China's future growth needs Aussie ideas

China’s hunger for resources has allowed Australia to enjoy over a decade of good growth, but it will be China’s hunger for ideas that holds the key to future prosperity.

If we thought finance was about money flows, then we would be wrong. Finance is above all about ideas. Backing the right ones brings rewards. Wrong ones lose money, confidence -- all the various forms of capital beyond money itself on which the world runs.

Sydney is a major finance centre, however it has a relatively low profile internationally. This will no doubt change.  Sydney operating in roughly the same time zone as China is a major competitive advantage, and one that it will need to use. Because for all China’s wealth, material importance and prosperity now, there is one asset it needs with increasing importance -- and that is ideas. China’s hunger for resources has allowed Australia to enjoy over a decade of good growth while the rest of the developed world suffered the travails of the Global Financial Crisis from 2008. But for the future, it will be China’s hunger for ideas, partnerships and innovative developments in industry that will unlock further growth.

At the moment, Australia’s structures and modes of engagement to promote this are still being developed. Australia has a well-educated, creative, free thinking population, and its role in engaging with China in the future will be far more important than digging coal or iron ore from the ground. Getting the people of Australia ready to engage in this new era of engagement with its largest trading partner is critical.

Part of this is about having a common framework by which to understand and work with each other. China’s aspirations to build a middle class, service sector focused, urban and higher consuming population in the next decade will have a massive impact on the world. Consumption in China is now a third of GDP -- half what it is in Australia. That figure will rise. And as it does, so too will the appetite of the Chinese middle class for stable investment vehicles, opportunities abroad, and more sophisticated products. Australia is in the process of articulating a role in this. It needs to brand itself not as a place of abundant resources but of abundant intellectual partnerships.

Sydney’s role as a finance centre is essential in playing a role here. With Shanghai, it already has a currency swapping relationship that can create the basis of this new kind of engagement. The outlines of a new narrative for our relationship are starting to emerge. But Australian banks, insurance companies, fund managers and consultancies now need to work out a way of tactically engaging with the vast domestic market in China -- selling them not just products (although we could do this better, the competition there is pretty steep), but also ideas.

Rebranding Australia as an ideas centre means demonstrating clearly that our companies have been globally competitive, open, internationalised and innovative in other markets. Now Australia needs to do so in China, perhaps the toughest market of them all. Politicians, with the Free Trade Agreement between China and Australia that might be signed later this year, need to provide the framework. But there is a role for almost everyone else in this new phase. Universities can contribute hugely through their different networks of expertise and their strong links into knowledge communities in China. Businesses can bring their knowledge of practical engagement.

Australian people, on an individual level, also have to quickly become knowledgeable about this major and growing economic partner they have. They need to have a conceptual understanding of why China matters in their lives, and why what seems like cultural and political differences can be understood and surmounted. After all, for Australia and China their bottom line is vastly similar: despite their many differences, they are looking for sustainable sources of efficient growth in a highly competitive world.

China has embraced many of the tenets of global finance and its accompanying framework regulation. So tactically, deeper engagement between Sydney and Shanghai’s finance centers would make sense. It would be the first move towards a different kind of bilateral relationship to the one we have now. And with the dynamic changes that are happening in China, and that are only likely to accelerate, getting prepared for this new era of more profound engagement, not just about capital, or resources, but above all about ideas, will put us at a major competitive advantage. It would be an abnegation of responsibility not to undertake this.  

Kerry Brown is the Executive Director of the University of Sydney’s China Studies Centre and Professor of Chinese Politics. He will chair the 2014 Sydney China Business Forum focusing on ‘Australia-China Partnerships in Financial Services’ in Sydney on Monday 17 November, which is open to the business, government and academia community. 

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