Plenty of opportunities to expand our trade with China

HOW did China so rapidly become Australia's No 1 export destination, purchasing $77 billion worth of iron ore, coal and other products in 2011-12?

Even a short visit to China offers some insights into its economic transformation -- which has seen Chinese steel production jump from 80 million tonnes in 2001 to 750 million tonnes today, in turn driving demand for Australian resources.

On a recent visit, travelling with other MPs, we began in the 10 million-plus city of Shenzen, just across the border from Hong Kong. Thirty-five years ago it was a sleepy fishing town, before it was declared a special economic zone by Deng Xiaoping.

Today it is home to the Foxconn factory where more than 200,000 people make Apple iPhones, and two of the world's largest telecoms equipment manufacturers, Huawei (with sales exceeding $US30bn) and ZTE (with sales of $US10bn). Huawei's headquarters, with multiple large buildings spreading across many hectares, feels like a cross between an American Ivy League University and the wide, planned boulevards of Canberra.

In Shanghai, we met with several companies based in the dazzling Pudong financial district east of the river in Shanghai, with its forest of neon-lit super-modern skyscrapers, all built in the past 20 years.

Our group visited Huawei's recently completed research and development building in Shanghai, more than a kilometre long, where 10,000 engineers, many with PhDs, are hard at work.

A 30-minute high-speed train ride took us 100km to the city of Suzhou, where the vast Suzhou Industrial Park, built in a joint venture between the Singapore and Chinese governments, covers nearly 300sq km.

Part of the park is an academic precinct where more than 20 universities from around the world have established campuses, often working with a partner Chinese university. One such pairing is Monash University and China's Southeastern University.

China's growth has dragged Australia along in its economic wake -- but our visit highlighted the intense competition among foreign companies to serve the huge and growing Chinese market.

Meeting the Chinese country heads for BHP Billiton and Rio Tinto, we gained a sense of the global competition to supply Chinese steel mills with iron ore. These two companies have done very well, thanks to high-quality product and because Australia is closer to China than competing locations such as Brazil, so transport costs are lower.

Other Australian businesses, too, need to play to their strengths. That certainly means being price-competitive. As one senior executive in an Australian firm said to us: "You have to understand: this is an incredibly capitalist country to do business in."

It also means working out what you offer that your competitors cannot.

For ANZ Bank, one focus is serving Chinese families with children studying in Australia; another is financing agribusiness opportunities including Chinese companies entering Australia, and Australian food producers exporting to China.

What Monash brings to its partner Southeastern -- a university more than 100 years old and among the most prestigious in China -- is the chance to learn from Monash's impressive track record in international education.

Meeting senior partners of Chinese law firm King & Wood, which recently merged with Australian law firm Mallesons, we heard that merging with an Australian firm made more sense than the many British or American firms that approached them. It puts them on the road to becoming a multinational law firm, but it feels like a merger of equals rather than being taken over.

There are plenty of opportunities to further expand Australia's trade with China.

Higher education remains a market with growth potential. A degree from a Western, English-speaking country is a desirable qualification, but not every interested student will be able to come to Australia -- hence the strategy of several Australian universities to take Western, English-taught degrees to China.

Tourism is another: we offer unique destinations and the cost and time of the trip to Australia is a lot less daunting for someone in China than someone in Europe or the US.

Food is a third obvious area. Following recent scandals with tainted milk powder, there is so much demand for high-quality product that there are limits on how many tins of milk powder you can take from Hong Kong to China. Announcements at Hong Kong airport threaten jail for breaching the limits.

ANZ's agribusiness specialist briefed us on the huge potential as more and more Chinese become middle class and can afford more protein in their diet. New Zealand dairy conglomerate Fonterra has built up a big position in the Chinese market; there is no reason Australia could not do the same.

China's remarkable transformation to date has benefited Australia greatly. But despite the delusions of the present government, we cannot just assume continued strong export earnings from China.

We must work hard -- in business, and supported by government, academic, security and other linkages -- to keep a strong position in this critical export market.

Paul Fletcher is a Liberal MP. He travelled to China with a multiparty delegation as a guest of Huawei.