. All businesses should have a "WTF they would do" guideline, in case their major customer disappeared.

Australia - and Australian businesses - have been lazy in regards to that possibility. We have taken for granted our trade to (and from) China and therefore not had a Plan B concept, and this is why we've been caught on the hop.

Doesn't mean a business has to diversify ... and Australia, as a whole, really does need everyone to have a "what if" strategy in place. Our reliance on foreign fuel sources is a glaring mismanagement by leaders and industry - not only do we not produce/refine vehicle fuel in this country, we also don't store our emergency stocks of fuel here (they're held in the US) - so what happens if there is a dramatic occurrence and shipping is bought to a standstill - or the US decides they want our stocks for themselves? Even minor events - such as the killing of an Iranian scientist coinciding with school holidays - has caused our bowser petrol prices to increase by 25%

Scomo's "diplomatic" abilities (or lack thereof) have certainly not helped

 

Absolutely agree on WTF plan.
But it is essentially, go and find new sales opportunities. Which should always be part of any business plans. I guess a downsizing plan should also be considered.

I also agree that we should still have a refinery in Australia, I remember the old Shell refinery in Sydney but cannot recall whether the government had the opportunity to provide a subsidy to retain it. I do know it wasn't economically viable. But as you point out it is a national security issue.

With the exception of the Covid enquiry, I don't have a problem with how scomo is handling the situation.

 

Never say never but I hope China isn't looking to start WW3.

As I said, rather than risk offending them (unfortunately, they're Goliath, we're David), we should maintain radio silence on any media releases on the relationship or our intentions and quietly start beavering away on reducing our dependence on them by :

1. placing limits on what we export, then
2. slowly ramp down exports of raw materials etc and cite supply/quality problems.

We'll pay an economic price for this in the short term for sure but in the long term, its better for our country IMHO. Sometimes, its better to divorce than stay married.

I'd also ban foreign ownership on everything other than brand new apartments.

No foreign ownership of land, businesses or significant links in the supply chain of anything we produce. I mean to think we allowed that to happen in the first place just boggles the mind.

 

I think we should be diversifying our economy not just our trading partners.

for example, mining and energy makes up about 58% of Australian exports. We are over exposed in exporting natural resources, so its not just our reliance on one trading partner. Makes us vulnerable and not sure whether it will be sustainable

Whats really interesting is Australia has world renowned research but we are at the bottom of the developed world for commercialisation of this research

 

Agree 100%. In fact Hubby & I were discussing the same thing the other day. Social media tells the world exactly what everyone else is doing. There are no secrets. Meanwhile China are busy building up their military, building in the South China Sea, etc. Buying up as much of Australia as they can, and if they can't buy it, they have 99 year leases on it.

Here's an island in the Whitsundays that has been leased by a Chinese group & won't even let locals into the National Park https://9now.nine.com.au/a-current-...-packing/4b00ae5f-02c6-4ffe-ba27-cff40c2a0920

Then you've got South Molle & Daydream Island owned by Chinese Chinese Investors Snap Up South Molle Island

I'm scared to think that they are planning a slow eventual takeover of Australia, and our Government is complicit in it.

 

Watched it. No words really. Would rather islands fell into disrepair than be foreign owned, or leased..whatever. 100 yr lease is pretty much ownership in one's lifetime.

I mean how and why are we selling pieces of this country to foreign owners? There are some things money can't buy. No so here in Oz obviously.

There should be an enquiry and the Govt brought to account. Can't see any defence or explanation being considered acceptable. Either that or our laws have to change immediately.

 

Absolutely! Should never have happened in the first place. Leaves us wide open to anything really. Just off the coast & they can set up anything they want, because it's now China. I have no issue with Mum & Dad foreign investors buying OTP units, but large foreign Corporations buying whole Islands, Ports, Airstrips etc is treason in my view.

 

That was one of my points though.
As far as minerals goes , there isn't really anyone to take their place.

We absolutely should start reducing our dependence on them, but the idea that we can just sell iron ore to someone else in the same quantities is false.

We can't say nothing when they post things like they did on twitter this week.

As far as property goes, this is a tricky one for me.
If we had banned all foreign ownership of all land in our country since federation we would not be the lucky country that we are. Foreign business and investors would have simply looked elsewhere to invest. However we should not be selling any prime farm land or strategic assets. Period.

As for foreign ownership of businesses. How exactly can you do this?
Only Australian's can buy shares in our companies? That's a fast train to nowhere.

On that point, I actually think there is no difference between a billionaire American, British, Chinese or AUSTRALIAN person owning a company. The only thing that matters is who they employ, what tax they pay, what happens to the goods/services they produce and how they contribute to Australia.
Currently I have a problem with a foreign owned farm producing goods that are shipped directly out of the country to the homeland. What price is being paying paid for these goods? Is the correct amount of tax and export duties being paid? Who is being employed to work on the farms?
But I think this can be regulated and as above, no more farm land sold.

 

Have always thought Andrew Robb should have been charged with treason ...

 

Mining is only 11% of our economy though.

Agree on the research, perhaps our Universities can be incentivised to increase profits from commercialisation of research rather than ever increasing numbers of overseas students?

 

I saw the Whitsunday's article the other day. I can only assume that our lease agreements are weak and full of loopholes. Absolutely disgraceful.

Not sure about your last paragraph though.

 

To be fair, they can't set up whatever they want. Local laws still apply and there will be some (albeit clearly too weak) rules in the lease about what can and cannot be done. Let's hope they do break the law so we can tear up the lease. Unlikely though, they are not stupid.

 

I read 2018/19 was 58%

Here is a link, will try to locate recent
Trade and investment

Australian mineral exports boom

 

I think it might be time to ask why our past and current governments for years have let this sort of stuff happen.

Chinese company buys Australian island then bans Australians from it

 

.... and this cybersecurity risk, is this still going ahead

https://www.google.com.au/amp/s/amp...isted-belt-and-road-firm-20201002-p561hj.html

 

That's the one I linked, but a different article. Surely this is in breach of their lease & we can claw it back?