China represents a singular opportunity for Australian businesses. Not only is it our country’s largest exports market (surpassing Japan in 2009), it is also our largest source of imports. One year on from the signing of the China-Australia Free Trade Agreement (ChAFTA), it’s well worth taking a closer look at our biggest trading partner.

With a population of around 1.37 billion, China boasts about 56 times more people than Australia. Little wonder then that this country represents our largest exports market.

Exactly what are we good at selling to our sizeable neighbour? As China’s middle class continues to expand, there is increasing demand for a higher-protein diet, better education and overseas travel, all goods and services in which Australia excels. At the same time our iron ore, used in the production of steel, is in huge demand, continuing to support China’s manufacturing and construction sectors.

That’s because, while China may be the world’s largest producer of iron ore, it still needs to import vast amounts of the mineral to meet its needs.[1] In contrast, the country is reasonably self-sufficient in coal.[2] Both exports are susceptible to the vagaries of the Chinese market however – while there has been a recent surge in prices for iron ore and coal, there is considerable concern this will be short lived.

Our trading relationship is far from one-way: China is also Australia’s largest source of imports.

We import about three quarters the amount we export to China, with telecommunications and computers our number one Chinese import.

Doing business in China

By Laura Mattiazzi, Head of Asia Business Development, NAB Business & Private Bank

•  Be aware of cultural nuances. For example, carefully hand over your business card with both hands, never publicly criticise or contradict anyone, and respect hierarchies. It’s well worth seeking guidance from professional firms here or in China to help you with this.
• Ensure there are people on your board or among your key management personnel who have significant experience and capabilities in dealing with China.
• Conduct thorough market research and develop a strategic business plan to ensure your future success in China.
• Talk to your financial advisors about cross-border trading and payment risks.
• Familiarise yourself with China’s e-commerce platform and ensure you bring online marketing into your strategic planning.
• Understand Chinese government policies and regulations and conduct your business in a transparent and sustainable way.
• Remember relationships are a critical part of doing business in China. They are the key to success.
• Use resources like Austrade, industry associations and government representatives here and in China.

[1] Lichentenstein, J., “How does China drive the mining and metals business?”, 26 June 2013, Yale Insights, Yale School of Management

[2] Ibid