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COUNTRY PROFILE REPORT: CHINA
Austrade’s International Business Survey (AIBS) is an important source of insight into the activities and opinions of Australia’s internationally-active businesses (IBs). Supported by Austrade, Efic and the Export Council of Australia and conducted by the University of Sydney, AIBS 2016 is the third survey in the AIBS series and builds upon the work of its two predecessors to help inform our understanding of Australia’s international business engagement at the firm level.
While much analysis of Australia’s international economic performance takes place at the macro level and focuses on aggregates such as total exports and the trade balance, AIBS provides a window onto how individual Australian businesses are adapting to the changing global economy and our place in it.
AIBS 2016 is based on online survey work conducted during late 2015 and early 2016 and captures the responses of 913 Australian companies drawn from 19 industry sectors (and 93 sub-sectors) and operating across more than 100 international markets. Thirty-three per cent of respondents are from the manufacturing sector, which once again is the single largest source of survey participants, while around half of respondents are drawn from a range of services industries.
AIBS 2016 does a particularly good job of capturing the views of internationally-experienced small and medium-sized enterprises (SMEs): about 90 per cent of survey respondents have less than 200 employees while 63 per cent have been earning international revenues for a decade or longer. More comprehensive background on this year’s survey participants is available towards the end of this Highlights Report as well as from the main survey report, which has been compiled by the University of Sydney.
AIBS 2016 Detailed insights into Australia’s international business engagement
CHINA
This report provides the results of Australia’s International Business Survey (AIBS) 2016. This
latest report follows AIBS surveys of internationally-active businesses published in 2015 and
2014.
A total of 107 companies (representing around 12 per cent of survey respondents)
nominated China as their first most important overseas market. As reflected in Figure 1,
strong growth/ profit opportunities were cited as the most important reason by 74 per cent
for targeting the market, followed by the presence of family or personal contacts (cited by
28 per cent of companies).
Figure1 Key reasons for targeting China as the first overseas market
Survey question: Why was this market your first target?
Number of respondents = 107
15%
15%
19%
21%
23%
23%
24%
25%
28%
74%
42%
46%
21%
30%
33%
36%
41%
30%
19%
20%
43%
39%
61%
49%
44%
41%
35%
45%
53%
7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Easy / safe business environment
Low barriers to trade / investment
Familiar culture / language
Followed similar firms / competitors
Presence of FTA or other market access agreement
Advice from external advisors / other businesses
Proximity
Trade mission or similar
Presence of family or personal contacts
Strong growth / profit opportunities
Very important Moderately important Not important
Among the companies that identified China as their most important overseas market, 26 per
cent were from the manufacturing sector, and 19 per cent were agricultural, forestry and
fishing companies (Figure 2). Among the service-oriented industries, professional, scientific
and technical services (12 per cent of companies) was the top sector that considered China
to be its most important market.
Figure 2 Main businesses - China
Survey question: What is the main business of your company?
Number of responses = 212
Note: the sample consists of companies that identify China as either top 1 or top 2 country from which they have earned international
revenue in the past year.
1%
1%
1%
1%
1%
1%
1%
2%
2%
7%
10%
12%
12%
19%
26%
0% 5% 10% 15% 20% 25% 30%
Financial and insurance services (n=2)
Health care and social assistance (n=2)
Electricity, gas, water and waste services (n=3)
Retail trade (n=3)
Transport postal and warehousing (n=3)
Information media and telecommunications (n=3)
Arts and recreation services (n=3)
Accommodation and food services (n=4)
Mining (n=5)
Other services (n=14)
Education and training (n=21)
Wholesale trade (n=25)
Professional, scientific and technical services (n=25
Agricultural, forestry and fishing (n=40)
Manufacturing (n=56)
Companies are most likely to service the China market directly from Australia, with 57 per
cent of respondents indicating this as their preferred servicing mode (Figure 3). A smaller
percentage of companies (22 per cent) prefer servicing the market through an agent or
distributor based in China.
Figure 3 Main mode of servicing exports to China
Survey question: What is the main mode of servicing for the top two countries from which
you have earned international revenue in the past year?
Number of responses = 197
Note: the sample consists of companies that identify China as either top 1 or top 2 country from which they have earned international
revenue in the past year.
Directly from Australia , 57%Through an agent or
distributor overseas, 22%
Through an agent or distributor in Australia, 5%
Licensing and franchising, 2%
Foreign sales branch or subsidiary, 8%
Joint venture, 5%Online sales from
third party website, 0%
Online sales from own website, 2%
Among the companies that identified China as their most important overseas market, close
to 80 per cent perceive that it is more difficult or much more difficult to business in the
country as compared doing business in Australia (Figure 4).
Figure 4 Ease of doing business in China
Survey question: What is the ease of doing business for the top two countries from which
you have earned international revenue in the past year?
Number of responses = 199
Note: the sample consists of companies that identify China as either top 1 or top 2 country from which they have earned international
revenue in the past year.
Much more difficult, 28%
More difficult , 50%
Same, 13%
Easier, 7%
Much easier, 3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ease of doing business (%)
A reputation for dependability and reliability was cited by 83 per cent of respondents as the
most important factor for ensuring market success in China (Figure 5). Other important key
market success factors identified were a reputation for honesty and trustworthiness (cited
by 82 per cent of companies) and a reputation for value for money (cited by 68 per cent of
companies).
Figure 5 Key factors in ensuring success in your top two international markets –
China
Survey question: How important are the following to ensuring success in your top two
international markets?
Number of responses = 212
Note: the sample consists of companies that identify China as either top 1 or top 2 country from which they have earned international
revenue in the past year.
26%
33%
34%
34%
37%
38%
49%
49%
62%
62%
66%
68%
82%
83%
37%
45%
40%
46%
46%
49%
34%
40%
29%
30%
29%
28%
17%
17%
23%
15%
16%
15%
12%
10%
11%
8%
6%
7%
3%
3%
1%
1%
14%
7%
10%
6%
5%
3%
6%
3%
2%
1%
2%
1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Access to competitive finance
Enhanced access to key markets via FTAs or similar
Access to low-cost production
Access to highly-skilled labour
Access to best-practice technology
Access to best-practice management skills
A strong national (Australian) brand
Access to high-quality market information
A reputation for innovation and adaptability
A competitive exchange rate
A strong company or product brand
A reputation for value for money
A reputation for honesty and trustworthiness
A reputation for dependability and reliability
Very important Moderately important Not important Not applicable
Understanding market compliance and risk was cited by 45 per cent of respondents as the
most important factor they considered when they targeted China as their top overseas
market (Figure 6). Other important factors for consideration were general information on
local customs and border procedures (cited by 36 per cent of companies) and help and
advice with local language and business culture (cited by 35 per cent of companies).
Figure 6 Key factors in targeting your most important current market – China Survey question: When you targeted your most important current market, how important were the following:
Number of responses = 155
Note: the sample consists of companies that identify China as top 1 country from which they have earned international
revenue in the past year.
13%
15%
15%
23%
23%
27%
27%
28%
31%
32%
32%
35%
36%
45%
40%
35%
35%
39%
45%
42%
53%
25%
27%
39%
45%
41%
45%
39%
37%
38%
40%
30%
26%
25%
16%
38%
32%
23%
19%
19%
15%
15%
10%
12%
10%
8%
6%
6%
4%
10%
10%
6%
5%
5%
3%
1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Education around Non-Tariff Barriers
Purchase of specific, tailored advice on market conditionsand requirements
Participation in trade missions
Access to official Australian support in-market
Education around international pricing for the market
Information on local agents and other relevant contacts
General information on local economic and politicalconditions
Access to finance
Access to EMDG or similar grants
Education around IP and trade mark protection
General information on local business taxes and regulations
Help and advice with local language and business culture
General information on local customs and borderprocedures
Understanding market compliance and risk
Very important Moderately important Not important Not applicable
Around 46 per cent of respondents identified networking and gaining access to foreign
business/industry networks as the most important way to effectively understand and
operate successfully within the business culture of China (Figure 7). Other important
approaches identified were hiring foreign employees overseas who have cross cultural or
language skills (identified by 39 per cent of companies), and hiring Australian employees
who have cross cultural or language skills (identified by 37 per cent of companies).
Figure 7 Key factors in understanding and operating in the business culture –
China Survey question: How important are the following for understanding and operating in the business culture of your
most important market (on a scale of 1-5, multiple choice):
For Use of professional service firms, number of responses = 154; for all the other answers,
number of responses = 155.
Note: the sample consists of companies that identify China as top 1 country from which they have earned international
revenue in the past year.
9%
12%
25%
27%
35%
37%
39%
46%
15%
23%
19%
25%
21%
21%
19%
26%
29%
21%
27%
21%
19%
23%
12%
15%
23%
25%
12%
12%
10%
10%
8%
5%
16%
14%
9%
5%
7%
5%
8%
1%
8%
5%
8%
10%
6%
5%
14%
6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Use of professional service firms
Networking with Australian companies in the samemarkets
Digital skills – social media in market, and e-commerce skills
Networking or access - foreign government networks
A local business partner
Australian employees with cross cultural or languageskills
Overseas employees with cross cultural or languageskills
Networking or access – foreign business/industry networks
Very important 5 4 3 2 Not important 1 Not applicable
The survey found that more than 70 per cent of respondents have opted to make a direct
investment overseas. Among those who have made an investment in China, 46 per cent
indicate that their main motivation for doing so was to better access the target market
(Figure 8). Other reasons were to build their brand (19 per cent of companies) and to lower
production costs (15 per cent of companies).
Figure 8 Key motives in making direct investment in China
Survey question: Most important motives of the investment
Number of responses =59
Note: the sample consists of companies that identify China as either top 1 or top 2 or top 3 market in which they have made direct
investment over the last 3 years.
2%
3%
3%
12%
15%
19%
46%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
To access service customers (n=1)
To increase efficiency (n=2)
To access local skills/IP (n=2)
To better access the global market (n=7)
To lower production cost (n=9)
To build brand (n=11)
To better access the target market (n=27)
The survey also found that close to 30 per cent of respondents have received capital from
overseas investors. Among those who have received an investment from investors from
China, 22 per cent indicate that the main motivation for the overseas investor was to access
particular skills/ technology (Figure 9). Other reasons were to better access Pacific or Asian
markets (19 per cent of companies) and to better service the Australian market (19 per cent
of companies).
Figure 9 Key reasons for receiving investment from China
Survey question: Most important motives of the investors
Number of responses =36
Note: the sample consists of companies that identify China as either top 1 or top 2 or top 3 market in which they have received investment
over the last 3 years.
6%
8%
11%
14%
19%
19%
22%
0% 5% 10% 15% 20% 25%
Other (n=2)
Financial return (n=3)
To access Australia’s natural resources (n=4)
To access the Australian brand (n=5)
To better service the domestic Australian markets (n=7)
To better access Pacific or Asian markets (n=7)
To access particular skills/technology (n=8)
As shown in Figure 10, respondents have a positive outlook on their business operations in
China, with 43 per cent indicating that they expect their business to do better and 18 per
cent expecting their business to do much better than last year.
Figure 10 Overall outlook – China
Survey question: What is the overall outlook for your company’s international operations in
2016 compared to 2015?
Number of responses = 212
Note: the sample consists of companies that identify China as either top 1 or top 2 country from which they have earned international
revenue in the past year.
Much better (n=38), 18%
Better (n=91), 43%
Same (n=59), 28%
Worse (n=18), 8%Much worse (n=6), 3%
Australia’s International Business Survey 2016 is the follow-up to the inaugural survey of Australia’s international businesses published in 2014, and AIBS 2015. The findings of this report are distinctive and significant because they provide key insights into the nature, needs, concerns and future plans of the overall Australian international business community from the company perspective. AIBS is one of Australia’s largest and most in-depth surveys of internationally-active businesses (IBs). AIBS 2016 is the latest survey in the series and introduces several new questions. AIBS 2016 reports on the views of 913 Australian IBs drawn from 19 industry sectors (and 93 sub-sectors) and operating across more than 100 international markets. AIBS 2016 was commissioned by the Export Council of Australia (ECA), with the support of Austrade and Efic (Export Finance and Insurance Corporation), and was conducted by the University of Sydney (USYD).
ACKNOWLEDGEMENTS
AIBS partners would like to thank all of the state and federal government agencies that supported the AIBS initiative in 2014-2016, as well as our industry and bilateral chamber partners.
AIBS 2016 CONTRIBUTORS
Austrade ■ Mark Thirlwell, Chief Economist ■ Divya Skene, Economist
Export Council of Australia (ECA) ■ Lisa McAuley, CEO ■ Stacey Mills-Smith, Trade Policy & Research Manager
Efic ■ Cassandra Winzenried, Senior Economist ■ Geir Kristiansen, Senior Manager, Insights, & Analytics
The University of Sydney ■ Sid Gray, Professor of International Business, University of Sydney Business School ■ Wei Li, Lecturer in International Business, University of Sydney Business School ■ Sandra Seno-Alday, Lecturer in International Business, University of Sydney Business School ■ Catherine Welch, Associate Professor of International Business, University of Sydney Business
School
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