Guangzhou - where it all begins
Speech by Laurie Smith*, Regional Director, North East Asia, Austrade
4 August 2011
1. Introduction
Guangzhou is the right place to be today. It’s where China’s open door policy was first trialled and where its economic take-off began. It’s the perfect place to begin for our mission looking at change and emerging opportunities in China for the next decade.
I first came here in 1978 when I got a job at Zhongshan University close by here. At the time, Guangzhou was a sea of khaki and blue. There were just two bridges across the Pearl River and a fleet of nine taxi cabs in the city.
The country was fascinating and people were great, but I would not have called Guangzhou pretty.
Even now, some still see Guangzhou as an ugly duckling – It isn’t the political heart of China the way Beijing is. Nor is it the largest commercial gateway, future financial centre and all round glamour girl that Shanghai is. It is different but very special:
Both Guangzhou and Guangdong are pioneers. They have been pioneers for over 30 years in economic reform and new pathways to growth for the whole country.
Looking back, they have achieved many firsts:
- as China’s first gateway to trade and foreign investment;
- as a test bed for new economic and social policies;
- as a pioneer of many financial sector reforms.
Now, Guangdong is again leading in developing a new growth model. This features ongoing industrial restructuring – welcoming the exit of labour intensive, low wage processing to other locations.
It involves big investment in in environmental remediation.
It builds on a long term focus on attracting high tech industry such as Helen represents.
It also has a strong focus on growing the services sector.
And in 2010 the Guangdong government announced the launch of its quality of life ‘happy Guangdong’ campaign. It may have a slightly incongruous name but it’s a serious campaign that seeks to improve governance and the wellbeing of the people of the province based on some critical indices covering housing, employment, income, consumption and social security.
Guangdong is also set on building strong investment and trade linkages into hinterland cities and provinces to reinforce its role as a prime gateway to inland China. Changsha in Hunan province that we will visit tomorrow is a good example of a city which is increasingly integrated with the Guangdong economy.
Before our panel discussion begins, I would like to briefly set the scene with some further comments on:
- The changing nature of China’s growth model;
- some of the qualitative dimensions of change in China;
- some of the challenges China faces;
- the drivers of opportunity for Australia and
- the way we think about China.
2. Growth
On any day you spend in China, you can’t help focus on growth. But we are seeing the start of a historic shift:
- There is a new and strong focus on the quality and sustainability of growth;
- In future, growth will rely more on domestic consumers, this is likely to be fuelled by 10%+ real wage growth over the next five years;
- As I noted above when talking about Guangdong, central policy makers and the advanced coastal cities are beginning to really focus on the jobs potential in services;
- And the decade-long policy of promoting balanced regional development just gets stronger, with recent road, rail, and river infrastructure linking central and western China much more tightly and efficiently to the coast.
3. Change
But China’s development is not just about numbers. It’s also about qualitative changes to people’s lives. Four stand out for me:
Mobility is one.
Hundreds of millions of people are on the move in China. The cities we visit this week –even in the west - are becoming far more cosmopolitan, attracting internal migrants from far and wide, and offering new experiences, new lives and new opportunities.
Information is another.
New media channels and the power of the internet have transformed the availability of information for ordinary people;
Of course there is censorship of issues regarded as ‘sensitive’ but the bottom line is, most Chinese now have a wealth of information at their fingertips that they never dreamed of 10 years ago.
Voice
Chinese people are also finding the space and the tools to get a public voice of the kind they have never had before:
It started with bulletin boards about 15 years ago, then SMS usage and later on, blogs took off.
The latest phenomenon is the birth of micro blog services and there are already around 200 million Chinese micro blogging away – reading and writing in real time about what matters to them.
The point of this is that Chinese people have strong opinions and, within certain limits, are surprisingly bold in putting them out there – this is changing society and ultimately, the business environment in the process.
Entrepreneurialism
The fourth change to keep in mind is the rise of private business. Despite the heavy role of SOEs in Australia’s minerals and energy trade and investment with China, reforms here have produced many millions of the world’s most competitive, daring, and single-minded entrepreneurs.
Many of you deal regularly with private businesspeople here; the good news is that you will meet plenty more during this trip, especially at the hospitality events each day on our program.
4. Challenges for China
From the outside, we can sometimes be overwhelmed by the scale of China’s achievement. But China’s people and leaders are clear about the challenges they face. Some that stand out to me include:
- Maintaining employment growth and rising living standards;
- Reviving and protecting the environment;
- Coping with an aging society;
- Maintaining social cohesion at a time of rising expectations but growing inequality and concern about corruption.
During the mission, you will hear Chinese officials talk about their agendas. I am sure you will be impressed how frankly they assess and outline their approach to these and other challenges.
5. Opportunities
So what about Australia? What about this mission?
I see a range of policy and structural changes shaping opportunity for Australia:
- Changing growth patterns and urbanisation that will be constant themes of this mission;
- Consumers who are benefiting from overall growth but also a bigger share of the pie;
- Industrial restructuring, a drive for domestic innovation and thirst for foreign technology;
- Clean energy and environmental remediation;
- Land reform and water problems driving change in agriculture and
- Continued increase in investment in social infrastructure.
There are also some less tangible factors at play:
- China has become a very open society and economy and consumers have a strong craving for what’s new, to see the world, improve themselves and enjoy themselves
- Education and more recently tourism provide ample evidence of how Australia can benefit from this openness and internationalisation but the drivers I mentioned above are producing opportunities for Australian service companies in a wide range of industries.
6. A challenge for us on the mission
Some mission members here today are relatively new to China. Some are not. Others are veteran visitors to China or have worked here over the long term.
For all of us, the mission will provide a great opportunity to discover and update. We will see new realities and changes in the cities we visit and be able to learn from speakers, panellists and from one another.
As we do that, I’d encourage you to think about some of the assessments you often hear about China, some from so called China gurus, some from business colleagues.
- Personal relationships ‘guanxi’ are what count.
- China is a planned economy – get the OK from the right people in Beijing and it will be fine.
- No, China is a market economy – find the right partner and just do the deal, forget the government.
- We’ve opened in Shanghai – so now we have China covered.
- We like being direct, let’s just lay our cards on the table with the Chinese – that’s the Australian way.
- Language skills are essential.
- Language skills are not essential.
- I’ve got great connections in China – My father is X, my schoolmate is Y. Trust me, we can do beautiful things together.
Are they truths? Myths? Or something in between?
With a group of fellow mission members such as this and the many hundreds of Chinese business people and dozens of officials you meet, you will have a chance to test your thinking about propositions like this in a range of local contexts and make some more nuanced assessments of your own.
Talking about a range of speakers … I will leave my opening comments at that and now start the panel discussion which will be followed by a Q and A session.
*Laurie Smith was speaking at the China 2.0 Mission seminar, Guangzhou.