Queensland Open for Business - China Market Brief

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Queensland Open for Business China Market Brief8 October 2015

ZIJIAN ZHANGTrade & Investment Commissioner for China

ContentsChina Market Spotlight Trends and Opportunities TIQ China Strategic Plan 2015-16

China Market SpotlightNew Normal Model: Transition from investment driven to consumption driven;Devaluation of Chinese currency and turbulence of Chinese stock market;Serious challenges by growth slowing, environmental pollution, food safety, ongoing anti corruption and its chain reaction.

The next 5 years will be a painful period for the reform of Chinese economy, and the main goals need to be achieved by 2020. China's economy will be mainly driven by consumption rather than investment and foreign trade during the reforming period, and this will not be an easy job to accomplish.

Secondly, China's economic cycle is different with the developed countries. Time gap from Western and China since 2008 GFC.

Chinas 7 percent and will contribute around 30% to the global growth.

Some positive changes in Chinese economy despite the lower of growth rate, including the contribution rate to growth of consumption comes higher than that of investment, the proportion of service in GDP over passed industry, the proportion of trade surplus in GDP has been decreasing, 7 million new jobs was created in the first half year, the quality of economic growth keeps rising.3

Trends & OpportunitiesTrade: Agribusiness and food supply: strong demanding;Ecommerce: fast growing marekt and direct purchasing from overseas

Agribusiness and FoodChina has been the worlds biggest food retail market since 2012China is Australias largest agriculture and fisheries market, worth close to $10 billion in 2014.Import growing fast for grain, beef, pork and fruits from Qld since 2010

Catching up with Food opportunitiesChAFTATariffs on most of the agriculatural products exporting from Australia to China will be eliminated, which will give Australia a significant advantage over larger players in the Chinese agriculture market the US, EU and Canada.

ProductA$ millionBeef722 Sheepmeat385Dairy351Horticulture83Seafood38Live animal142Wine217

Australian Export to China 2013

TARIFFEXPORT

Catching up with Food opportunities7.5-30%4-7 Years

12-25%9 Years12-23%8 Years15%9 Years10-30%8 Years10-25%4 Years14-20%4 Years14%4 Years10%4 Years

Top 10 imported foods@Tmallby country of origins

Orders of imported foods@Tmail by cities

Trends & OpportunitiesInvestment: One Belt and One Road Initiative; Ongoing overseas investment focusing on agri and property development

Chinas Outbound Direct Investment

Chinas outward foreign direct investment (FDI) has increased substantially over the past decade. Today, outbound investment flow exceeds USD100 billion making China the worlds thirdlargest overseas investor, strong evidence that Chinese companies are changing their roles from global manufacturers to global investors.Currently, the focus of Chinas outward FDI is shifting from natural resources to high technology- and consumption-oriented sectors.2015 will mark another milestone in Chinas outward FDI. This year, the Chinese government is expected to announce that outbound investment has surpassed inbound investment thus making it an economy with a net capital outflow.11

Chinas Outbound Direct Investment

China has invested (FDI) A$27.7billion in Australian during 2013-14, According to FIRB statistics, around A$12.4 billion in the real estate sector. Chinese FDI has overtaken US investment of A$17.5 as the largest FDI investor to Australia.12

One Belt One Road

Rise of Privately Owned Enterprised Chinas New ForceWith the growing strength of Chinese POEs and the governments support for going out, a smaller proportion of Chinas increasing outward FDI is coming from SOEs. By the end of 2013, Chinas outward FDI of non-SOEs accounted for 44.8% of Chinas total accumulated outward FDI value, and their outflow comprised 56.1% of the total outflow of 2013.

Chinese POEs are more flexible, faster-growing, more diversified in terms of investment, and less affected by possible stringent political censorship in the host countries. Therefore, they are more likely to gain better investment results and benefits. But at the same time, POEs experience more difficulties in being able to go out, especially for financing as POEs are rarely supported by Chinas policy banks, andcommercial banks prefer large SOEs. Many POEs are smaller and lack a good credit basis for overseas financing and cross-border payments. POEs also have problems in strategy and management. For example, many lack longterm strategy development and risk awareness, an understanding of the investment environment and cultures of host countries, and experience of overseas investment.Insufficient strategic coordination can easily lead to vicious competition.14

M&A Rush in Real Estate and Construction

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M&A Rush in Agribusiness and Food

Chinas overseas M&A landscape is seeing a lot of activities in various sectors but mainly in the technology, agribusiness and real estate sectors. The policy support is making infrastructure a new market focus. Enthusiasm for investing in the energy sector is faltering, but it is still one of the investors focus areas.16

M&A Rush in Energy and Mining

Main Risks Faced by the Chinese CompaniesPolitical Risk in host countries;Intitutional Risk such as legal and taxation;Lack of strategic planning;Weak of local cultural understanding and integration;Lack of international professionals

TIQ China Strategic Plan 2015 -16Qld Premiers visit to China in Sept, 2015Chinese buyers mission to Qld in Sept, 2015Qld food mission to FHC, Shanghai , Nov 2015Initiating investment missions to Qld focusing on agribusiness and tourism facilities development in 2015 /16Queensland Government ministerial missions to China 2015/16Chinese business migration / investment mission to Queensland, in 2015 /16Regular investment / business migration promotion workshops in various cities 2015-16

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TIQ China Office look forward to working with youQ&A section

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Chart10.1570.1240.0890.0710.0650.0550.0450.0430.0410.034

Country of Origins

Sheet1Country of OriginsRepublic of Korea16%Hong Kong&Macau12.40%Vietnam8.90%Malaysia7.10%Italy6.50%Germany5.50%Thailand4.50%France4.30%Indonesia4.10%New Zealand3.40%

Chart10.190.240.120.230.080.080.06

Rate

Sheet1Rate1st Tier Cities19%New 1st Tier Cities24%2nd Tier Cities12%3rd Tier Cities23%4th Tier Cities8%5th Tier Cities8%Others6%To resize chart data range, drag lower right corner of range.