Robert Gottliebsen has some timely advice about how we view our relationship with China. In this article he suggests we start looking at some different trends over the more traditional indicators of China’s interest in Australia.

Start to prepare for a new era in the Australian Chinese relationship. For the last couple of decades every time we thought of China we have tended to examine trends in demand for iron ore, coal and gas. The enormous demand by Chinese for these base commodities has underpinned government revenue and that of our miners.

Chinese demand is not going to go away but all the signs are that in coal, and perhaps gas, the rate of demand growth will at best be subdued. Iron ore might be stronger, although there are big increases in global capacity on the horizon.

But well within five years, instead of simply looking at Chinese manufacturing, Australia will look at the tourist bookings. We are going to see a very big rise in Chinese tourism. The Boston Consulting Group (BCG) projects the number of Chinese travellers to Australia and New Zealand will soar from 910,000 trips in 2012 to 2.2 million in 2020 – just six years away.

This rise will cause almost a doubling of the ratio of Chinese travellers to inbound tourists from 16 to 28 percent. And it doesn’t stop there.

BCG expects the number of inbound trips from China to Australia to grow at an incredible nine percent per annum between 2012 and 2030. BCG is more bullish than the Australian Tourism Research Group which is forecasting a compounding growth rate of 6.4 percent.

Growth rates of between six and nine per cent annually are going to require growth in infrastructure and I don’t think we are properly prepared for it.

The new China relationship goes even deeper because they are now aggressively buying our real estate, particularly in capital city markets of Melbourne and Sydney. Perhaps they understand the implications of the tourism boom better than we do.

There are two other forces driving the Chinese to send money abroad. First they are being encouraged by the Chinese government to spend abroad but even more importantly, the prosecution and jailing of Bo Xilai and his supporters has created feeling of insecurity among many people in China. If such an important person can be brought down by the current leadership who else is vulnerable?

The understandable reaction is to make sure you have the ability to reside in a country like Australia. The combination of all these forces means we have a lot of activity ahead of us.

This article was written by Robert Gottliebsen and first published in Business Spectator.

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