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)

Understanding China and the future economic order:
Australia must look to history

STANCE #4 – APRIL EDITION

By Amy King

In May 2016, US President Barack Obama made the case for passing the Trans-Pacific Partnership (TPP). “America should write the rules”, Obama said, “America should call the shots”. For if America did not write the global trade and investment rules, China would.

But the election of Donald Trump has changed all this. President Trump wasted little time issuing an executive order to withdraw the US from the TPP. He has pledged to close America’s borders, apply 45 per cent tariffs on Chinese imports, and take an ‘America first’ approach to global trade and investment agreements. We do not yet know how many of these promises will be upheld. Yet invoking them threatens to unravel the US-led, liberal international economic order upon which we have depended since the end of World War II.

We are facing a new world order. Australia’s traditional strategic partners are stepping back, and rising powers like China are stepping up.

We are facing a new world order. Australia’s traditional strategic partners are stepping back, and rising powers like China are stepping up. To navigate this, countries like Australia need to better understand China and its economic goals.

Over the last four years, China has launched the $100 billion Asian Infrastructure Investment Bank (AIIB) and the $40 billion Silk Road Fund. As part of its Belt and Road Initiative (BRI), China has announced one trillion RMB worth of future investment in railways, pipelines, highways and ports stretching from North Africa to the South Pacific. And everywhere from Lima to Davos to Canberra, China’s leaders now appear to be the leading champions of free trade and an open global economic order.

But the scale and goals of China’s economic ambitions have prompted great debate and concern. Many fear that a self-interested, nationalist China seeks to subvert the post-WWII liberal international economic order, or that China will attempt to use its new economic connectivity as the basis for regional domination.

As we in Australia try to understand China and its economic goals, we should keep three things in mind.

First, to understand China today, we need to understand China’s recent past. This is a country whose leaders think in terms of decades- and centuries-long ideas, such as the ‘century of humiliation’ (百年国耻) and the ‘double century goals’ (两个一百年). Sometimes, this history is used by China’s leaders in quite instrumental ways to shape the present, a phenomenon that we tend to observe in the “history wars” that play out in the China-Japan relationship for example.

China’s fairly recent experience of war, imperialism, and economic exploitation at the hands of foreign powers has shaped deeply China’s thinking about economics, development, and security. It is this history that explains China’s unwavering focus on economic modernization as a way to achieve security.

however powerful China is or may become, it is not the only country shaping the international economic order.

Second, we should remember that however powerful China is or may become, it is not the only country shaping the international economic order. Since the collapse of the TPP, for example, many have adopted Obama’s warning that China is now dominating Asia-Pacific trade and investment agreements like the Regional Comprehensive Economic Partnership (RCEP). But describing RCEP as “China-led” or “China-dominated” is a mistake. Such a description might fit geopolitical narratives about US-China conflict, but ignores the significant role that Japan, ASEAN and Australia have played in shaping the evolution of this agreement.

As China continues to roll out BRI, we are likely to see more fear and anxiety about China’s ability to dominate the region and to use its economic power to coerce or influence its neighbours.  Yet as research by Evelyn Goh has shown, whether China manages to achieve influence over its neighbours is determined as much by these countries’ decision-making processes and behaviour, as it is by China’s behaviour and goals.

Third, we must remember that China is not a monolith. This point is well understood by anyone who lives in and works on China, but is not well understood by those outside. We must understand that China’s foreign and security policy is the product of complex interactions between the Party, the State, local governments, private and state-owned enterprises, public opinion, the military and the media. And although Xi Jinping has achieved much greater control of the policy-making system since 2013, he is not all powerful.

Happily, more and more research, including by Linda Jakobson, is helping to focus attention in Australia on these complex interactions. But more needs to be done to help Australian policy-makers, businesses and students understand how China works from the inside. This means greater investment in the study of China and, in particular, how its history and domestic context are shaping the country’s policy choices.

It is equally as important that we invest in the study of China’s Asian neighbours. We should not underestimate how the international economic order will be shaped by the preferences, behaviour and responses of others. Focusing only on China and ignoring every other country in the region is a dangerous analytical mindset that will lead us to overestimate China’s power and influence.

Amy King is an ARC DECRA Fellow and Westpac Research Fellow based at the Australian National University.

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

Abandoning characters first step on path to learning Chinese

STANCE #3 – MARCH EDITION

By Nathan Lee

Chinese language education in Australia is failing and requires a complete rethink. Thankfully, a radical but simple solution exists to the current malaise – that is, using pīnyīn (Romanised Chinese) entirely in primary and secondary schooling, and only introducing characters at university-level. This would ensure the focus of teachers and students is on speaking Chinese, rather than memorising characters.

If Australia wants to make the most of China’s rise, we should be leading the world in creating Asia literate citizens. Instead, we are utterly failing in this task, with many Australians holding an outdated and unsophisticated view of China as a land of dragon dances and lemon chicken, a great country to sell rocks to but not somewhere we’re inclined to know more intimately.

Nowhere is the gap between promise and reality more stark than in our approach to language learning. For more than a decade, successive governments at all levels have opined about the need for more Australians to learn Chinese, and have matched their rhetoric with increased spending.

The situation has only worsened, with a follow-up study in 2015 finding that only 2.4 per cent of students who start Chinese continue it to Year 12

Unfortunately, while the number of school children starting to learn Chinese has grown significantly, retention rates remain dismally low. A comprehensive 2010 study by Dr. Jane Orton of the University of Melbourne neatly summarised senior secondary Mandarin learning in Australia as consisting of ‘Chinese teaching Chinese to Chinese’. Since then, the situation has only worsened, with a follow-up study in 2015 finding that only 2.4 per cent of students who start Chinese continue it to Year 12, with only 10 per cent of these coming from non-Chinese backgrounds. In my high school, I was the first student to go on to study Chinese at university in my teacher’s twelve-year career.

There are a range of reasons why non-Chinese-background Australians aren’t succeeding in Chinese. Foremost is the fact that learning Chinese presents unique challenges that our schools, teachers and students are all ill-equipped to overcome. Schools provide students with inadequate time – often just an hour a week – to learn Chinese. Teachers often instruct students in the same way they learnt as children, focusing on the rote memorisation of characters. This not only doesn’t work in the short time available, it also bores students and crowds out more interesting language study. And students struggle to compete with native speakers, for whom studying Chinese is both a good way to stay connected to their heritage and an easy path to an ‘A’.

To all of this must be added the immense difficulty of learning Chinese for a native English speaker. To reach proficiency, learners must grapple with a lack of cognates (words that are similar to their English equivalents, like ‘porc’, and ‘boeuf’ in French); a tonal system which clashes with the (often unconscious) use of emphasis in English; and, most crucially, the need to memorise thousands of non phonetic characters that cannot be guessed or attempted in the way English words can.

It is this last challenge that presents the greatest difficulty. Chinese characters are so trying and take so long to memorise that the Australian Curriculum for Chinese stipulates a level for Year 12 students that is the same as that for Grade 1 students in China. Yet few Australian students achieve even this.

There is an urgent need to re-examine what it is we want students to be able to do by the end of secondary schooling. Do we want students who have memorised a few hundred characters but who, in doing so, have barely learnt to speak and have grown to hate Chinese in the process? Or should school level Chinese focus on verbal communication, allowing students to gain real oral proficiency and, hopefully, a love for Chinese that will encourage them to tackle it full-time at university?

Replacing characters with pīnyīn in the classroom would make genuine proficiency in spoken Chinese achievable for school students.

If it is the latter, then moving to a pīnyīn-based curriculum for compulsory schooling would help. Unlike characters, pīnyīn is phonetic, assisting pronunciation and tones; intuitive for English speakers; and, if mastered, a useful building block for later character study. It is also needed to type Chinese. Replacing characters with pīnyīn in the classroom would make genuine proficiency in spoken Chinese achievable for school students. And many of Australia’s hundreds of thousands of Chinese speakers, and over a million tourists from China a year, would relish the chance to help them practice.

Purists would argue that studying Chinese without characters is like visiting Beijing without eating Peking duck. This may be true in the long-run, but for school students, it is more important to build basic language first, and grow from there – or, as Laozi put it: ‘qiānlĭ zhī xíng, shĭyú zú xià’ (begin the journey of a thousand miles with a single step).

Nathan Lee works for the Attorney-General’s Department.

The opinions expressed in this article are the author’s and do not represent the views of China Matters.
(Photo: Alice-wang via Pixabay) 

Climate Change and Green Energy: Australia should warm to China

STANCE #2 – FEBRUARY EDITION

By Jackson Kwok

Canberra should look to Beijing as its primary partner for combatting climate change.

With Donald Trump in the White House, an oil magnate as his Secretary of State, and a climate sceptic as Administrator of the Environmental Protection Agency, it’s safe to expect four years of American inaction on climate change policy. Trump infamously claimed in a tweet that ‘the concept of global warming was created by and for the Chinese.’ During the presidential campaign, he vowed to withdraw the US from the Paris Agreement – a threat he is likely to follow through with.

At best, Washington will continue to be ambivalent about climate change; at worst, the Trump administration will undo much of the progress made under his predecessor. Meanwhile, China is surging ahead in its efforts to combat climate change.

In many aspects, China is already a leader in the green economy. In 2015 it invested US$102 billion in renewable energy – more than the United States and European Union combined. In the same year, China surpassed Germany as the nation with the largest photovoltaic solar capacity. With 3.5 million people working in the renewable energy sector – five times more than in the US – China is emerging as a global leader in clean energy.

Late last month, Beijing ordered 13 provinces to scrap 104 coal-fired projects and re-announced A$400 billion worth of investment into renewable energy. China has pledged to increase the amount of energy coming from non-fossil fuels to 20 per cent of the total by 2030. Reports indicate that by some metrics, China is ahead of schedule in meeting commitments outlined in the 2015 Paris Agreement.

Australia should welcome Chinese leadership on climate change in place of the ambivalence, uncertainty, and inaction which will grip Washington for the next four years.

Climate change measures and renewable energy research are areas where Australia and China can cooperate with minimal reservation. Australia should welcome Chinese leadership on climate change in place of the ambivalence, uncertainty, and inaction which will grip Washington for the next four years.

One avenue for deepened cooperation with China is the design, planning, and development of low carbon cities, a priority given Australia’s high level of urbanisation. Key to this is the implementation of smart grid and micro grid systems which integrate renewable energy and are capable of supporting large-scale power transition from multiple sources. China has already trialled more than 300 pilots of this project with plans for operational implementation by 2020.

Australia needs to upgrade its energy infrastructure to better incorporate renewable energy sources, and should seek to gain access to Chinese scientists’ latest advances in renewable energy technology. For example, Australia’s import of wind turbines provides an opportunity to improve efficiency and smooth wind energy integration into domestic electricity grid systems. It is in Australia’s interests to be closely linked to developments in China, as Chinese expertise in these areas is inevitably set to deepen.

Of course, Australia and China should ramp up existing cooperation on the research and development of renewable energy technology. Shi Zhengrong, known as the ‘Sun King’, became the world’s first ‘green billionaire’ in solar technology following his time at the University of New South Wales. In April last year, UNSW became home to a Chinese Torch Research and Innovation Precinct, the first outside of China. This entailed an A$100 million investment by the Chinese. One area of research the precinct will focus on is energy innovation, and advances have already been made in efficient next-generation power cables. Other Australian universities should urgently focus on enticing similar projects to Australia.

China’s slowing demand for fossil fuels will have implications for Australia’s long-term prosperity.

A pivot to green technology makes sense economically as well. China plans to reduce its dependence on coal to below 40 per cent by 2050. Valued at A$5.6 billion, coal is Australia’s second largest export to China after iron ores and concentrates, but export volumes of thermal coal to China declined by 28.5 per cent in 2015. China’s slowing demand for fossil fuels will have implications for Australia’s long-term prosperity. By comparison, a recent report found that an Australian coal power plan was twice as costly as an equivalent renewables alternative.

Beijing will continue to seek new solutions to its environmental woes – it certainly has the domestic incentive to do so. Environmental grievances inspire hundreds of protests nationwide every year. According to a 2015 study, air pollution accounts for up to 1.6 million deaths per year in China. Rising temperatures and sea-levels could displace some 145 million people from China’s most affluent coastal areas. Addressing environmental concerns and climate change has become a matter of existential legitimacy for the Communist Party.

There is also an international soft power game at play. Zou Ji, a senior Chinese climate talks negotiator, stated last November: ‘Proactively taking action against climate change will improve China’s international image and allow it to occupy the moral high ground.’ By demonstrating leadership on a number of global issues, Xi Jinping is vying to strengthen China’s international standing.

Chinese leadership on climate change will have implications for how we think about Beijing’s role in other areas. Faced with the uncertainty in Washington and the consistency of Beijing’s efforts, it would benefit Australia to partner as closely as possible with China on climate change.

Jackson Kwok is a Research Assistant at China Matters

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