Tim Harcourt

We get a lot of free advice from billionaires on how to deal with Australia’s largest trading partner, China. First, we had gaming mogul James Packer saying we didn’t “bow enough” or treat our trading partners with sufficient deference. At the other end of the spectrum is Mineralogy owner Clive Palmer.

The two billionaires’ remarks, especially Palmer’s reference to “mongrels” and “bastards”, created ripples in Beijing and Canberra. Palmer has since apologised. But do either Packer or Palmer really have an impact on the long-term trading relationship between China and Australia? And what’s the future of Sino-Australian trade ties?

While iron ore and coal are a big part of the story, Australia will move from the mining boom to the dining boom, as its food exports grow rapidly and it sees more agricultural delegations visiting China to build up domestic farm capacity.

But will the trade relationship move beyond rocks and crops? It won’t and probably doesn’t have to.

Primary industry brings with it associated services in mining equipment, agricultural technology, human capital and education resources that China needs. In this regard, the proposed China-Australia free trade agreement (FTA) should help reduce agricultural tariffs and subsidies and smooth away tight services regulations.

According to the latest DHL survey, most exporters would welcome an FTA with China. Up to 61% of exporters think an agreement would benefit their business, 31% think it would be neutral and only 8% think it would have a negative impact.

In some ways, China’s development is as much about urbanisation as it is about globalisation, and Australia will play a big role in servicing China’s second and third-tier cities, such as Chongqing, Chengdu, Wuhan and Qingdao, which my Chinese friends tell me are “country towns” with more than or close to 10 million residents.

This means opportunity for Australian architects such as Place Design, which has moved its office from Brisbane to Chengdu to meet the insatiable demand for landscape gardening in Sichuan province, and Sunshine Coast horticulture company Bassett Barks, which has found China to be a happy hunting ground.

But the story of China’s structural reform is not only about rural-urban migration; it is also about transforming itself from being a nation of shippers to a nation of shoppers. It wants to rely less on exports and more on domestic consumption and investment.

Middle-class incomes are on the rise along with the demand for consumer goods, which were once considered a luxury in China. That’s why water-heater manufacturer Rheem is now based outside Chengdu to service the domestic market and BlueScope Steel is based outside Shanghai to transfer steel locally, free of tariffs.

Add to this the opportunities in the professional services sector, such as architecture, landscape design, education and financial services and the win-win picture becomes clear.

In fact, Australia’s export relationship with China is more broadly based than people think at first glance. According to Australian Bureau of Statistics data, more than 5,600 Australian small and medium-sized enterprises (SMEs) now export to China (plus another 4,900 via Hong Kong) and more than 3,000 are based in China and are flourishing.

More Australian businesses lose money in the US than in China, and more SMEs export to China than to the whole of Europe. Australian SMEs have battled their way into China and over time many have forged a reasonable business through enduring relationships.

Maybe we should listen more to the little Aussie battlers in the SME sector and less to our billionaires on how to succeed in China in the long run.

Tim Harcourt is the J.W. Nevile fellow in economics at UNSW Australia Business School. A version of this post appeared in China Daily.