Challenges and Pitfalls Chinese companies face in investment in the Australian market

Transcription

1 Challenges and Pitfalls Chinese companies face in investment in the Australian market

2 China is no threat to Australia Chen Yuming Chinese Ambassador to Australia February 2011

3 The Challenge As a strategic communications firm, KGA decided to undertake research into what drives the political and media agenda on Chinese investment in Australia China s growing prominence internationally is causing Australians and our policy makers to think about how we respond The research shows Australians have a strong sense of opportunity about our engagement with China However there is a strong underlying perception of economic threat Building on our observations to advise our clients better Undertook qualitative research to understand how people feel about China and Chinese investment Build understanding of the Challenges and Pitfalls Chinese companies face in investment in the Australian market

4 Our Approach Focus groups Undertook qualitative research among engaged (shareholders in major companies) and non-engaged voters in marginal seats This built upon our observations over a number of deals Ongoing direct communication with a range of stakeholders here and in China

5 Top Line Findings Concerns about Australia s ability to reap long term dividends from the China relationship are front of mind for Australians Uncertainty based on size, scale and a range of unknowns about China leads to fears we will lose out in the long-term Engaged and non-engaged voters see the need to build certainty about Australia s economic and strategic future with China Post SGX/ASX need for government to send clear signals about stability and certainty for investors Need to demystify Chinese investment and speak to Australian marketplace Opportunities for educating the Australian market Hunger in Australia for long term, sustainable investments, partnerships and the development of Win-Win approaches to acquisitions

6 Political and Media timeline 2007 November Kevin Rudd elected with strong focus on being able to engage China; bring benefit to the economy 2008 Global Financial Crisis Coalition accuses Rudd of being Beijing s Ambassador; Coalition question Chinese investments in Australia, especially around resources and energy 2009 Downturn in Sino-Australian relations 2011 February Incoming Chinese Ambassador Chen Yuming seeks to assure Australia that China is no threat (The Australian) April Julia Gillard will meet the implications of China's military rise head-on in her first visit to Beijing as Prime Minister

7 Observations about Foreign Investment Foreign ownership continues to be a vexed issue in Australia Foreign investors still complain about a lack of certainty Policy shifts leave both investors and market confused FIRB process still a black box to most investors Assumption that the FIRB process is politicised because of the national interest test Naive approach that Australia is a free market absent of any political influence on deals Need to understand influence of public perceptions

8 Observations about Foreign Investment Deals have floundered because: Commercial benefits have been uncertain or failed to be communicated (SGX/ASX merger) Lack of ground work including poor understanding of media, political and regulatory influences Lack of political, media and regulatory relationships allow deal opponents to set the agenda Deal opponents create suspicions amongst politicians/regulators of Chinese SOEs objectives Deals then flounder under sustained pressure, fuelled by fears that Australia is losing sovereignty to Chinese Restrictions impact Chinese SOE acquisitions

9 Key public perceptions of China Relationship Australia needs a plan for future diplomatic and economic challenges Future prosperity interlinked with Asia Pacific economy China will become a preeminent world power Close economic ties with China carried us through the GFC Relationship is paying dividends for now

10 What does the future prominence of China in global affairs mean for Australia? Demand for Australian resources Military threat (very limited) Resource Depletion in Australia Demand for Australian Services Massive Export Markets Centralised decision-making Australian economy not competitive enough to sustain relationship with Chinese Australians lack knowledge about China, Chinese traditions and business practices Dependency without a future Opportunity Threat

11 Why is China perceived as threatening? China is organised, disciplined and effective China has modernised quickly China is very powerful and very large China is calculating and lacking in transparency

12 Entering the Australian marketplace Decisions are made in dynamic political and media environments Understand local context, political and media perceptions can change quickly and there will be divided views Local companies always have the advantage in terms of contacts, history and trust New entrants into the Australian market are often opposed by entrenched local players with strong political and media links Third party support is essential deals fail when they are friendless

13 Entering the Australian marketplace Foreign Investment Review Board (FIRB) will seek assurances that foreign investment brings real benefits to Australia Australia is still going to be protective of its national interest Do not allow undue speculation or gossip to scupper deals Invest in explaining your actions and long term intentions Foreign investors will require a strong local knowledge to successfully navigate the new political paradigm

14 What does this mean for Chinese investors Groundwork Certainty Transparency Trust

15 Biographies Nick Maher, Partner, Melbourne-based Nick Maher has worked with a wide range of leading Asian companies entering the Australian market, including Cheung Kong Infrastructure and Singapore Power. Michael Morgan, Director, Canberra-based Michael Morgan is Chair of KGA Australia s Asia Group. He is a former International Director of Australian Labor, where he played a leading role building links with China.