What China’s Rebalancing Means for the future of Australia’s finance sector

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The Australia China Business Council (ACBC) and ShineWing Australia recently released the industry leading 2016 Australia China Trade Report – The Long Boom: What China’s Rebalancing Means for Australia’s Future.

The report, produced in conjunction with Monash Business School and the Australian Centre for Financial Services, serves to highlight some of the opportunities that may flow to Australia as a result of “China’s Rebalancing” from an infrastructure investment-led, to a consumer demand-driven economy.

Australia’s Finance and Insurance sector

China presents an enormous opportunity to expand it’s current output, share of the economy and jobs. As a major employer of Australian workers and the largest single contributor to corporate tax receipts, expanding this sector through greater trade and investment with China will have a major flow-on impact for the wider economy.

Some of the  key messages for the finance sector include:

  • Financial services is Australia’s single largest industry contributing more gross value to the Australian economy than the mining sector
  • China could represent up to 19% of Australia’s financial services export market by 2026
  • China’s share of the financial services export pie is projected to grow from 11% to 16% in 2026, which will result  in the growth of more than 110,000 jobs.

“Like healthcare and education, financial services will be a key driver of Australian economic growth over the next decade”.

Continued Opportunities for Growth

Modelling by the Australian Centre for Financial Studies rebuts the view that China’s softening growth will have a predominantly negative impact on Australian trade. In particular:

  • China’s demand for Australian exports will grow as it modernises its economy and the middle class grows by an estimated 109 million adults
  • China will claim just over 31% of Australia’s exports by 2025, up from 28% at present
  • Close to one million new jobs could be created across the five key industries of financial and insurance services, healthcare and social assistance, education, tourism and construction by 2026.
Conclusion

The future of the Australia-China trade relationship is one of both opportunity and challenge. Key opportunities lie in industries other than mining that align with China’s likely growth profile. The rising Chinese middle class presents an opportunity to broaden and deepen the Australia-China bilateral economic relationship in the generations to come with services already accounting for around 75% of Australia’s economic output and some 85% of employment.

Even with a relatively conservative forecast for Chinese economic growth, China appears set to remain Australia’s dominant trading partner. However, the ability to capitalise on Chinese demand will be contingent on policy decisions, such as visa and investment policy, foreign investment screening thresholds, export finance and insurance.

Tim Hogan-Doran, ShineWing Australia
Tim Hogan-Doran, ShineWing Australia

For more information on the report and it’s implications for Australian businesses, contact community member Tim Hogan-Doran from ShineWing Australia or download the full report here.