Feature
Issue No. 36 - August/September 2007
Avoid bust in the China boom
With China predicted to soon occupy one third of global GDP, Austrade says it is imperative for Australian businesses to include China as part of any export strategy.
Austrade's Chief Economist Tim Harcourt said the economic rise of China was fuelling the agency's drive to increase awareness about its export potential.
"The Chinese economy has been growing at a rapid rate. It's currently 12 per cent of world GDP, measured on a purchasing power parity basis,” he said.
“If it keeps up 10 plus percentage growth rates over the next 10 years or so, it will be as big as the US economy within the decade and twice as large by 2050.
“China's strength in the world economy goes beyond just its GDP. In terms of global demand, China accounts for something like 70 per cent of total demand for key resources driving a commodity boom in economies like Australia. China is our second largest export destination - accounting for almost $24 billion in exports - and over 3800 exporters sell to China. Australian exporters will be 'hugging the Panda' for a long time.”
However, despite this China Boom, it is not all sweetness and light for Australian companies seeking to trade with businesses in our great Asian neighbour. An area that commonly causes problem involves negotiating contracts.
Timothy Williams, a lawyer with firm Hunt & Hunt, which has a growing Asian practice, including an office in Shanghai, said negotiating contracts in China was little different from elsewhere in the world. “The most common problems occur simply because companies become lost in the language and cultural issues,” he said.
“They fail to apply normal commercial standards and due diligence to the company and the deal that they are contemplating.”
Timothy said unprepared companies could pay a high price. “A recent example was an Australian distributor that negotiated a contract for the distribution rights to certain Chinese ma...
