Transcript Opportunities for SA Agribusiness in China

The impact of China’s continuing
growth on the Eyre Peninsula
Sean Keenihan, Chairman of Partners
24 February 2014
Presentation Overview
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Discussion 3 years ago about how EP’s future prosperity linked to
China
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Since then we have seen a lot of change – globally and more
specifically in China and Australia
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Were we on the right track 3 years ago?
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Does LG have a role supporting engagement with China
EPLGA Conference - 2011
At the EPLGA Conference in 2011 we talked about –
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Compelling story in China that entitles big thinking about Eyre
Peninsula’s future
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Australia’s economic prosperity is linked to China’s economic
growth and transformation
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China’s and Australia’s economies are highly complementary –
Australia has what China needs to fuel and sustain its
continuing growth
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EP is one of SA’s most productive regions – highly export
oriented and has what China wants to sustain its growth and
economic transformation
EPLGA Conference – 2011
(cont)
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EP would benefit from China’s demand for resources,
agribusiness products and tourism
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Despite tough times ahead Australia’s and SA’s trade with China
would continue to surge
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More Chinese companies would be seeking investment beyond
resources into agribusiness and other industries
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EP needed to think big and boldly about engagement with China
to secure markets and investment dollars that support key EP
industries
So what has happened in
the last 3 years?
Change in the landscape –
China perspective
In China:
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Change in China’s senior leadership – once in a decade event
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China has embarked on a new growth model – consumption
driven growth and an increased focus on private sector
participation in the economy
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Restructuring of China’s state owned enterprises
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Analysis of outbound investment thinking and strategies
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Overhaul of China’s financial system
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Bilateral relationship with Australia upgraded
Change in the landscape –
Australia and SA
In Australia and SA:
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Challenges in traditional manufacturing sector
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Sustained high AUD$ and associated challenges for agri sector
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Less favourable global mineral/commodity prices impacted
resources sector’s growth
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More and different industries increasingly looking to understand how
China might be an opportunity for them – export, import, investment
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More business groups and industry sectors and all tiers of
government openly engaged around China increasingly
strengthening that engagement
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SA has a strategy for engagement with China
Where do we stand in 2014
Where we are at now
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Despite economic headwinds SA goods exports to China up
30% in 2013
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China is SA’s largest 2-way trading partner by considerable
margin - 24% of SA’s exports go to China
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Chinese tourist numbers up 47% in 2013 – outspent all other
tourists – outspent US tourists 2:1 and Europeans 3:1
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Over 40% of SA’s overseas students are Chinese
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More and broader Chinese interest in investment in SA – private
sector investment and business migrant investment
China slowdown?
Year
$GDP
% GDP Growth
Real GDP Growth
($)
2008
$4.5 trillion
10%
$450 bn
2013
$8.2 trillion
7.7%
$630 bn
SA China Engagement Strategy
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One year into SA’s China Engagement Strategy
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Big opportunity that demands a planned approach.
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By strengthening our partnership with China now, we will provide future
opportunities for our businesses to grow as China grows.
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The essence of the Strategy can be summarised as follows:
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Developing the SA value proposition
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Building platforms for engagement
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Getting business ready to engage
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Resourcing government to better coordinate and support this
engagement
Shandong – SA’s sister
state
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#3 China Provincial GDP
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90x larger than SA GDP
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2013 GDP US$890 billion
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Similar size to Indonesian economy
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Growth rate 9.8% in 2012
Rise of China’s middle class
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China’s growth a key driver of Asia’s burgeoning middle class
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It will be lumpy but we will see a transformation into a voracious
middle class consumer market right on our doorstep
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Sustained growth driven by continued urbanisation and
substantial capacity for improved productivity and efficiency
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Continued outbound foreign investment
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Not without significant challenges and risk but consensus is
China’s rise will continue and this middle class will emerge
Rise of China’s middle class
(cont)
Source:
Peter Drysdale
What this means for the EP
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Continuing demand for resources to fuel China’s growth
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Continuing demand for agribusiness commodities to feed China
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Increasing demand for premium, clean food and wine demanded
by middle classes
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Emerging and growing market for premium seafood
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Growing tourist demographic from China seeking food, wine and
nature experience
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Growing interest by Chinese companies in trading and/or
investing directly with EP businesses in these growth industries
The Agribusiness Landscape
in China
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China’s rising middle class is driving demand for agribusiness
products
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China is now the world’s largest food importer
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Middle class diet is replacing plant protein with animal protein
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China’s food industry plagued by scandal and poor reputation
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Australia’s reputation for food safety and quality assurance a big
plus.
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Competition is fierce – our stocks of supply are limited – South
Australia must compete on value – not price
Competition is stiff
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This won’t just fall in our lap – the whole world wants the
Chinese market
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How do we differentiate our product and selling proposition?
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Strategically promote and place our product – position for
sustainable long term markets
Challenged by :
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•
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High Australian dollar and tariff barriers
Scale
Two-way knowledge and capability gap
Common stumbling blocks - broadly
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Language – effective communication
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Different business culture - interpersonal and government
interface
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Lack of understanding of local issues that dictate value and
impact production costs and outcomes
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Unfamiliar with the business and regulatory environment in
which product and projects are developed and delivered in SA
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Relatively high cost of doing business relative to our competitors
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We must compete on value – not price – and leverage
relationships and platforms that underpin our value proposition
The role of LG
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Challenge of scale for SA businesses engaging with
China
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Growth opportunity for SA businesses likely to be in
second and third tier cities
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Interlinked nature of government and business in China
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Fundamental role of Government in establishing
frameworks for business engagement with China
The role of LG (cont)
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Small business needs assistance dealing in a new
business environment
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LG sector the right tier of government to support
entry to 2nd and 3rd tier markets
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Legitimate role – refer the SA China Strategy
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Councils have a crucial role to play in supporting
business engagement with China
Specifically…
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Capitalising on Federal and State platforms to
establish B2B engagement frameworks in 2nd and
3rd tier markets
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Show support for business in its engagement with
Chinese counterparts
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Facilitate China literacy and business education for
local business
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Nurture a supporting environment for greater
cultural and people to people links
What we will see in the short term in SA
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More Chinese students and parents, skilled, business and family
reunion migrants, tourists in SA
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Chinese FDI will continue – resources, agribusiness and property
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Greater trade volumes with China as its economy grows and
middle class consumers change buying patterns
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More activity from SA Government and SA industry bodies who
have an important leadership role in China engagement
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Councils more active and hands on in supporting business
engagement with China
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Increased prosperity for SA businesses through grasping the
China opportunity
When opportunity knocks,
grab it
3 years later…..
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Give the nature of China’s growth, China’s impact
on EP could be profound
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Opportunity is growing each year - real and present
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As China’s second and third tier cities and markets
grow, can LG assist business to grow with those
markets
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‘How’, ‘where’ and ‘what are the challenges’ – a
separate discussion
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SA has a strategy – and it’s working – good starting