Opportunities between Australia and China in the midst of the pandemic
David Chu, Head of International Business, discusses the challenges and opportunities between Australia and China in the midst of the COVID-19 pandemic.
David Chu, Head of International Business, recently joined Thomas Sung (host) on the SBS Radio Cantonese Program to discuss the financials measures that both the Australian and Chinese governments have released in response to COVID-19 and analyse the potential opportunities these measures might bring. Listen to the podcast episode in Cantonese or read the transcript of his interview in English below.
Host: We know that the whole world is introducing a wide range of financial measures to save the market, whether it is Hong Kong, China or Australia. Our focus being placed on China and Australia. Actually the two countries are taking different financial actions. Is there any room for new business opportunities to be created? To answer this question, we have David Chu, Head of International Business of ShineWing Australia here today to share with us his analysis. Hi David!
David: Hi Thomas! Hi everybody!
Host: David, as we know, Australia and China have each introduced some financial measures to save the market. Now everyone is talking about one issue – whether any business opportunities have been created in this situation. Please share your thoughts with us.
David: Correct. The Chinese term for “crisis” – Ngai Gei, implies both danger (Ngai) and opportunities (Gei). This pandemic creates a difficult situation that companies may need to address. At the international level, close to 60% of the countries have shut down their borders, keeping all visitors out. Travelling is a big hassle. Trading has been affected a bit, and investment has to be put aside at this stage.
Host: However, it is not until recently that China has returned to work. To what extent has work resumed?
David: A company called China AMC issued a report, showing that the overall resumption of work has reached 89% in China. For listed companies this figure is close to 100%. For SMEs and privately held businesses, the percentage would undoubtedly be a bit lower. However, work has resumed to varying forms. Some have fully resumed working in office, some require employees to work from home, and some are working with flexible hours, in order to avoid forming clusters during the peak hours of commuting. It also varies between industries, such as manufacturing, where in some places workers aren’t able to go to work due to access issues. In some others, such as the service industry, consulting work can be done remotely. However, this may not work for the catering industry.
Nonetheless, the industries are gradually recovering. China has employed many indicators to measure work resumption, including the volume of coal use, passenger load in public transport, people travelling by air, road and railway and foot traffic in malls; all indicative of work resumption. It can also be substantially demonstrated by parcel delivery, internet usage, power usage and many other aspects. A report has recently been released in Shanghai based on electricity consumption where close to 85% of office work has resumed; roughly 70-80% in the medical sector (since some medical workers are deployed to fight the pandemic); 85% in shopping malls; a smaller 60-70 % in hospitality and catering, where there is still some challenges; and 80-85% in commercial buildings, i.e., an uptick in power usage in office buildings. This shows recovery is underway.
Host: What about logistics and supply chains?
David: Since the Chinese government wishes to stabilise its domestic economy, and therefore pays particular attention to logistics and supply chains, they will take whatever measures necessary to keep the supply chain unhindered. For example, now all highways, including tollways, are free. It is expected that this measure will continue until the end of June, in an attempt to support the transport of cargos. On carrying capacity arrangements, anything related to medical and pandemic control equipment such as masks, preventive clothing and sanitisers – among others – will be given priority for transportation.
Host: We understand that Australia and China have introduced their own respective financial measures, and the current business environment is different from the past. Given the mutual dependence and reliance at this stage, have any new business opportunities been created?
David: As I said, “crisis” implies both “danger” and “opportunities”. There are naturally new business opportunities. A lot of restaurants are affected in eat-in terms, but have more take-away business, which has increased by 20% to 40%. This has greatly increased the use of containers, such as plastic boxes and styrofoam boxes. These are not environmental friendly. So if Australian companies are able to provide environmental technology, they will have a great opportunity in single-use disposable food containers. Next is online shopping.
The shutdowns and social distancing required in many locations have encouraged people to shop more online, resulting in an increase in online shopping volume. What opportunities does this bring to Australian? If Australian companies are able to take advantage of this momentum in the way of shopping and promote their products to the Chinese market, they will have a great number of opportunities. There are over 1.4 billion mobile phones in China now, which means there are many people shopping over the phone. However, Australian companies have still needed to consider which platform to use, and which KOLs (key opinion leaders) to choose, to help them. Even if you manage to sell a product, how will you deliver it? This will require logistics and storage arrangements, and after-sales services. These, of course, need to be considered. Since lifestyle or the way of shopping has changed, Australian companies are given new opportunities.
Thirdly, online shopping has, in turn, bridged the gap between countries. While talking about selling our products to China, have we thought of the other way around? That Australian companies can help some Chinese brands in entering into Australia? This is also an opportunity. China is manufacturing a lot of products for different foreign brands. For example, if we go to the supermarket, we will find Made-in-China products on all shelves. By Made-in-China, however, it usually means OEM, where the foreign company provides their design and specifications for the Chinese manufacturer to make, assemble and affix the foreign label to the finished product. Actually, Chinese entities are able to independently manufacture some products, such as food and fashion. We may consider whether some Chinese products can be made to Western flavours, which, in fact, is feasible. The Australians of course have Australian flavours, seasoning and herbs. Is it possible for some of the herbs and spices to be made in China, and then exported with a Chinese brand? This is virtually achievable in China, but of course we need to ensure food quality, hygiene and safety. If the same level of safety and quality is achieved, why not use their own brands to market in Australia? Take garments and fashions for example. Many branded products are made in China. Is China able to design garments by themselves catered for the Western taste? China actually has the capability to do these kinds of designs now, but has not made them for the global market.
Host: With so many opportunities before us, is there any hindrance?
David: This will depend on when the traffic ban will be completely lifted. No one knows at this stage. Business dealings always require interpersonal communications and delivery of goods. On interpersonal communications, if people cannot sit down together and talk face-to-face, the communication will be less effective. By my own observations over the last few months, I have found that online conferencing software is able to handle 50% of the work, but the remaining 50% really needs face-to-face discussions. On the other hand, if borders are not reopened, cargos may not arrive on time. I heard that the recent cut in air traffic – such as the cut on Hong Kong-Melbourne and Hong Kong-Sydney flights to just one per day – has resulted in many cargos (which would have otherwise been carried by these passenger flights) could not be delivered in time. Even for the few that were shipped out – as I understand from my discussions with a few logistics operators – were charged 3-4 times higher than before the pandemic.
Host: This has inevitably raised the cost.
David: Yes. This has made export less desirable in some cases.
Host: Right. Then all we can do is wait until the pandemic passes. Big thanks to Mr David Chu Head of International Business of ShineWing Australia who is currently on a business trip in Hong Kong, for sharing with us the resumption of work in China as well as the trade relationship between Australia and China. Thank you!
David: Thank you Thomas! Thanks everybody!
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David is attuned to the Asian listed company market, international taxation issues, corporate regulations and various stock exchange requirements and is highly regarded in the market place. Reach out below to discuss how we can support your business during this challenging time.
This podcast was originally published on SBS Cantonese Radio on 22 April 2020. Disclaimer: The material contained in this page is in the nature of general comment and information only and is not advice. The material should not be relied upon. ShineWing Australia, and related entity, or any of its offices, employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in the publication.