China is the new ‘workshop of the world’ and its
manufacturing and trade finance links span the globe, with many multinational
corporations (MNCs) either setting up regional treasury centres (RTCs) there or
dealing with the country and its controlled currency policies on a regular
Understanding Chinese culture and business practices well is
essential knowledge if MNCs are to make a success of their dealings with the
emergent nation. For China’s neighbours in Asia, including Australia and those
nations directly bordering the country, there is also an opportunity to supply
treasury, accounting and finance expertise to enhance the efficiency of
businesses there or aid start-ups.
Just as Australia is a key
destination for Chinese investment, with the country’s need for raw materials
attracting significant amounts of commodities and mining money, Australia
should also be looking to China as a growth area for treasury expertise and
its professional services firms. Australian professional services practitioners
have been slow to turn their radar towards China, with ‘AsiaLink’ statistics
reporting that they represent only 11% of the country’s total exports to Asia.
Brand Australia is unburdened by historical baggage with China –
unlike, say, the UK – or the superpower friction that exists between the world’s
second-largest economy and its largest, the US. Indeed, Australia’s long trade,
investment, political and cultural relationship with China has been slowly and
positively evolving in recent years, as evidenced by a number of recent
significant strategic agreements between the Australian and Chinese
Principal among these was the historic agreement to
directly trade the Australian dollar and yuan (CNY) in China’s onshore foreign
exchange (FX) market, making the Australian dollar (AUD) only the third
currency directly exchangeable with CNY after the US dollar (USD) and the
Japanese yen (JPY). This reduces the cost of FX, helps treasurers, and also
signals a strong intent between Australia and China to improve bilateral trade
and the ease of doing business between the two nations.
privileged to be part of the recent business delegation accompanying the
Australian prime minister, Julia Gillard, on her recent visit to China where
she held fruitful discussions with China’s new president, Xi Jinping, and
premier Li Keqiang in the spring. The talks took place just weeks after the
country’s transition towards a new leadership. These discussions hold both
economic and symbolic significance for Australia, reinforcing the vision set
out in the country’s
white paper, to deepen bilateral
relationships with China.
Significant outcomes were the ‘Strategic
Partnership’ agreement, signed by both governments to hold an annual round of
formal leaders’ discussions, highlighting the importance of the bilateral
relationship with China, and opening opportunities for this relationship to
strengthen and grow. As an attendee and ‘trip insider’, I experienced
firsthand both the Australian and Chinese reactions to the talks and
subsequent trade delegations.
Overall, the response, access and
increasing warmth as the visit progressed translates into a very positive
strategic advance, in my opinion. Securing the annual governmental strategic
dialogue with China is without doubt an invaluable political coup for
Australia. It should also open up treasury, accounting and finance
opportunities for professional services firms.
Through Chinese Eyes
Doing business with China can be
challenging. Australia and China are at fundamentally different stages of
economic development and social aspirations. Their complex network of
relationships and their interconnected decision-making can make it difficult
for Australian business to win immediate success.
To borrow the
Chinese love of metaphors, Australia is ‘trading in the car for the bike’.
Beyond the new found love for bike riding by middle-aged Australian males,
after centuries of industrial and economic development, many of its citizens
are now prioritising their quality of life over hard long hours at the office.
For example, there is the phenomenon of the ‘stay at home dad’, and more
Australians embracing part-time work as well as part-paid or unpaid leave.
China on the other hand, entered the economic development revolution
later and has a deep desire to ‘ditch the bike and upgrade to the car’. These
are first generation capitalists, ambitious and determined to build wealth.
Their values and ethics are very different from westerners, and this should be
remembered when doing business in the country.
Economy: The Growing Tide
China’s economy is showing
emerging signs of further economic slowdown, but the long-term fundamentals
remain strong and should be on target to meet 8% growth in gross domestic
product (GDP) during 2013. This is still relatively very strong economic
growth, especially given that the rate has consistently exceeded 10% over the
China has 37 cities with a population over three
million people, and 170 cities with over one million. Each can be considered
an emerging market in itself. By 2025, 75% of the world’s 50 largest cities
will be located in China.
China views Australia as a country with
something worthwhile to offer in professional services: innovation,
creativity, technology and environmentally friendly approaches are all
attractive. The large Australian and MNC clients of Australian professional
services firms are increasingly heading towards China, and more generally
Asia. With integrated physical and financial supply chains, they are accessing
new markets, acquiring companies, brands and technology. They are looking at
key global themes or systems: energy and food security, outsourcing, ageing
populations, healthcare and lifestyle.
Treasury and financial
expertise is required in all these growing sectors. Country boundaries are no
longer relevant. These MNC clients demand globally-minded client service teams
offering expert local advisers in each country and Australia’s relative
proximity to the country and its timezone can be a benefit here, particularly
if local offices are established.
Even more so than in Australia, in China personal
relationships matter; they drive professional services business interactions.
Over the years, Australian firms have delivered many high profile projects in
China, and word of mouth referral by government is helpful and very important
for future growth. Nonetheless, you need to have the right senior executives
permanently on the ground in China to develop strong relationships over the
Unless you are proposing a one off opportunity and are
not interested in the longer term, your business strategy must involve a
permanent presence in Hong Kong or China.
It is very difficult to be
successful unless clients see you have a permanent presence and capacity to
follow through. A local treasury, accounting or finance office can provide
this and aid business growth. Treasurers and other professionals could also
look for consultancy work in the country. You need to know the regulators,
with a relationship strong enough to call them up directly, and also be well
known to the relevant professional industry bodies.
economic growth is creating a massive new market in local clients, many of
whom are amongst the largest in the world for their sectors, which need
treasury assistance, staff, finance knowledge and help.
Australian professional adviser’s strategy must be niche, supporting Chinese
companies or wealthy clients to address their domestic competitive position or
to invest intelligently offshore. Accounting and treasury expertise in risk
management, governance, regulatory and tax reform will be in demand, as well
as technology and environmental services knowledge.
Chinese Investment in Australia
Australia at the
end of 2012 narrowly maintained its top ranking as the most significant
recipient of Chinese outbound direct investment. This is a position it has
held since 2006, rising year-on-year by 21% in 2012. Of note is the rise in
the proportion of investments by privately-owned Chinese companies in 2012,
with 26% of all deals by number and 13% by value. This differs from the
historical trend where state owned enterprises (SOEs) accounted for 94% by
value and 80% by number of deals between September 2006 and December 2012.
Australia is also stepping up its investment in China, with the Reserve Bank of
Australia (RBA) recently announcing plans to
in Chinese government bonds
Despite this, Australia is in
danger of losing its number one rank and urgently needs to develop new and
creative competitive strategies to maintain its position as a preferred
investment partner for China. Australian businesses need to look honestly at
themselves, their skills and attitudes, and be prepared to view China with a
fresh perspective – through Chinese eyes. We need to build an Asia-capable
workforce from board level through to university students, and leverage the
large pool of existing Australian-educated Chinese talent, while simultaneously
better using the large numbers of experienced expatriate Australians currently
working throughout Greater China.
During Julia Gillard’s recent
visit, president Xi Jinping, speaking at the Bo’ao Forum, recited an old
Chinese saying about how a wise man changes as time and events change. China
has already unleashed considerable change upon the world’s economy and shifted
the globe’s manufacturing base eastwards. It would be wise to follow this move
and ensure that the growing Chinese market benefits from international
treasury, amounting and finance expertise, with strong local presences and
knowledge a prerequisite for success.
The revised Payment Services Directive regulation, regarded as one of the most disruptive in Europe’s financial services sector, will begin to make an impact on January 13, 2018.
This year promises to further the regulatory compliance burden imposed on financial institutions. How are firms in the sector responding to the challenge?
The benefits of an in-house bank are increasingly evident, but some treasury departments still hesitate to take the plunge. This article offers a step-by-step guide.
While GDPR and Europe’s revised Payment Services Directive (PSD2) are not contradictory, the fact that the regulators and many banks work on them in silos is problematic, AccessPay executives argue.