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China in 2018 – the view from ground level

I have just concluded a short visit to Guangzhou in China to meet with our local business partners and a diverse and supportive group of local entrepreneurs and investors. Here follows a summary of some of the views expressed on a range of issues of interest to us. I have refrained from adding my own personal views at this stage so as to only present what was said.
1. President Xi is popular and highly respected
Everyone expressed their full support for President Xi and everything he is doing to (a) stamp out corruption (b) identify and promote the best people into key roles (‘meritocracy’), and (c) set out a clear and coherent policy and direction to achieve high rates of long term economic growth. He is making bold policy statements for the long term and, now that he has an unlimited term, everyone can see that he has the power, stability and support to implement his strategic plan. The general consensus amongst the people we talked to is that there is ‘more freedom and less control’, a stark contradiction to what is reported in the western media.
2. China’s ‘Big Gulf’ region is a major new growth area
One of President Xi’s new initiatives is to establish a ‘Big Gulf’ region, linking what is known as the ‘Pearl River Delta’ (mainly the first and second tier cities in Guangdong Province) with Hong Kong and Macau which are now all linked by a new 50 km bridge-tunnel network which opens soon. Expect to see major new infrastructure links between all the key cities and a business and investment boom created by Government stimulus packages in the new ‘Big Gulf’ region.
In addition, Hainan Island has been singled out as a new special economic zone to rival Hong Kong as a new gateway to China. New relaxed regulations will be introduced to make it an attractive launching pad for foreign companies entering the China market.
3. China will import more from the USA
Anyone who has been reading reports of the recent resolution of the US-China trade war will know that China has committed to redressing the balance of the current trade deficit between the two countries. This will mean much greater emphasis on importing resources and agricultural products from the US to the detriment of other countries (eg Australia and Canada).
4. One Belt One Road is the focus for outbound investment
Future large scale outbound investment, particularly from State Owned Enterprises, in infrastructure and heavy industry will be directed towards projects located along the One Belt One Road (OBR) route. Countries who are not active and committed partners in this initiative (eg Australia) will see a decline in major infrastructure investment as projects are awarded to the countries who have shown their commitment to OBR.
5. Australia is missing out for unnecessary political reasons
Our Chinese partners are becoming increasingly aware and concerned about the current political tensions between Australia and China which will start to impact on Chinese investment and trade activity. It seems only the Trade Minister, Steve Ciobo seems to understand the seriousness of the current situation given some of his recent remarks after visiting Shanghai last weekend. It’s time for a reset to avoid longer term damage which will undoubtedly have an impact on Australia’s economy. There has been far too much unnecessary talk recently of political interference, espionage and foreign influence which would be better handled behind closed doors rather than voiced in the media or worse in Canberra under the veil of ‘parliamentary privilege’.
6. Major push towards ‘Made in China 2025’ initiative
We met with our friend Mr Xie Hon who is the President of the Guangdong SME Association and will be a key collaborator for us in organising our ACSME Innovation Mission later this year. He reiterated the strong push towards high value manufacturing, innovative technology and the commercialisation of new ideas (particularly in the healthcare, education, energy and environmental sectors) and the allocation of new resources and investment to attract foreign entrepreneurs to China. He also made observations about the changes to the make up of his SME membership over the last 5 years, including the emergence of younger, more educated, professional and ambitious Chinese entrepreneurs who are embracing the new regime under President Xi with less corruption, a high respect for IP protection and a system which rewards merit, innovation and hard work, rather than just ‘guanxi’.
Stand by to see China’s growth rate soar in the next 5 years!

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