Martin Jacques, a leading British academic who wrote a best-selling book called When China Rules the World: The End of the Western World and the Birth of a New Global Order believes, as you can probably tell from the title, that China will be the dominant power of this century. Predictions about when China becomes the largest economy in the world range from 2030 onwards to as early as 2018.
Those in the West, he says, have no idea what that will entail for we arrogantly presume that as China gets richer its citizens will become more like us. Jacques says that won’t happen. China has 1000 years of civilisation to draw upon where the state is the paramount force and is seen by the population as an extension of the family – the ultimate patriarch. He says that Chinese citizens won’t become like westerners, with our demands for individual rights and freedoms and our reliance on rules over relationships. Instead China will maintain its uniqueness.
Jacques believes that the winners of the next century will be those who are able to integrate themselves into China’s ways – “we will all require to be sinocised in some terms or another”, he says. And that’s where Australia has a competitive advantage. Jacques was at China’s recent equivalent of the World Economic Forum, the Boao Forum (the same one Julia Gillard attended) and says that Australia is the “cutting edge country in the age of China”. We have “the most interesting debate that a western country has had” and he’s been very impressed by how able Australian business people have been in their attempts to understand China’s nuances.
But if Australian companies are to really make it in China, Jacques says they’ve “got to go seriously native. The people running your firms either need to be Chinese, or speak Chinese, know the customs, and be deeply embedded.” Those who’ve done that and been there for the long haul have done and will do well.
The speakers at The Australian’s Global Food Forum yesterday certainly understand the implications of that. Time and again, panelists pointed out the enormous potential for Australian food exports to China, as well as the wider region. According to Ross Fitzgerald, a director of packaging company Visy, food is the biggest opportunity for Australia going forward, potentially a $1.5 trillion market by 2050. Dairy is at the forefront of that. Yet time and again, panelists and farmers bemoaned the fact that New Zealand has completely stolen a march on Australia in exporting to China. Australian dairy is slapped with a 15 per cent tariff, New Zealand’s is tariff free.
It seems New Zealand’s leaders long ago worked out what Jacques is talking about. Ian Halliday, Managing Director of Dairy Australia explained that Fonterra, the New Zealand dairy behemoth borne out of that country’s painful deregulation, went to China years ago to help the Chinese government set up a fresh milk industry. They realised that they wouldn’t be competing with fresh milk and by assisting the local industry get on its feet, they not only found themselves truly in favour with Chinese officials but also helped build awareness of the value of milk as a source of nutrition. New Zealand officials worked hand in glove with their dairy producers and as a result Australia is “being flogged by New Zealand”, as Andrew Robb, the shadow minister for finance and deregulation, puts it. “They build relationships and they get the investment.” Fonterra is embarking on a similar program in India, according to Halliday.
In some ways it comes down to the age-old adage ‘know your customer’. Rebecca Dee-Bradbury, president of developed markets for Kraft Foods, said that rather than what we are doing currently in food – growing or processing something and then hoping to sell the excess to China – farmers should instead be going to China, understanding consumer tastes and working backwards from there. Sound business practice, but if you listen to Martin Jacques’ warning it goes much deeper than that. We have no choice but to understand China’s psychology, otherwise our relationship will become increasingly one-way. Fears about Chinese state companies coming over and buying up land will make the Cubbie station saga look like a Punch and Judy show.
If Jacques is right and China does become the dominant power in the world, then we have two options. We can prepare to regularly negotiate from a point of weakness or set up systems and structures (including joint ventures with Chinese investors) now that will place Australia at the front of the coming food boom.
Gary Helou, Managing Director of Murray Goulburn Dairy Co-operative, pointed out that Australia does not have a single, globally recognisable food company. But Australia has the land, the talent and the capital to achieve that.
Shifting the mindset will be a good place to start.
Martin Jacques will be speaking at the ADC Future Summit, at which Business Spectator is a media partner.