country profile report: china - export finance€¦ · this report provides the results of...

COUNTRY PROFILE REPORT: CHINA

Austrade’s International Business Survey (AIBS) is an important source of insight into the activities and opinions of Australia’s internationally-active businesses (IBs). Supported by Austrade, Efic and the Export Council of Australia and conducted by the University of Sydney, AIBS 2016 is the third survey in the AIBS series and builds upon the work of its two predecessors to help inform our understanding of Australia’s international business engagement at the firm level.

While much analysis of Australia’s international economic performance takes place at the macro level and focuses on aggregates such as total exports and the trade balance, AIBS provides a window onto how individual Australian businesses are adapting to the changing global economy and our place in it.

AIBS 2016 is based on online survey work conducted during late 2015 and early 2016 and captures the responses of 913 Australian companies drawn from 19 industry sectors (and 93 sub-sectors) and operating across more than 100 international markets. Thirty-three per cent of respondents are from the manufacturing sector, which once again is the single largest source of survey participants, while around half of respondents are drawn from a range of services industries.

AIBS 2016 does a particularly good job of capturing the views of internationally-experienced small and medium-sized enterprises (SMEs): about 90 per cent of survey respondents have less than 200 employees while 63 per cent have been earning international revenues for a decade or longer. More comprehensive background on this year’s survey participants is available towards the end of this Highlights Report as well as from the main survey report, which has been compiled by the University of Sydney.

AIBS 2016 Detailed insights into Australia’s international business engagement

CHINA

This report provides the results of Australia’s International Business Survey (AIBS) 2016. This

latest report follows AIBS surveys of internationally-active businesses published in 2015 and

2014.

A total of 107 companies (representing around 12 per cent of survey respondents)

nominated China as their first most important overseas market. As reflected in Figure 1,

strong growth/ profit opportunities were cited as the most important reason by 74 per cent

for targeting the market, followed by the presence of family or personal contacts (cited by

28 per cent of companies).

Figure1 Key reasons for targeting China as the first overseas market

Survey question: Why was this market your first target?

Number of respondents = 107

15%

15%

19%

21%

23%

23%

24%

25%

28%

74%

42%

46%

21%

30%

33%

36%

41%

30%

19%

20%

43%

39%

61%

49%

44%

41%

35%

45%

53%

7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Easy / safe business environment

Low barriers to trade / investment

Familiar culture / language

Followed similar firms / competitors

Presence of FTA or other market access agreement

Advice from external advisors / other businesses

Proximity

Trade mission or similar

Presence of family or personal contacts

Strong growth / profit opportunities

Very important Moderately important Not important

Among the companies that identified China as their most important overseas market, 26 per

cent were from the manufacturing sector, and 19 per cent were agricultural, forestry and

fishing companies (Figure 2). Among the service-oriented industries, professional, scientific

and technical services (12 per cent of companies) was the top sector that considered China

to be its most important market.

Figure 2 Main businesses - China

Survey question: What is the main business of your company?

Number of responses = 212

Note: the sample consists of companies that identify China as either top 1 or top 2 country from which they have earned international

revenue in the past year.

1%

1%

1%

1%

1%

1%

1%

2%

2%

7%

10%

12%

12%

19%

26%

0% 5% 10% 15% 20% 25% 30%

Financial and insurance services (n=2)

Health care and social assistance (n=2)

Electricity, gas, water and waste services (n=3)

Retail trade (n=3)

Transport postal and warehousing (n=3)

Information media and telecommunications (n=3)

Arts and recreation services (n=3)

Accommodation and food services (n=4)

Mining (n=5)

Other services (n=14)

Education and training (n=21)

Wholesale trade (n=25)

Professional, scientific and technical services (n=25

Agricultural, forestry and fishing (n=40)

Manufacturing (n=56)

Companies are most likely to service the China market directly from Australia, with 57 per

cent of respondents indicating this as their preferred servicing mode (Figure 3). A smaller

percentage of companies (22 per cent) prefer servicing the market through an agent or

distributor based in China.

Figure 3 Main mode of servicing exports to China

Survey question: What is the main mode of servicing for the top two countries from which

you have earned international revenue in the past year?




Directly from Australia , 57%Through an agent or

distributor overseas, 22%

Through an agent or distributor in Australia, 5%

Licensing and franchising, 2%

Foreign sales branch or subsidiary, 8%

Joint venture, 5%Online sales from

third party website, 0%

Online sales from own website, 2%

Among the companies that identified China as their most important overseas market, close

to 80 per cent perceive that it is more difficult or much more difficult to business in the

country as compared doing business in Australia (Figure 4).

Figure 4 Ease of doing business in China

Survey question: What is the ease of doing business for the top two countries from which

you have earned international revenue in the past year?




Much more difficult, 28%

More difficult , 50%

Same, 13%

Easier, 7%

Much easier, 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ease of doing business (%)

A reputation for dependability and reliability was cited by 83 per cent of respondents as the

most important factor for ensuring market success in China (Figure 5). Other important key

market success factors identified were a reputation for honesty and trustworthiness (cited

by 82 per cent of companies) and a reputation for value for money (cited by 68 per cent of

companies).

Figure 5 Key factors in ensuring success in your top two international markets –

China

Survey question: How important are the following to ensuring success in your top two

international markets?




26%

33%

34%

34%

37%

38%

49%

49%

62%

62%

66%

68%

82%

83%

37%

45%

40%

46%

46%

49%

34%

40%

29%

30%

29%

28%

17%

17%

23%

15%

16%

15%

12%

10%

11%

8%

6%

7%

3%

3%

1%

1%

14%

7%

10%

6%

5%

3%

6%

3%

2%

1%

2%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Access to competitive finance

Enhanced access to key markets via FTAs or similar

Access to low-cost production

Access to highly-skilled labour

Access to best-practice technology

Access to best-practice management skills

A strong national (Australian) brand

Access to high-quality market information

A reputation for innovation and adaptability

A competitive exchange rate

A strong company or product brand

A reputation for value for money

A reputation for honesty and trustworthiness

A reputation for dependability and reliability

Very important Moderately important Not important Not applicable

Understanding market compliance and risk was cited by 45 per cent of respondents as the

most important factor they considered when they targeted China as their top overseas

market (Figure 6). Other important factors for consideration were general information on

local customs and border procedures (cited by 36 per cent of companies) and help and

advice with local language and business culture (cited by 35 per cent of companies).

Figure 6 Key factors in targeting your most important current market – China Survey question: When you targeted your most important current market, how important were the following:


Note: the sample consists of companies that identify China as top 1 country from which they have earned international


13%

15%

15%

23%

23%

27%

27%

28%

31%

32%

32%

35%

36%

45%

40%

35%

35%

39%

45%

42%

53%

25%

27%

39%

45%

41%

45%

39%

37%

38%

40%

30%

26%

25%

16%

38%

32%

23%

19%

19%

15%

15%

10%

12%

10%

8%

6%

6%

4%

10%

10%

6%

5%

5%

3%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Education around Non-Tariff Barriers

Purchase of specific, tailored advice on market conditionsand requirements

Participation in trade missions

Access to official Australian support in-market

Education around international pricing for the market

Information on local agents and other relevant contacts

General information on local economic and politicalconditions

Access to finance

Access to EMDG or similar grants

Education around IP and trade mark protection

General information on local business taxes and regulations

Help and advice with local language and business culture

General information on local customs and borderprocedures

Understanding market compliance and risk

Very important Moderately important Not important Not applicable

Around 46 per cent of respondents identified networking and gaining access to foreign

business/industry networks as the most important way to effectively understand and

operate successfully within the business culture of China (Figure 7). Other important

approaches identified were hiring foreign employees overseas who have cross cultural or

language skills (identified by 39 per cent of companies), and hiring Australian employees

who have cross cultural or language skills (identified by 37 per cent of companies).

Figure 7 Key factors in understanding and operating in the business culture –

China Survey question: How important are the following for understanding and operating in the business culture of your

most important market (on a scale of 1-5, multiple choice):

For Use of professional service firms, number of responses = 154; for all the other answers,

number of responses = 155.

Note: the sample consists of companies that identify China as top 1 country from which they have earned international


9%

12%

25%

27%

35%

37%

39%

46%

15%

23%

19%

25%

21%

21%

19%

26%

29%

21%

27%

21%

19%

23%

12%

15%

23%

25%

12%

12%

10%

10%

8%

5%

16%

14%

9%

5%

7%

5%

8%

1%

8%

5%

8%

10%

6%

5%

14%

6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Use of professional service firms

Networking with Australian companies in the samemarkets

Digital skills – social media in market, and e-commerce skills

Networking or access - foreign government networks

A local business partner

Australian employees with cross cultural or languageskills

Overseas employees with cross cultural or languageskills

Networking or access – foreign business/industry networks

Very important 5 4 3 2 Not important 1 Not applicable

The survey found that more than 70 per cent of respondents have opted to make a direct

investment overseas. Among those who have made an investment in China, 46 per cent

indicate that their main motivation for doing so was to better access the target market

(Figure 8). Other reasons were to build their brand (19 per cent of companies) and to lower

production costs (15 per cent of companies).

Figure 8 Key motives in making direct investment in China

Survey question: Most important motives of the investment

Number of responses =59

Note: the sample consists of companies that identify China as either top 1 or top 2 or top 3 market in which they have made direct

investment over the last 3 years.

2%

3%

3%

12%

15%

19%

46%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

To access service customers (n=1)

To increase efficiency (n=2)

To access local skills/IP (n=2)

To better access the global market (n=7)

To lower production cost (n=9)

To build brand (n=11)

To better access the target market (n=27)

The survey also found that close to 30 per cent of respondents have received capital from

overseas investors. Among those who have received an investment from investors from

China, 22 per cent indicate that the main motivation for the overseas investor was to access

particular skills/ technology (Figure 9). Other reasons were to better access Pacific or Asian

markets (19 per cent of companies) and to better service the Australian market (19 per cent

of companies).

Figure 9 Key reasons for receiving investment from China

Survey question: Most important motives of the investors

Number of responses =36

Note: the sample consists of companies that identify China as either top 1 or top 2 or top 3 market in which they have received investment

over the last 3 years.

6%

8%

11%

14%

19%

19%

22%

0% 5% 10% 15% 20% 25%

Other (n=2)

Financial return (n=3)

To access Australia’s natural resources (n=4)

To access the Australian brand (n=5)

To better service the domestic Australian markets (n=7)

To better access Pacific or Asian markets (n=7)

To access particular skills/technology (n=8)

As shown in Figure 10, respondents have a positive outlook on their business operations in

China, with 43 per cent indicating that they expect their business to do better and 18 per

cent expecting their business to do much better than last year.

Figure 10 Overall outlook – China

Survey question: What is the overall outlook for your company’s international operations in

2016 compared to 2015?




Much better (n=38), 18%

Better (n=91), 43%

Same (n=59), 28%

Worse (n=18), 8%Much worse (n=6), 3%

Australia’s International Business Survey 2016 is the follow-up to the inaugural survey of Australia’s international businesses published in 2014, and AIBS 2015. The findings of this report are distinctive and significant because they provide key insights into the nature, needs, concerns and future plans of the overall Australian international business community from the company perspective. AIBS is one of Australia’s largest and most in-depth surveys of internationally-active businesses (IBs). AIBS 2016 is the latest survey in the series and introduces several new questions. AIBS 2016 reports on the views of 913 Australian IBs drawn from 19 industry sectors (and 93 sub-sectors) and operating across more than 100 international markets. AIBS 2016 was commissioned by the Export Council of Australia (ECA), with the support of Austrade and Efic (Export Finance and Insurance Corporation), and was conducted by the University of Sydney (USYD).

ACKNOWLEDGEMENTS

AIBS partners would like to thank all of the state and federal government agencies that supported the AIBS initiative in 2014-2016, as well as our industry and bilateral chamber partners.

AIBS 2016 CONTRIBUTORS

Austrade ■ Mark Thirlwell, Chief Economist ■ Divya Skene, Economist

Export Council of Australia (ECA) ■ Lisa McAuley, CEO ■ Stacey Mills-Smith, Trade Policy & Research Manager

Efic ■ Cassandra Winzenried, Senior Economist ■ Geir Kristiansen, Senior Manager, Insights, & Analytics

The University of Sydney ■ Sid Gray, Professor of International Business, University of Sydney Business School ■ Wei Li, Lecturer in International Business, University of Sydney Business School ■ Sandra Seno-Alday, Lecturer in International Business, University of Sydney Business School ■ Catherine Welch, Associate Professor of International Business, University of Sydney Business

School

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