Martin Parkinson – Speech to the Australia China Business Council

Martin Parkinson – Speech to the Australia China Business Council

PM&C Who We Are The Secretary
Wednesday, 11 April 2018

Dr Martin Parkinson AC PSM
Secretary of the Department of the Prime Minister and Cabinet

Martin Parkinson

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'Observations about the Australia-China business relationship and prospects for the future'

I would like to begin by acknowledging the Traditional Custodians of the land on which we meet today, and pay my respects to their Elders past and present. I extend that respect to Aboriginal and Torres Strait Islander peoples here today.

Thank you for that kind introduction. And thanks, of course, go to the ACBC and to CEO Natalie Cope for bringing us together tonight to discuss such an important subject to Australia: China.

When talking about China, it’s hard not to reprise the country’s remarkable recent history.

In 1978, the Chinese Government began the structural reforms and opening up that would move China from centrally-planning towards a more market-based, consumer-driven economy.

The architect of those reforms, Deng Xiaoping, believed that when China was open and engaged with the world, it was strong; when it was closed to the world, it was weak.

When considering the benefits of opening to the world, I can’t think of an example more compelling than China’s.

In 25 years, from 1979 to 2004, China’s GDP per capita quintupled, from $1,000 to $5,000. It took Australia around 90 years to do the same thing.

One cannot but admire the truly remarkable feat the Chinese people have accomplished: 800 million people lifting themselves out of poverty, and contributing to rising living standards across the world – including in Australia – through trade, investment, and consumption.

Imports of China’s manufactured goods have markedly lowered the cost of living for all Australians.

And of course, our high-quality, reliable, coal, iron ore, LNG, and other resources have helped build and power the cities created by China’s extraordinary re‑emergence.

In 2017 alone, Australia was the source of 62 per cent of China’s iron ore imports.

But the complementarity and interconnectedness of our economies go beyond rocks and consumer goods.

China is Australia’s biggest services export market, indeed according to UNESCO, we are second only to the US in the number of Chinese tertiary students we educate. These are students who are drawn not only to our high-quality education institutions, but also to the safe and friendly communities in which we live.

Chinese investment has also allowed our economy to grow faster than would be possible if we’d relied on domestic savings alone. Chinese foreign direct investment in Australia has nearly doubled between 2013 and 2016.

This is an important point that often gets overlooked – foreign direct investment delivers jobs, income and wealth Australia could not achieve if we had to rely solely on our own capacity to fund new investments.

This investment and trade also provides substantial benefits to China, lifting its income, wealth and capacity to create jobs as well. In Australia, China has a stable location for its investment, a reliable supply of high-quality commodities, and a source of highly competitive services based on our expertise in areas such as healthcare, education, and commerce.

So both nations have a real stake in our mutual economic success. And this interconnectedness will increase if China’s economy becomes more open as it continues to grow.

The Treasury projects that China’s GDP, measured by Purchasing Power Parity, will expand from $21 trillion in 2016 to $42 trillion in 2030. That would put it at almost double the US’s GDP PPP and nearly 25 times that of Australia.

But, as Chinese leaders know well, there are a number of structural and regulatory challenges that the country must work through to ensure this continued growth.

These changes will present both opportunities and challenges for Australian businesses, including demographic changes, new environmental rules, China’s ‘Made in China 2025’ industrial policy, and the shifting tastes of China’s urbanising consumers.

And more needs to be done on issues like the ease of doing business in China for foreign investors. Australia is the second largest recipient of Chinese direct investment. But it is a lot easier for a Chinese company to invest in Australia than for an Australian company to invest in China.

What this highlights is that Australian businesses must be fully aware of regulatory and other changes in China to stay alert to potential opportunities and challenges. In a region as fast‑paced as our own, there is no room to stand still.

In that, the Australian Government is here to support the Australian business community.

We will soon have six diplomatic posts in China with the planned opening this year of a new Consulate in Shenyang, as well as the Australian Office in Taipei. We have 10 Austrade offices on mainland China, as well as one in Hong Kong, and one in Taipei. And of course, a landing pad in Shanghai to support our innovation agenda.

We also engage comprehensively with our state and territory partners. I speak regularly to my state and territory counterparts to ensure a coordinated approach to advancing our interests with China.

Our Chinese-Australia community is a huge national asset for Australia.

There are over a million Australians of Chinese descent, contributing richly to every facet of Australia’s economic, social, and cultural success. When it comes to engaging with the world, and China in particular, they are a force multiplier for Australia.

And while differences do emerge, and will continue to emerge, between the Australian and Chinese Governments, any insinuation that the Australian Government, or Australia more broadly, is anti‑Chinese is completely baseless.

As the Prime Minister often says, you could not imagine modern Australia without the contribution of Chinese‑Australians. Openness to all peoples is at the core of the values of modern Australia.

It is this openness that has seen Australia become one of the most successful multicultural nations in the world.

And it is this openness that has seen Australia record 26 years of continuous growth, as our businesses and entrepreneurs seized the opportunities emerging from innovation, liberalising markets, and technological advances.

Any reversal of this openness would undoubtedly be harmful to everyone.

The possibility of a ‘trade war’ between the United States and China is worrying and in a world of global supply chains, its effects are not easy to predict or contain.

In our view, it is important that China and the United States discuss their differences, rather than adopting measures that will harm global growth and damage multilateral trade rules and disciplines.

Protectionism is not the path to economic success. It didn’t work for Australia historically, and it will not work now.

Business also has a big role in this – including explaining publically how economic openness, underpinned by the rules-based trading system, supports our prosperity and helps advance our commercial interests.

This openness has enabled the Indo-Pacific to become the fastest‑growing and most dynamic part of the world. All nations and businesses that depend on regional stability and prosperity have an interest in helping sustain it.

As the Prime Minister said at the Shangri‑La Security Dialogue last year:

“We must commit to the principle that respect for the rules delivers lasting peace and work together through our regional institutions for the common good; reject the deglobalisation impulse with a principled and sustained commitment to greater economic integration; and embrace the opportunities and address the vulnerabilities of the digital age.”

It is these principles that form the mutual respect and shared interests that underpin our bilateral relationship with China.

Of course, our two governments will have differences. But we should not let these differences define our relationship.

As the Foreign Policy White Paper makes clear, Australia will stay true to our values of political, economic, and religious freedoms, liberal democracy, the rule of law, racial and gender equality, and mutual respect.

The White Paper also makes it clear that strengthening our Comprehensive Strategic Partnership with China is a top priority.

We look forward to continuing to work constructively with the Chinese Government to make our region a safer and more prosperous place. China has emerged as a strategic powerhouse and will only get more influential. No one wants to prevent this. But we all have an interest in China exercising that power in ways that enhance stability and help sustain the international rules‑based order.

As the Prime Minister has made clear, we welcome China’s leadership, including on issues of critical regional importance, such as North Korea’s nuclear and ballistic missile weapons program.

So on that positive point, and before I end, I want to highlight three main messages:

Firstly, the Government appreciates that business community has a large stake in the China relationship, and in the open, rules-based trading system more broadly. We are always keen to hear your perspectives on how we can work together to strengthen these.

Secondly, the Australian Government remains as committed as ever to a long-term, constructive relationship with China. We remain focused on maximising cooperation on our shared interests and supporting Australian businesses to do the same. When differences emerge, we will respond with care and purpose, guided by Australia’s national interest.

And finally, we shouldn’t underestimate that our relationship goes two ways – like the concept of mutual respect, in which both words are equally important. China has many reasons to want a good relationship with Australia. Australians – including our business community – have a lot to offer the Chinese people.

I believe those in the audience tonight are certainly a testament to that.

Thank you.