Go Global Strategy
manufactured goods and equipment from China, taking pressure vessels, rail wagons, and mining equipment from Chinese manufacturers. Australia was also the first
developed nation where a Chinese company has been delivering a lead EPC role. China’s MCC has been building the Sino Iron Project in Western Australia, and now MCC will undertake the China First project in Queensland, and China National Electric Equipment Corporation will undertake the first ever power plant in a developed nation (in Victoria), where they are cooperating with HRL to deliver a duel fuel, natural and synthetic gas-fired power plant. Australia and China can broaden
bulk commodities, and shipping cost is critical when considering smaller margins and such a large labour force. Australia has 200 years of stable political history and long term stable supply is a critical ingredient to proper macroeconomic planning, particularly in an economy as large and complex as China. It is worth noting that during the period of iron ore price increases over the past few years, the increase in Australian spot price to China was less than that of our major competitors. Australian suppliers, in fact, increased the discount they provided to Chinese mills relative to its competitors on a year-by-year basis. Outbound investment from China
to Australia will remain strong, but different in composition in the coming years to encompass private companies and the consolidation of a number of resource sectors.
DRIVER 3: the internationalisation and globalisation of Chinese SOEs The globalisation of Chinese companies had its roots in the 1980s when Engineering or EPC
(Engineering Procure and Construct) companies sought projects abroad as a basis for selling manufactured goods and sets of equipment. This was followed in the 1990s by the establishment of the policy banks such as EXIM, CDB, and others for the provision of export-focused credit to purchasing countries. With the development of super
companies in the mid to late 90s through mergers and restructuring of the shareholding of those companies, these companies have become more active and confident entering international markets. Australia and China have cooperated significantly in this area. Putting aside the groundbreaking
investments in certain sectors by CNOOC, Huaneng in Intergen, Sinosteel at Channar, and CITIC Pacific, the manufacturing and sale of Chinese equipment and sets of equipment, which has been the backbone of China’s economy since the early 80s, has been well supported by Australian infrastructure projects. Australia was the first developed nation to purchase large industrial
this cooperation in infrastructure building focusing on ports, rail links, power stations, hospitals, and education institutions. These projects can utilise Chinese engineering with local Australian support and standards, Chinese manufactured machinery, Chinese financing, and can be institutionalised and run by Australian management giving fixed returns to financiers in a win-win model for both economies
DRIVER 4: The need for currency diversification The weakening USD has driven China to seek a strategy for diversification, including all ranges of sector, regional and RMB revaluation activities. China has slowed the rate of its
purchase of US bonds and securities, as well as investing in securities and bonds in Australia, Europe and other parts of Asia. Chinese banks have also deployed enormous amounts of debt as part of Chinese equipment- oriented projects in Australia, Africa and Europe, all in local currencies. Policies providing 50 per cent funding for overseas acquisitions in certain sectors and jurisdictions has also helped the shift from US bonds to hard assets in resources in Australia, and infrastructure in Europe. The government has also
steadily been introducing RMB trade in Asia and promoting debt facilities in RMB.
Australia China: BEYOND TOMORROW 131
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