China’s growing middle class is great news for the New South Wales economy, but changes are needed to make sure that the state reaps all of the rewards, former ambassador Geoff Raby has warned.
High-end services such as tourism and education will benefit the state, as increased urbanisation and government reform in China help foster a middle class with cash to burn.
But Raby, who represented Australia in China between 2007 and 2011, told a Committee for Sydney lunch yesterday that Australia needs to change the way it thinks about Asia’s biggest economy, and the Federal Government and industry should be lobbied to go through with a raft of changes.
The Federal Government needs to foster a more active involvement in Renminbi transactions, and business and government needs to stop thinking about China’s and Australia’s relationship purely in terms of transactions, he said.
Our leaders also need to engage with China more often, with Germany’s Angela Merkel and British leader David Cameron now making annual visits, while an Australian Prime Minister hasn’t been since 2011, Raby said.
“It should be an objective to have [Renminbi] as a convertible currency on the streets of Sydney, just as it is in Hong Kong today, and there is no reason why Sydney should not join Singapore, which has just become a Renminbi clearing centre.
Raby, who has just been named vice chairman of Macquarie Group’s operations in Greater China, made a very good case for going the extra mile to build relationships, saying that services that cater to high-end tourists are “mostly price inelastic.”
“You hear a lot in Australia about the high dollar and the damage it’s doing to the Australian Economy. But one thing for sure, is that it has not had any impact on the growth of the market for tourist services, or education services.
“The price inelasticity in the demand for these things is not inverse: It doesn’t matter if they become more expensive, people just consume them.”
And Sydney, more than any city in Australia, is well placed to cash in. Raby, who is also a director of Fortescue Metals and Yancoal Australia, said that if you ask anyone in China about Australia, “they think Sydney.”
But despite the recognition, there are still issues holding the city, and Australia back as a destination, Raby said.
“The immigration department in Canberra would deny this, but there is no doubt that there is profiling of Chinese coming to Australia.
“The one thing I can assure any one in Australia of, is that young Chinese who are well educated – and most are that come from major cities – have no interest in absconding in Sydney, no matter how beautiful it is.
“They make their money in China; their livelihoods are in China. We have got to get over the presumption that ‘you’re Chinese, therefor you want to abscond.
“Our immigration people need to understand that these people are coming from high-income cities now, in fact they are upwardly mobile,” said Raby.
Another step would be to encourage more business travel, he said, by allowing 72 hour transit visas, as many Chinese businesspeople are annoyed that they need to apply just to stop over in Australia.
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