Australian CEOs flock to China as political hostilities fade

[beijingwalker]

Australian CEOs flock to China as political hostilities fade​

Feb 2, 2023 – 10.47am

Tokyo | Australian CEOs, investors and university bosses are flocking to China for the first time in three years as Xi Jinping’s promise to reboot the economy and end the diplomatic deep freeze with Canberra revives hopes for a flurry of corporate activity this year.

Business leaders including Fortescue Metals executive chairman Andrew Forrest, Treasury Wine Estates chief Tim Ford, and Rio Tinto chief Jakob Stausholm are preparing to visit mainland China in the next two months. The heads of all eight Group of Eight (G08) universities are also planning to visit China before July.

Fortescue Metals executive chairman Andrew Forrest, Treasury Wine Estates chief Tim Ford, Rio Tinto chief Jakob Stausholm, Group of Eight universities chief executive Vicki Thomson and Lynch Group chief executive Hugh Toll. AFR

BHP’s chief commercial officer is planning to attend the China Development Forum in Beijing next month, while the mining giant’s chief, Mike Henry, has said he wants to visit as soon as his schedule allows.

Dozens of delegations of Chinese government officials and investors have also arrived in Australia since China’s borders opened three weeks ago, as Beijing ramps up efforts to attract foreign investment back into the country, The Australian Financial Review has learnt.

The surge in high-level business trips follows a three-year drought because of border closures and political hostilities and comes ahead of Trade Minister Don Farrell’s online meeting with his Chinese counterpart next week.

“It is very much business as usual and people are getting on with their lives. Freeways, airports are busy and people are out and about and leading a very normal life again,” Hugh Toll, the chief executive of ASX-listed Lynch Group said by telephone from Yunnan province.

Mr Toll was visiting China, where his company employs 1500 people at seven flower farms and processing centres, for the first time since the start of the pandemic.

“Pricing is better, so we are performing better and that opens up decision-making around further expansion over time. So, we’ve gone from being very cautious about things a few months ago to now thinking we have a clean slate in front of us,” he said.

More cautious this time​

China’s manufacturing activity returned to growth in January while consumer consumption bounced back as the country recovered from a wave of COVID-19 infections faster than expected, the National Bureau of Statistics said on Tuesday.

However, the renewed optimism in China by Australian companies comes with a caveat. Investors and business groups warned China’s unpredictable regulatory and political environment meant Australian companies would be more cautious than before about investing large amounts of capital back into the country.


“Companies looking at the market need to consider political and market risk more than they did ten years ago, but I do think there are opportunities here and Australian companies will be pushing on an open door at the moment,” Vaughan Barber, chairman of the China-Australia Chamber of Commerce, said.

An Aust Cham survey of 160 Australian companies doing business with China released in December showed 66 per cent were planning to increase their investment in the country.

While there are plans to send a formal trade delegation to China in coming months, corporate Australia’s first significant presence will be at Mr Xi’s annual Boao Forum for Asia, an annual talkfest for big business, on China’s Hainan Island in late March.

Fortescue Metals confirmed Mr Forrest would attend the event to co-chair an Australia-China Senior Business Leaders Forum. There are hopes other Australian business leaders will also attend as part of the delegation. It would be the first significant Australian business presence at the event since diplomatic relations soured in 2018.

It is hoped Mr Farrell’s meeting with his Chinese counterpart, Wang Wentao, next week will pave the way for a physical visit this year by the trade minister and a formal delegation of business chiefs. Foreign Minister Penny Wong and her Chinese counterpart agreed on her visit to Beijing in December to restart the Australia-China CEO Roundtable for the first time since 2017.

Investors in Australia​

Australian executives, including from ANZ bank, are also heading back to Hong Kong as the city’s government tries to encourage foreign business after many expatriates left because of tough COVID-19 restrictions.

The abrupt change in the political mood in Beijing in the past two months and a thawing in bilateral relations also means Chinese investors are flocking to Australia. China abolished quarantine rules in early January, as part of Mr Xi’s sudden dropping of zero-COVID policies, which made travelling in and out of the country difficult.

David Olsson, president of the Australia China Business Council, said he was aware of at least three or four Chinese provincial delegations coming to Australia in the next month to fortify business ties.

“There is obviously an intent within China to encourage foreign investors back into China and the provinces have got mandates to secure that investment. There is also pent-up demand for Chinese investment abroad as well,” he said.

Albert Tse, founder of private equity fund Wattle Hill and a long-time China investor, said he was seeing increased outbound activity from China, although the megadeals of a decade ago were a thing of the past.


While he said the multibillion dollar deals by Chinese companies that overpaid for Australian investments a decade ago would not return, personal investment would further buoy the Australian property sector. Mr Tse was also optimistic about China despite the damage to its economy from zero-COVID.

“China still represents one of the only markets in the world where there are a lot of growth opportunities despite COVID setbacks,” he said.

Outbound students​

China slapped sanctions on $20 billion worth of Australian exports in 2020 after bilateral relations hit an all-time low under the former Coalition government. Even companies hurt by those sanctions said they had not given up on China despite the federal government’s suggestion they diversify to other markets.

“It’s been pleasing to see the increased engagement between the two nations in recent months,” Treasury Wine Estates chief Tim Ford, who plans to visit China in coming months, said.

“I’m very much looking forward to returning to China, continuing to build relationships in person with our customers and commercial partners, as well as government and the broader industry.”


TWE was hit hard by hefty tariffs imposed by the Chinese government in late 2020 on Australian wine exporters. It has since started producing its signature Penfolds wine brand in China.

Privately, some investors and exporters said while they still wanted to engage with China because of the huge size of its economy, they did not trust the government and the risks were high. Australian superannuation funds have also been reluctant to pump capital back into China because of the regulatory uncertainty.

“Anything to do with trade which is short term is fine, but I doubt anyone is going to make long-term investments into a county where arbitrary decisions are being made all the time,” one investor said. “The view from some of the bigger investors I speak to is that they see it has short term. Make the money and get out. They don’t want to get trapped.”

Mr Olsson said Australian companies were wide awake to the risks.

“Australian businesses are not naïve to the risks and there are new risks, but we have always been pretty good at managing those risks,” he said. “We are gearing up for business as normal which means sending more people to China.”

A revival in Chinese outbound tourism and the return of students to Australian campuses is also expected to boost the economy. China this week told students enrolled in overseas universities they should return to physical classes as soon as possible.

“With border barriers effectively removed, our university leaders will be looking to re-engage face to face with our partners and government to reinforce both our education and research links with China,” said Vicki Thomson, chief executive of the Group of Eight universities.

CEOs flock to China as political hostilities fade

After a long hiatus due to COVID-19 and a diplomatic downturn, Australian business leaders are returning to China in droves. Many remain cautious, however, about the risks involved.

www.afr.com