Australia service providers are tipped to be the big winners in Australia’s Free Trade Agreement with China, which will be officially signed off by Prime Minister Tony Abbott and Chinese President Xi Jinping today.
The signing will mark the end of almost 10 years of negotiation over an FTA with China, which accounts for more than $150.9 billion of Australia’s foreign trade.
According to reports from Fairfax this morning, service providers will be among the big winners under the deal, gaining unprecedented access to the Chinese market.
Insurance providers are expected to be given entry to China’s third-party motor vehicle scheme, while Australian superannuation funds will be given the go ahead to invest in the Chinese market. Tourism and health providers will also be allowed to build facilities in China.
The deal is also expected to be beneficial for the local beer, dairy and horticultural industries, with more than 90 tariffs on Australian exports into China to be liberated over a four-year period.
University of New South Wales economics professor Tim Harcourt told SmartCompany firms in the architecture, construction and financial services sectors will likely benefit the most from the deal, as will those in key agricultural markets.
But Harcourt says there will be some disappointment among sugar producers as the sector was one of those to miss out.
Nevertheless, Harcourt says it will be SMEs who benefit the most from the deal and the perception that the agreement is about “the big end of town” is misguided.
He says there are already around 5600 Australian SMEs doing business directly with China, another 4800 trading with China through Hong Kong and another 3000 who have a physical presence in China.
“So that’s around 15,000 companies … this is a bigger deal for them,” he says. “It’s better than the deals with Japan and South Korea.”
Harcourt says free trade agreements are about stimulating the economy in the long-run and the “building block” nature of the agreement means there will be scope for further benefits down the track.
But Morry Morgan, co-founder of training consultancy ClarkMorgan and author of Selling Big to China, told SmartCompany the deal also means Chinese firms will gain greater access to Australia.
“Economics aside, this FTA will encourage more Chinese private and state-owned enterprises to enter the Aussie market, increasing the demand for China-savvy employees and executives,” Morgan says.
“The challenge for these Chinese brands will be in staying in the good books, with both the regulators and general public, and avoiding the troubles experienced by companies like Huawei Technologies. That’s where local Aussie expertise will be valuable.”
For companies thinking about entering the Chinese market for the first time, Harcourt says it’s important not to be scared or put off by the language barrier.
“It’s more important to feel China business ready, rather than a great linguist,” he says.
“Learn a bit about the history and the culture, be international, but don’t expect to learn Mandarin overnight.”
Editor
Eloise is an experienced business journalist and editor, who has held senior editorial roles at SmartCompany since 2014. Prior to joining SmartCompany, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry. Eloise has degrees in media and communications, marketing and business management, and political science. You can follow her on LinkedIn, and Twitter at @ellykeating.
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