Chinese mobile payments in Australia: convenience at what cost?

STANCE #14 – FEBRUARY EDITION

By Hannah Caldwell

At the entrance to Alibaba’s headquarters in Hangzhou is a large, traditional-style Chinese painting. On closer inspection, hidden in the scene are many of the big names in tech: Steve Jobs, Mark Zuckerberg, and Bill Gates to name a few. The painting captures the essence of the Alibaba dream: to surpass the past achievements of the Western tech world, and forge the future.

Many visitors to the People’s Republic of China (PRC) are struck by its technological innovation, particularly the widespread use of mobile payments. Alipay and WeChat Pay have become seamlessly integrated into people’s lives: users can hail a cab, shop online, and even give money to beggars on the street via their smartphones. Grame Barty, ex-Austrade Executive Director for International Operations, described this as a “financial technology tsunami” facing the Australian Government, business and regulation leaders.

To ride this wave successfully, Australia must strike the right balance between promoting opportunities this new technology offers for attracting Chinese tourism and spending power, and addressing concerns around data security and the potential economic influence the PRC could leverage through these payment platforms.

Australia is a popular destination for Chinese tourists who make up the largest proportion of visitors by nationality, spending a total of A$10.3bn last year, making up over 25 per cent of the total tourist spend. Retailers are increasingly offering Alipay and WeChat Pay as a way to boost spending. These methods offer customers convenience: it removes the need to carry cash, and avoids currency conversion costs by allowing payments in Renminbi. Alibaba’s Australia and New Zealand headquarters opened in Melbourne last year to encourage Australian retailers to market to Chinese customers.

Interestingly, there has been little effort to open up these payment methods to Australian consumers. Late last month, WeChat’s developer Tencent moved to allow major international credit cards on WeChat Pay, yet this was only possible on versions of WeChat downloaded in Mainland China, Hong Kong, Taiwan and Macao.

Part of the hesitancy of Chinese tech companies to offer these services to customers who are not PRC citizens stems from the challenges around data security regulations. WeChat Pay, as part of the WeChat social media platform, collects a wealth of data about its users: their location, preferences, social connections, and spending habits. This creates a mine of information that can be exploited for targeted marketing and consumer insights.

More worryingly, it is also being used to assign unofficial credit scores to PRC citizens, which come with benefits and penalties managed by private companies and government bureaus. Alibaba was recently forced to apologise for automatically opting in users to its credit scoring system. While these controls impact PRC consumers far more than the Australian businesses offering the mobile payment methods, they highlight concerns for all users around the lack of clarity about what exactly is tracked, how that information is managed, and how secure that information is.

These concerns are not unfounded. Australian businesses using these apps run the risk of the metadata collected providing more information than they are aware of sharing. It was only recently that the PRC central bank established a clearing house for these payment services in order to address concerns about money laundering and fraud. There are also potential risks associated with the influence Alipay and WeChat Pay may be able to exert over Australian retailers due to their dominance. Since they set the cost retailers are charged for offering a service, or for each transaction, this could be used to exert economic influence over the sector, or as a bargaining tool for the PRC with the Australian Government when negotiating other cross-border trade agreements.

To realise the benefits of this technological innovation, and temper the potential pitfalls, the Australian Government should draw on the expertise of those in the Fintech sector to understand the challenges of regulating this industry. Last year, the Australian Securities and Investments Commission (ASIC) and the China Securities Regulatory Commission (CSRC) entered an agreement to promote innovation in financial services in their respective markets. This is a great start to share ideas, but the Government should create an advisory committee to focus on identifying key concerns and putting forward measures or policy decisions to address them.

A similar initiative launched in the UK, with the China Market Advisory Group (MAG), which brings together senior practitioners from across the UK from the financial and related professional services industry to provide strategic insight, guidance and support to policymakers. It hosts an annual UK-China Financial Services Summit to allow industry to put forward its views on policy issues to the two governments. This kind of focus and direct link to Government policymaking is needed to allow innovation, while ensuring these new technologies are not in conflict with Australian data regulation and privacy standards.

Offering these new payment methods to Chinese visitors increases Australia’s attractiveness as a tourist destination, bringing benefits from the increased spending of the growing middle class. However, the Australian Government should not lose sight of the broader challenges in pursuit of short-term financial gain. Drawing on the knowledge of experts to ensure appropriate regulation and safeguards are in place will enable the retail sector to unlock the benefits, without the risk of paying a much higher cost.

Hannah works in Management Consulting and is a keen China observer. 

The opinions expressed in this article are the author’s and do not represent the views of China Matters.

Empower Chinese-Australians to improve bilateral relations

STANCE #13 – January EDITION

By Jieh-Yung Lo

The 2017 Foreign Policy White Paper reflects the increasing complexity of Australia’s relationship with the People’s Republic of China (PRC) and the need to balance trade, investment, and security. Whilst two-way trade remains strong and healthy, the PRC’s assertiveness to expand its geopolitical presence and influence in Australian politics has caused much concern and frustration for Australia.

To help Australia unlock this complexity, it needs to use every tool at its disposal. One of the tools that have yet to be used to its full potential is Chinese-Australian communities.

Australia-China relations have faced challenges in recent times as a result of the Sam Dastyari and Huang Xiangmo political donations scandals, the ongoing media coverage of Chinese influence in Australia, and the Turnbull Government’s new foreign interference laws. Furthermore, the actions of Huang Xiangmo and Chau Chak Wing have tarnished the reputation of Chinese-Australian communities. To break down these tensions and misunderstandings, it requires Chinese-Australians to be more active in foreign policy to help Australia and China navigate through the cultural nuances and political complexities surrounding these issues.

In his opening remarks at the launch of the white paper, Prime Minister Malcolm Turnbull mentioned Australia’s success as a multicultural society and recognised the role of the one million Australians of Chinese ancestry. Having the prime minister recognise this feature is a positive start.

The white paper states that Australia is committed to advancing its comprehensive strategic partnership with the PRC. Australia’s relationship with the PRC has moved beyond trade and investment and into strategic matters such as defence, research, combating transnational crime and law enforcement. To deliver these outcomes, Australia needs to involve and engage Chinese-Australian communities to help influence the PRC in a positive manner. The Australian Government through the Department of Foreign Affairs (DFAT) can start by appointing a working group of Chinese-Australian representatives, which could be guided by the Australia-China Council (ACC), provide ongoing policy advice, and develop outreach initiatives and recommendations from Chinese-Australian communities to the government.

One of the key takeaways from the white paper was the government’s commitment to work with Australia’s diasporas and culturally diverse communities. The paper states “these communities often have the connections, language skills and cultural understanding to assist Australia to deepen ties with other countries. The numerous communities who have their roots in the PRC and from Overseas Chinese origins are no exception.

Chinese-Australians are in a unique position. We understand both sides and have the ability to navigate between both cultures. I experienced this firsthand when I coordinated and facilitated the establishment of the sister/friendship city relationship between Xi’an and Hobart. A significant attribute that led to the successful delivery of this project was my team’s language and cultural skills to build trust and confidence between both sides. The conversation started with both sides not knowing each other existed to developing one of Australia and China’s most unique sister/friendship city relationships.

Like any successful relationship, it requires trust, respect and confidence – attributes Chinese-Australians can help Australia provide in its dealings with the PRC and vice versa due to our shared sense of belonging such as beliefs, culture, language and heritage. The Chinese-Australian perspectives on the bilateral relationship need to be heard if we want to understand how the PRC works, what the government in Beijing is thinking and to develop strategies to maintain and build on this relationship.

Part of Australia’s uncertainty and nervousness with the PRC derives from the difference in political systems, law, culture and values. From my own interactions with PRC officials, the PRC does not fully appreciate our political and legal systems due to a lack of knowledge. Our 45-year bilateral relationship is mature enough to allow us to have a frank conversation about our political agendas. From senior ministerial to community levels, and within academia, these political dialogues should be conducted in an environment that allows candid and fearless discussion in an informal setting.

Australia has an incredible human resource that is heavily underutilised. We need to embrace and empower Chinese-Australians by giving them a platform to share their views and have a presence at decision making tables. Government departments, academic institutions, businesses and think tanks should invite Chinese-Australian representatives to participate in discussion forums, conferences and research. Chinese-Australian community representatives must be more proactive and reach out to relevant stakeholders to express their opinions and perspectives. I, for one, am more than willing to work with both sides to foster a more productive, positive and trusting relationship.

 Jieh-Yung Lo is a Chinese-Australian writer and policy advisor. He is currently working on his first book My Chinese Australian Story. He tweets at @jiehyunglo.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.
(Photo: Wikimedia Commons)

Students of Mandarin: Dare to take the plunge

STANCE #12 – December Edition

By Simone van Nieuwenhuizen

Chinese international students in Australian universities have come under the spotlight in recent months. This is not surprising; there are more than 131,000 university students from the People’s Republic of China (PRC) in Australia, accounting for almost 40 per cent of all international students in the higher education sector.

At the same time, student mobility from Australia to the PRC is almost completely absent from public discussion. The numbers are stark: there are 4,796 Australian students in the PRC, or just over one per cent of international students there. Furthermore, while the total number of Australians studying in the PRC has increased, the majority stay for less than six months.

In order to improve Australians’ grasp of Chinese language and understanding of the PRC’s influence in our region, students need to be spending more time in the PRC and enrol in Chinese- rather than English-taught programs. To facilitate this, both the tertiary education sector and the federal government should provide greater incentives for students to take part in these longer programs.

Research by the Australian Department of Education shows that the PRC is the second most popular destination for Australian university exchange and study abroad students. Additionally, while the numbers have fluctuated over recent years, there has generally been an upward trajectory (see figure 1).

However, the number of students in longer programs has stagnated (see figure 2). According to the most recent data from the PRC’s Ministry of Foreign Affairs, of Australians studying in the PRC in 2016, 69 per cent stayed less than six months.

There are several problems with shorter-term stays. Most participants in short-term Chinese language immersion programs engage more on a day-to-day basis with their foreign classmates than with local Chinese students. Chinese universities usually offer separate accommodation for international students. Thus, while the classroom experience might be immersive, the social environment outside the classroom often dilutes linguistic and cultural engagement.

The abundance of English-taught programs exacerbates this. Peking and Tsinghua universities have introduced the prestigious Yenching and Schwarzman Scholars programs respectively, which have no Chinese proficiency requirement. Some programs explicitly forbid enrolment of PRC nationals, eradicating the possibility of interaction with Chinese students in the classroom, and in turn the possibility of an authentic experience.

Longer stays offer profound benefits. The more time spent overseas, the greater the degree of language immersion and fluency. This is sorely needed in Australia. 2016 Census data show that while Mandarin Chinese is the second most commonly spoken household language in Australia (2.5 per cent) an overwhelming majority of households (72.7 per cent) speak only English. This leaves a huge knowledge deficit, demonstrated by the employment demand for bilingual speakers. Earlier this year, Tim Mayfield, Executive Director of Asialink’s Asia Education Foundation argued, ‘A good strategy [to fill this gap] is to start incorporating native Mandarin speakers in top companies using those bilingual skills’. However, reliance on native speakers will  not reduce the knowledge deficit. As Jane Orton has pointed out, ‘[I]t may often be the native English speakers who are seeking information or connection that is vital to them. Relying only on what people can or choose to tell them in English … leaves English speakers in a passive position’.

Longer stays also facilitate lasting professional and interpersonal relationships, of particular importance in the PRC.

With this in mind, universities can play a role by providing greater incentives and more opportunities for undergraduate students to undertake longer and Chinese-taught programs, especially for those majoring in Chinese Studies or related disciplines. Further incentives could include giving priority to scholarship applicants enrolling in longer programs, and integrating a compulsory year-long exchange into competitive undergraduate language-focused degrees. The Australian National University’s ‘Year in Asia’ program is an example of the latter. More credit points could be offered for Chinese-taught subjects. Other actions could include reviewing existing exchange agreements and negotiating extensions; and surveying students to ascertain the reasons behind their preference for short-term programs, in order to develop initiatives to address the key challenges.

On the government’s part, the New Colombo Plan could prioritise proposed programs over six months in length, which would in turn incentivise universities to develop creative and rewarding programs for more immersive China experiences.

Universities also have a role in empowering students to make informed choices about their studies, both during their tenure and beyond. This includes raising awareness of alternative sources of funding, such as the PRC’s China Scholarship Council (CSC). The CSC offers a comprehensive suite of scholarships for Chinese-taught degree programs, at the municipal, regional and national levels. Individual PRC universities also run their own scholarship programs.

Chinese-taught programs not only offer a more immersive language experience – by completing assignments, presentations and theses in Mandarin, one’s Chinese is guaranteed to improve exponentially – but also give the student invaluable insights into the PRC’s education system, politics, media and society. These are all valuable skills for Australia’s future. China scholars should consider the benefits of witnessing developments first hand; these insights are not attainable at arm’s length. While living in the safety net of one’s native language and among a familiar community might be tempting, it makes for superficial engagement.

Simone van Nieuwenhuizen is Project and Research Officer at the Australia-China Relations Institute at the University of Technology Sydney. She lived in China for three years, and holds a Master of International Relations (Diplomacy) from Peking University.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.
(Photo: Junyu Wang via Flickr)

How to help Australian start-ups succeed in the PRC

STANCE #11 – November Edition

By Jemma Xu

2015 was an interesting year for Australian start-ups in the People’s Republic of China (PRC). In mid-June, the Shanghai stock market collapsed, losing nearly 30 per cent and more than US$2.8 trillion in value within a month. China’s early stage venture investing market then turned from a euphoric bubble to a freezing low. But few could have guessed that merely a year later in 2016, Chinese venture capital commitments would exceed US$50 billion, nearly matching the United States for the first time.

With so many opportunities available, the Australian government should spare no effort to ensure Australian start-ups targeting China’s market have every chance to succeed.

This excess capital is not just fuelling the Chinese start-up ecosystem, it is also drawing the attention of Australian founders. At the start of 2015, few Australian entrepreneurs had any interest in China. Fast forward to 2017, observing from my base in Beijing, many Australian entrepreneurs are now thinking about China, both as a market and a source of capital. With so many opportunities available, the Australian government should spare no effort to ensure Australian start-ups targeting China’s market have every chance to succeed.

But the PRC is not one market; rather it is the sum of 34 unique markets consisting of its provinces, regions and municipalities. With this in mind, Australian start-ups should never attempt to tackle China as a whole and instead select one province or even one city first and go deep. Australian start-up hubs like Austrade’s Landing Pad in Shanghai and Australian co-working space provider Fishburners Shanghai are excellent starting points, and such initiatives should be expanded.

However, start-ups should realise different cities specialise in different industry verticals and pick their initial market entry accordingly. Both start-ups and ecosystem supporters like the Australian government should place greater emphasis on Tier 3 cities – less developed than the metropolises of Shanghai and Shenzhen – by engaging with industries in which these cities have an advantage. The opportunities that come with the chaos of a developing market are no longer present in Tier 1 and some Tier 2 cities.

Start-ups are encouraged to invest more time and energy into understanding China’s domestic politics. The recent 19th Communist Party Congress was a timely reminder of party-state supremacy where Party policies can have a significant impact on business opportunities.

First promoted by Premier Li Keqiang at the World Economic Forum’s 2014 summer gathering in Tianjin, the top-down ‘mass entrepreneurship and innovation’ policy has resulted in new mandatory entrepreneurship programs throughout the Chinese education system, opening up a whole new niche in the sector. Fintech is another sector where there are significant regulatory risks and opportunities, where peer-to-peer lending laws and the recent ban on initial coin offerings are all underpinned by a concern for social stability, one of the pillars of the Communist Party of China (CPC).

Australian government departments, as well as relevant institutes and companies, produce high-level industry reports. However there should be more coherent analysis of specific CPC policies and their potential direct implications on business in China. The Australian government can assist this by facilitating a working group of experienced founders and investors in the Chinese markets to share experiences and analysis.

One area which deserves particular attention is intellectual property. Australian start-ups tend to obsess over intellectual property infringements in China. There are many publications that provide a myriad of well-trodden paths for intellectual property protection. However, I strongly suggest start-ups to only pursue intellectual property infringements to the extent that it is commercially viable.

To be successful in the Chinese markets, it is first and foremost about execution. If one’s technology or brand has been ‘copied’ and is more successful in China, resources may be better spent on understanding why the original could not achieve the same level of success. Perhaps it is better to ‘copy’ some of the Chinese execution, rather than engage in long intellectual property battles. In addition, it is worth keeping in mind that China is very advanced in some areas of deep technology such as artificial intelligence and soft technology such as payments.

It is time to come up with a systematic method for the Australian government to first discover and then engage with start-up entrepreneurs and early stage investors with real China experiences.

The above recommendations would be obvious to anyone who has spent substantial time in China building or investing in companies. Yet, from the founding teams of start-ups to the Boards of ASX companies and industry peak bodies, there appears to be a systemic lack of Australians with real China experiences. Such experiences not only help individual start-ups and established companies but also help to inform the Australian government of how to provide the best opportunities for Australian innovation to succeed in China. Perhaps it is time to come up with a systematic method for the Australian government to first discover and then engage with start-up entrepreneurs and early stage investors with real China experiences. Existing bodies such as AustCham and the Australia China Business Council have been active in engaging with established businesses – perhaps there should now be a working group to focus on start-ups.

Jemma Xu is the Beijing-based founder and CEO of Tripalocal, an Advisory Board Member at Haymarket HQ and an early stage investor in China focussed edutech and fintech startups.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.
(Photo: Perzon Seo via Flickr)

Addressing PRC Influence in Australia: Working with all Australians

STANCE #10 – October Edition

By Brendan Forde

Australia’s relationship with the People’s Republic of China (PRC) is increasingly complex and difficult to navigate. Recent media reports about PRC government influence in this country have demonstrated this complexity, touching on different segments of Australian society. This issue of PRC government influence peddling is not just a question of the reported influence on some sections of the political and educational elite in Australia. Of equal importance in its extent and immediacy is the targeting of Chinese-Australians with the same style of influence. This must be addressed, but it can only be tackled through engaging fully with the Chinese-Australian community.

The attitude of the Chinese state towards overseas Chinese communities assumes, in the words of Gerry Groot, “a ‘common sense’ of understanding of the world shaped by decades of Chinese Communist Party thought work”. Sun Chunlan, head of the PRC’s United Front Work Department, articulated this very point during a visit to Australia earlier this year, telling a group of Chinese-Australians: “As we say ‘a mother always worries about her travelling child’. To all overseas Chinese, including students, you will always be an important member of the global Chinese family”.

The types and levels of influence in question include trying to stifle public debate and discussion, to organising protests and public demonstrations of support for the PRC government position …

This assumption of shared political values sits at the core of the PRC’s relationship with overseas Chinese, and informs the attitude of the Chinese state that foreign citizens are, by virtue of their ethnic heritage, non-negotiable parts of the overall project of national renewal. The types and levels of influence in question include trying to stifle public debate and discussion, to organising protests and public demonstrations of support for the PRC government position, to requests for information and other activities, in some cases even touching on espionage. We have seen many Chinese-language newspapers and radio stations in Australia come under the influence of the Chinese state, permeating and extending the reach of propaganda.

Never before in this country has a foreign power attempted to exercise influence to this extent over and through an expatriate community. As Australia’s first ambassador to the PRC Stephen FitzGerald has written: “[The Chinese state] demands loyalty to China of Australian citizens of Chinese descent, a direct challenge to Australian sovereignty”. But the challenge runs even deeper. Through influence over some Chinese-language media outlets, and expectations that PRC-born Chinese-Australians will temper public comments and interactions out of loyalty to the motherland, we may be witnessing an attempt to deny a group of Australians the full rights of citizenship in a liberal-democratic state.

We must approach the matter of PRC government influence in a way which does not adversely impact our social stability and cohesion.

Under these circumstances, it is too easy to come to see Chinese-Australians as a fifth column, as a suspect class of uncertain loyalties. This view is misleading and ignorant. We must approach the matter of PRC government influence in a way which does not adversely impact our social stability and cohesion. We must start from the principle that most recently arrived migrants from the PRC are unwittingly the object of official interest by the Chinese state. Two courses of action can be taken which will make progress towards curtailing PRC government influence in Australia, and ensuring that Chinese-Australians can freely express themselves without fear.

First, in circumscribing PRC government influence in Australia, the role of the Chinese-Australian community is crucial. The arms of government concerned with security need to make more effort to reach out to these communities, and consciously engage with them on discussions about attempts by PRC government officials to control or manipulate the community. The security services need to build substantial relationships with Chinese-Australians, and provide a secure environment for members of the community to report instances of attempts by the PRC to influence.

Second, the growing influence of the PRC government over the Chinese-language media in this country needs to be curtailed. But before this can happen, the full extent of this influence and control needs to be properly measured and assessed. A government inquiry, public or secret, is needed to capture a full picture of the extent and scope of influence. Once a full picture of that influence has been gained, it must be dismantled. This process might include funding community groups to establish new media outlets.

It is unacceptable that the People’s Republic seeks to use Australian communities to achieve greater influence. For the sake of security and social cohesion, these efforts must be resisted. We cannot accept PRC government influence and control over Chinese-Australians as axiomatic or irreversible. Chinese-Australians are part of the solution, not part of the problem. We can curtail this problem, but we must act now.

Brendan Forde is a Canberra-based academic, writer and consultant.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.
(Photo: Luke Zeme via Flickr)

Foreign Donations: “Influence Peddling” and the Erosion of Political Trust

STANCE #9 – SEPTEMBER EDITION

By Jonathan Gordon

When NSW Senator Sam Dastyari resigned from the opposition front bench in September 2016 he had broken no Australian electoral laws or any formal rules of the NSW Labor Party. Rather his resignation, for allowing an entity with alleged links to the People’s Republic of China (PRC) to pay a $1,600 travel debt, was the result of a swift and vocal public backlash.

Less than a year later the Senator found himself in hot water again after a joint investigation by Four Corners and Fairfax Media accused him of breaking with the Labor Party’s stance on the South China Sea in exchange for a $400,000 political donation from billionaire Huang Xiangmo, a citizen of the PRC and permanent resident of Australia. Aired during a period of heightened suspicion of foreign interference in democratic processes, the report has sparked fierce debate in Australia about foreign donations to political parties.

At a time when faith in representative government around the world is being challenged, Australia should take the opportunity to amend the way we regulate foreign donations.

During his resignation statement last year, Senator Dastyari declared “what I did was within the rules, but it was wrong”, words that speak to the heart of the problem with our current donations system. At a time when faith in representative government around the world is being challenged, Australia should take the opportunity to amend the way we regulate foreign donations.

Political donations are by their nature intended to influence policy decisions, and are a legitimate form of participation in the democratic process. In the space of a decade total political donations in Australia have more than doubled from $12.3 million in 2005-06 to over $30 million by the 2016 election. For all of the controversy around foreign donations, they actually make up a small part of that total. In 2015-16 foreign donations accounted for just 2.6% of total donations to political parties. In fact during the last seven election periods, the proportion of foreign donations has only once topped 6% of the total (in 2013).

Why then are we so concerned with foreign donations? For many it comes down to the issue of sovereignty – that only Australians should have the power to influence Australian politics and elections. The Four Corners investigation revealed that ASIO had expressed this exact concern to politicians as early as 2015, having briefed both the government and the opposition on the donation activities of two PRC-born property developers, Huang Xiangmo and Dr Chau Chak Wing.

The issue with foreign donations is that they can be used to buy access to ministers, politicians and advisors, in what the OECD’s José Ángel Gurría refers to as “influence peddling”. Important donors are invited to fundraising dinners and private events, giving them face-to-face access to key decision makers. Furthermore, as Sean Kelly points out, “[politicians] are smart, and don’t generally have to be asked directly for a favour. They know that donations are crucial to their electoral fortunes, and therefore to their ability to earn an income.”

Ultimately, this behaviour, both actual and perceived, undermines the public’s trust in their elected representatives and political institutions. When people believe that political influence can be bought, it damages the whole system of representative government. Even if individual MPs can be voted out, a loss of trust in the political process weakens our democracy.

This problem is multiplied when the entities attempting to influence Australian politics have connections to a foreign government, as is the case with many PRC donors.

This problem is multiplied when the entities attempting to influence Australian politics have connections to a foreign government, as is the case with many PRC donors. Businesses with PRC connections are by far the largest source of foreign donations to Australian political parties, with the ABC revealing that between 2013 and 2015 PRC-linked businesses and individuals donated more than $5.5 million to Labor and the Coalition.

Many other countries have already cottoned on to this threat of foreign influence. Australia remains one of a handful of developed nations that does not ban foreign donations to political parties. In fact, Australia is one of only two English-speaking democracies in the world that permit them. The other is New Zealand, where foreign donations are capped at NZ$1,500.

In the last decade various attempts to amend donation laws have failed to get through Parliament. Most recently, in February 2017, Labor introduced the Commonwealth Electoral Amendment (Donation Reform and Transparency) Bill, which again proposes to ban all foreign donations and lower the disclosure threshold to $1,000. Importantly, the bill also proposes to ban donation splitting, where donations are spread between party branches and business entities, and to replace annual donation disclosure with real-time reporting.

These measures alone won’t fix all the problems of political financing in Australia. They don’t address the question of donations from third-party groups or the role of multinational corporations. There also remains the crucial question of dual nationals. Dr Chau for example holds Australian citizenship, and would therefore remain entitled to make donations if Labor’s bill is passed.

Australians have good reason to be sceptical of foreign influence in our politics, particularly from the PRC. Whether malicious or not, entities associated with PRC state organs have shown great interest and skill in exerting soft power through education, civil society and the media. While measures to prohibit foreign donations won’t end the Australian public’s mistrust of the PRC government, it will demonstrate our politician’s commitment to protecting the sovereignty and transparency of our own political processes.

Jonathan Gordon is an Assistant Policy Officer at NSW Trade & Investment.

The opinions expressed in this article are the author’s and do not represent the views of China Matters or the NSW Government.
(Photo: Wikimedia Commons)

Be Wary of the China Narrative

STANCE #8 – AUGUST EDITION

By Cecilia Ren

China is increasingly seen as both good and evil in the common narrative which prevails in Australia. This ambivalent feeling is reflected in the recent Lowy Institute poll which showed that while a majority of people think China is more of an economic partner than a security risk, almost half (46%) still worry that it remains a potential military threat.

These sort of conflicting popular perceptions of China also prevail in the Australian business community. China is perceived as being an abundant source of capital for foreign investment in Australia and a vast new market for trade and investment. But yet it is also seen as home to opaque business practices, complex capital structures, unpredictable domestic regulation and inadequate rule of law – the hallmarks of a politically risky authoritarian regime.

This way of viewing China can translate into simplistic strategies in the hands of the Australian business community, which is prone to looking for either a deal-breaker or a deal-maker. As a result of this polarised approach, risks and rewards are either over- or underrated.

For example, many Australian investors think that the ownership structure of Australian-listed Chinese companies is too complicated and so likely to be vulnerable to fraud. Only a handful understand that these structures are a prerequisite for a Chinese company to be listed overseas because Chinese regulators do not want a Chinese company to directly list overseas. Therefore an offshore listing entity and an onshore operating entity as its subsidiary are necessary. Some of the most successful Chinese companies listed overseas, such as Alibaba and Tencent, use a more complex structure than what most Australian investors have seen – the Variable Interest Entity structure, putting an extra layer of entities in between the listing entity and the operating subsidiary. These complex corporate structures do pose challenges for overseas investors, but the real risk of fraud depends on the individual company management. If US investors shunned Alibaba and Tencent just because of this, great opportunities would have been missed. Similarly, Australian business communities must learn to understand and work with these corporate structures if they wish to find decent business opportunities.

there can be an excessively positive perception that expanding into China is always a good growth strategy, and this is a common narrative until problems occur.

On the other hand, there can be an excessively positive perception that expanding into China is always a good growth strategy, and this is a common narrative until problems occur. Two large Australian bio-tech companies, CSL and Cochlear, announced China investment plans in recent months and they were generally lauded by the market. But earlier when Wesfarmers announced the takeover of a UK houseware chain, the media reported different views about the feasibility of the expansion plan – which was not seen in either of the China cases. Unrealistic market optimism about expansion into China can be dangerous for many Australian SMEs by giving them false hope about what can be achieved. China’s higher annual growth and growing per capita income do not flow easily to the bottom line of Australian companies. When ambitious expansion plans don’t succeed, the whole market swings towards pessimism about China. This cycle only seems to repeat itself.

Australians need to abandon these China narratives in order to build a rigorous evaluation model.

Australians need to abandon these China narratives in order to build a rigorous evaluation model. Business owners and investors should be wary of mainstream news reports reflecting these common stereotypes. Instead, they should seek out more in-depth business information on China from non-government organisations and business or trade institutions. Going to more specialised industry events will also allow investors and small business owners to meet industry experts and participants who can explain regulatory issues and common practices which relate to their specific sector.

Nevertheless, the mainstream media needs to move on from simplistic China narratives because media reports still set agendas and influence perceptions. Most China related media reports cover business and politics, whereas a wider spectrum of topics including culture, education and societal trends need more attention. They could provide a more comprehensive view of China and thus allow insights into business practices and political developments that would otherwise be concealed.

There are already many exchange and education initiatives supported by the Australian government that don’t receive enough media attention. Participants in these programs deserve more attention because they have firsthand experience and can offer more neutral and diversified opinions on China-related issues. While these initiatives may not directly deal with business issues they can expand the diversity and sophistication of the discussion about China. This in turn will facilitate more comprehensive evaluation of potential business deals by providing more accurate information about China’s diversity.

Cecilia Ren is an Analyst at Amery Partners. Neither the author nor her firm owns stocks of companies mentioned in this article.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.

The Quad Redux: Casting Off The Albatross

STANCE #7 – JULY EDITION

By David Lang

Ships from the American, Indian and Japanese navies will gather in the Bay of Bengal for Malabar 2017 later this month. The wargames come six months after Canberra formally asked the Indian defence ministry to consider permitting observer status to a handful of Royal Australian Navy vessels, and mere weeks after that request was denied. The consolation reportedly offered by Delhi was that Australian officers could watch the maneuvers from the decks of the participating countries’ ships. That wasn’t the outcome Australia was after, but it’s still a small step in the right direction. While the expanded Malabar exercise was a one-time matter of contention in the Sino-Australian relationship, Canberra should continue to push for its resurrection.

The history is well documented. Buoyed by cooperation in response to the 2004 Indian Ocean tsunami, and with China’s growing economic and strategic heft giving pause, policymakers in Delhi, Tokyo, Canberra and Washington spied an opportunity. May 2007 saw the Quadrilateral Security Dialogue convened on the sidelines of the ASEAN Regional Forum. That September, the four, along with Singapore, sent their navies off to momentarily supercharge the US-India naval engagement into a large multilateral endeavour. Diplomatic demarches from Beijing and a change of government in Canberra saw Australia unilaterally back away from the group in 2008.

In the final analysis, Beijing’s actions in recent years have cast a pall over prospects for continued peace and stability in the Asia-Pacific.

The regional strategic designs of President Hu’s China in 2007 were far less clear, and its actions far less provocative and assertive, than they are under President Xi today. China presents a major challenge to the established rules-based regional order, particularly at sea. Compulsive land reclamation efforts in the South China Sea are but one aspect of a coercive and muscular foreign policy that seeks to carve out a regional sphere of influence for China. In the final analysis, Beijing’s actions in recent years have cast a pall over prospects for continued peace and stability in the Asia–Pacific.

In the face of this more worrying regional strategic environment, it could be said—with hindsight—that the Quad was an idea before its time. While the Trilateral Strategic Dialogue between the US, Japan and Australia has existed since 2006, minilateralism between the Quad partners has proliferated since 2007: the US–Japan–India trilateral has been on the scene since late 2011, the Japan–India–Australia trilateral arrived in mid-2015, and Japan joined as a permanent participant of Malabar in late 2015. With those complementary engagements supported by positive bilateral relations among the four, it’s easy to imagine that expanding Malabar might actually be reasonably straightforward today if it wasn’t saddled with the baggage of a decade prior. That earlier outing hangs like an albatross around the neck of Australia’s ambitions to join today.

Reviving the Quad would be an important act of strategic signalling, from which a number of benefits could flow. At the operational level, the four navies get to build interoperability, inter-force relations and trust. They also get to consolidate habits of cooperation, shape a shared perception of the strategic environment and demonstrate collective resolve. At the regional level, it would stand as a contribution to a more ‘networked security architecture’ that further evolves the hub-and-spokes system and matures the region’s nascent multipolar flavour. The initiative would impose a cost on Beijing for its recent behaviour.

The Quad members could come together to pursue … a stable, open and prosperous region wherein China abides by the established rules and norms.

While China’s tolerance for multilateral security activities in Asia appears to have grown, Australia must nonetheless be prepared for Beijing to again brand an expanded Malabar as a tool of containment or encirclement. Member countries should resist such claims if they’re made. The Quad members would come together to pursue their shared interest in a stable, open and prosperous region wherein China abides by the established rules and norms. But let’s be clear: China is the Quad’s animating principle. Once the group is again off the ground, China should be invited along as an observer.

India didn’t deny Australia’s request in order to mollify China, nor because of some overwhelming angst about Australia’s about-face in 2007—though some in Delhi maintain lingering doubts about our reliability. The time just wasn’t right, meaning that expanding Malabar will require Australia’s ongoing patience. Canberra should continue to quietly push the idea forward and advance Delhi’s understanding of the RAN’s capabilities. Last month’s Indo-Australian naval exercise off Western Australia was just our second together (the first was in 2015), so these are early days.

The Quad 2.0 must be sustainable, well-calibrated and built on consensus, so there’s no alternative but to wait for Delhi to come to the party. Pending the character of China’s contributions to the region and Washington’s appetite for Asia-Pacific minilateralism, the group could yet shape up as a worthwhile venture to complicate Beijing’s considerations.

David Lang is an analyst and managing editor of The Strategist at the Australian Strategic Policy Institute.

The opinions expressed in this article are the author’s and do not represent the views of China Matters or ASPI.
(Photo: Wikimedia Commons)

Quietly Taking Apart the Bamboo Ceiling

STANCE #6 – June EDITION

By Shanna Pan

“You can’t be what you can’t see”. These seven short words from American activist Marian Wright Edelman explain so simply, yet profoundly, the remarkable importance of diverse and fair representation in society. It’s a phrase that encapsulates one of the key problems of the “bamboo ceiling”: the idea that there exists an invisible barrier in our labour force that prevents Asian talent from breaking through into leadership positions.

We run the risk of becoming entrenched in a vicious cycle of underrepresentation, and potentially losing some of our top talent to overseas markets.

People of Asian descent currently make up 10 per cent of Australia’s population, with Chinese ancestry contributing to nearly half this figure. Contrast this with their representation in senior executive positions at ASX 200 companies, which sits at less than 2 per cent, and it is apparent that the bamboo ceiling has found its way into the structure of corporate Australia. Without actively trying to address this, we run the risk of becoming entrenched in a vicious cycle of underrepresentation, and potentially losing some of our top talent to overseas markets.

The book which originally coined the term “bamboo ceiling” provides career strategies on how to transform yourself in order to “break the bamboo ceiling”. Whilst resources like this may help individuals overcome adversity in challenging work environments, placing all the onus on the individual to change and adapt is akin to a moderate form of victim blaming. So, at what point do we need to shift our focus from the person to the environment?

Enacting blanket policies at the organisational level to address diversity issues can be troublesome, particularly once quotas become involved. On the one hand, they can be relatively simple to implement; on the other, we are faced with the moral dilemma of potentially compromising the meritocracy upon which hiring practices are supposedly built.

The act of balancing a desire for greater cultural representation with the complexities attached could easily be written off as being in the “too hard basket”. However, Australia’s proximity to China, our increasing trade ties within the Asian region and China’s growing international power and influence should be enough to warrant special attention to this matter.

A report released last year by the Australian Human Rights Commission (AHRC) suggested addressing three different layers within this issue: leadership, systems and culture. An example it cited was Westpac, which has taken a bold step in introducing racial diversity targets for its leadership team. While this is a more extreme measure, there are other ways businesses and governments might ensure a more accessible path to leadership for their broader talent base.

One such method may be to encourage cultural empathy from a young age, through offering exchanges and scholarships as per Westpac’s Asian Exchange Scholarship program. Exposure early on to the inner workings of a culture as diverse as China’s would help foster deeper understanding and could influence decision making when it comes to hiring as referenced in the AHRC report.

Providing young talent with access to senior mentors, who may later act as advocates for them, is particularly important for Chinese culture in which modesty is encouraged more than in the West. This may come with the added benefit of a knowledge-transfer, allowing existing leadership to understand more about this demographic and how they might be able to adjust current practices to better engage with this growing talent pool.

Finally, a theory explored in Susan Cain’s book “Quiet: The Power of Introverts in a World That Can’t Stop Talking” posits that introverted qualities are often more valued in Chinese society, and that this has implications in a business environment. For example, consider whether team meetings are the most beneficial format for everyone, or if there might be a better way to encourage introverted team members to participate. If you can identify someone with talent who might need some assistance in making their accomplishments known, try to build a close relationship with them, and offer to act as a mouth piece if they do not feel comfortable speaking up for themselves. If someone is particularly quiet, it may be because they are simply spending more time “doing” instead of just talking.

Companies which recognise this issue and look to take action early on could be set to profit from a first-mover advantage

The bamboo ceiling is complex, and not an issue for which I claim to have all the answers. But the above suggestions could go a long way in fostering the next generation of leaders and achieving a more equitable representation of our diverse cultural makeup, something which should be a point of pride for Australia. Companies which recognise this issue and look to take action early on could be set to profit from a first-mover advantage, an invaluable benefit as Australia gears up for the Asian Century.

Shanna Pan is a Senior Consultant at PwC Australia.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.
(Photo: Casey Yee via Flickr)

Exporting AFL to China: Can it be more than a game?

STANCE #5 – May EDITION

By Edward Kus

Is Australian sport a community or a commodity? Whichever it may be, can you sell it to China? On 14 May 2017 the Australian Football League will host its first match in China for premiership points. In Australia, passion for sport has the ability to unite people like few other interests. Chinese Premier Li Keqiang recently exemplified this. He was pictured donning both teams’ scarves at an AFL match during his latest visit to Australia. The question is, however, will AFL work in China?

Australian sport (could) become a new dimension in the Australia-China relationship, helping to build trust between the two countries.

I am not sure if it will. But it certainly can, if the AFL can balance the need to be profitable with the need to invest time and money engaging new Chinese fans (whether based in Australia or overseas). If the AFL can find that balance then it could pave the way for Australian sport, and AFL in particular, to become a new dimension in the Australia-China relationship, helping to build trust between the two countries.

Some of the challenges for sport in China are commercial. Others are cultural. On the commercial side, the AFL’s strategy seems to be working so far. The upcoming Shanghai match is sold out. The AFL expects the crowd of around 10,000 people to comprise a mixture of locals and visitors from abroad. That number may seem small in the context of China. But it will be interesting to see some post-match analysis of the crowd demographics. I wonder how many locals will attend, scratching their heads at our peculiar game. Yet if China’s middle class is willing to buy bottled air then, so the thinking goes, perhaps they may also be interested in Aussie rules.

Capturing even a tiny slice of China’s growing middle class market would be lucrative for the AFL. Commercial rights, including merchandise and other licensing rights are lucrative revenue sources. As are the broadcast and content distribution rights. If interest in AFL takes off there is huge potential for growth. Basketball provides a precedent for this. Chinese basketball superstar Yao Ming put NBA on the map for China’s millennials. Now China is NBA’s second largest market. But basketball in China has also faced its challenges. It took Michael Jordan more than four years to win a long-running law suit to stop a Chinese firm using his name on its products. Giving effect to the court’s ruling is another question entirely.

On the community side, team sports (especially dangerous ones) are not traditionally a big part of Chinese culture. Bridging this cultural gap may be a challenge for the AFL. Team sport in China reminds me of when I used to play rugby in China. In 2006 I spent part of the year playing rugby at the Shenyang Sports University. The rugby team consisted of some big, strong young men. All excellent athletes in their own right. But the team’s cohesion suffered because they had not grown up playing rugby or team sports more generally.

I still have the training shirt boasting the rugby club’s name: 大愚橄榄球俱乐部 (Dàyú gǎnlǎnqiú jùlèbù). It is of course just a name. But literally translated it means the ‘great fool rugby club’. I couldn’t help but think maybe the name was emblematic of their perception of rugby. It is objectively (like AFL) a fairly silly game where players must risk life and limb to keep possession of the ball.

But the future looks brighter for team sport in China. China’s investment in developing its next generation of soccer stars means success on the soccer field is officially part of the ‘China dream’. China’s efforts to encourage its next generation to play team sport is one assumption underpinning team sport’s market growth in China. It is too early to say if Chinese kids will really take to team sport. But making sure it is fun and safe is especially important for Chinese parents considering letting their kids participate – especially when they may be nervous about protecting their only child.

The upcoming match will become an interesting case study for Australia-China engagement and, in particular, how to ‘sell’ Australian sport in China.

AFL faces some commercial and cultural challenges in its bid to expand into China. No matter how the upcoming match in Shanghai plays out, one thing is for sure: it will become an interesting case study for Australia-China engagement and, in particular, how to ‘sell’ Australian sport in China. For success with its China plans the AFL needs to take a long-term, relationship-driven view of its role as an ambassador of Australian sport and culture in China.

Edward Kus is a lawyer and China observer based in Melbourne. 

The opinions expressed in this article are the author’s and do not represent the views of China Matters or the Australian Football League.
(Photo: Facebook, Malcolm Turnbull)